Government Transparency: Opaque?

3/29/09

Last Wednesday, during the operations administration meeting, I brought up a potential ordinance that I wrote about, several weeks ago, on this blog.

The idea was that “ALL” ordinances and resolutions must be made available to the media and city council a minimum of one news cycle (defined as the Wednesday or Saturday edition of the Missourian) before it can be considered in a public session of the city council.

Initially I wanted to see the entire ordinance posted in the paper so the citizens could see exactly what is going on. But after looking at the printing cost, I determined that agenda items with plain language descriptions of ordinances/resolutions would be much more economical.

If an interested party wanted more detail, they could go the City of Washington website and read the full ordinance. The printings cost would be about $40 per week to have the information published in the Missourian.

Now, let me digress: Sometimes city councilmen can get City Council packages the Friday before a Monday City Council meeting. Not only does this make it difficult for the council to properly research agenda items but can make it equally or more difficult for citizens to know what government is up to.

For example: On Wednesday, 13th, 2006, the City Council voted unanimously amending Title V of the city code relating to certificates of occupancy and inspections of existing homes and buildings. (See story in Missourian.)

Here is where it gets interesting: Quoting from the Missourian, ”
No one expressed opposition to the code amendment Wednesday night. ” This is really rich considering no one in the community knew about the upcoming vote. Maybe that is because the story came out in the Missourian on the same day and hour as the votes was being cast – possibly giving some hint as to why “No one expressed opposition to the code amendment Wednesday night.”

Since 2002, the city had tried to pass this change to the code and every time was met with stiff resistance from the community. And only with a “no notice” vote, was it ever passed – all but annihilating  public opposition.  As if this wasn’t enough, the city went on to authorize buying private information from Ameren UE, so as to more effectively manage this new “safety” program of occupancy inspections. Some have gone so far as to suggest this entire ordinance was nothing more than an attempt at the gentrification of Washington.

Thomas Paine, in ‘Common Sense’ wrote: “Time makes more converts than reason.” I will let Paine’s words and ideas speak eloquently in ways I can not.

Bringing us back to the present, I was shocked (and somewhat appalled) when some on the city council actually felt the citizens have enough transparency in the way government works. Some actually, and with a straight face, suggesting $40 per week was a waste of tax payer money.

Councilman Dill asked me how many people would actually read the agendas. My response was that if only one read it, it would be worth the expense. The Mayor, along with Councilman Mohesky, opined that sources currently in place are more than adequate for an informed community to be in the know.

Current sources would be the broadcast video/audio of each city council meeting (even though this system is currently being upgraded and still has unacceptably poor quality issues). The Mayor intoned that people could go up to city hall and read the public postings or view the channel 10 bulletin board and that the staff does a more than adequate job getting information out to the public.

So there you have it; go to city hall each week, and read the public postings or watch the channel 10 bulletin board – never mind that most of us don’t even get channel 10. Or you could just view the agenda on the city website – after the vote has taken place.

Transparency is vitally important because it shines an uncomfortably bright light on some things that government would prefer kept in the dark. Apathy empowers government and if a mathematical equation should be derived expressing this relationship, it could be shown graphically that the less people know about their government, the more apathetic they become. Transparency is one of the few disinfectants that can keep and purify government and give citizens an active voice in how their money is spent.

Ironically,  shortly following this discussion on how $40 was too great an expense for a cash strapped city budget, what did we discuss? Kicking in between $12,000 and $23,000 dollars to help pave a joint use parking lot, that we don’t own, but us.

Sometimes being a councilman can be a real head scratcher.

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Economic Recovery Program Coming to Washmo ?

2/5/09

During the February 2nd, 2009 City Council meeting, we were presented a wish list of what is euphemistically called “shovel ready” projects. Shovel ready is important because it means these are projects that can be  quickly approved, already have engineering and DNR approval. In short, shovels can begin digging immediately once approved by the Obama administration.

Here is list of Round One Projects:

  • W. Main and Grand Ave. resurfacing      $169,300
    W. 8th resurfacing                                        $290,000
    Clay resurfacing                                            $155,250
    Old H/W 100 resurfacing                           $42,000
    Camp St. Bridge construction                    $450,000

Round Two Projects:

  • Front and Elm Streetscape                                        $2,500,000
    H/W 100 widening to the west                                 $15 million
    H/w A to YY ditch & shoulder work                          TBA
    Old H/W 100 replace bridge                                       TBA

John Rhodes tried to pass a resolution that would remove the Camp Street bridge as a project. Ultimately, his proposal failed to gain council support and the Mohesky version passed, including all recovery items.

My thinking was that I would rather have a bird in hand than 10 in the bush. I commented that if we were to get approval for the Camp Street Bridge, I would go back to my constituents and seek their guidance for an up or down vote as to whether or not we should except the funding.

Most of my objection to the Camp Street Bridge was cost and justification. Many of my arguments are neutralized if the bridge is built free and “free” is what I really want to talk about regarding this subject of “stimulus.”

In the 1930’s America had their own version of the Obama stimulus package and it was called the “New Deal.” While many like to reconstruct history and romanticize about FDR and his “New Deal,” reality sometimes takes a back seat to popularized myths.

By 1939 Roosevelt’s own Treasury Secretary, Henry Morgenthau, had realized that the New Deal economic policies had failed. “We have tried spending money,” Morgenthau wrote in his diary. “We are spending more than we have ever spent before and it does not work. . . . After eight years of this Administration we have just as much unemployment as when we started. . . . And an enormous debt to boot!”

The reality is that in early 1933, the unemployment rate was 25%. After 5 years of the “New Deal” and billions of “then” dollars spent, the unemployment rate was still near 20%. Big whoopty-do.

And as Obama attempts to create some 4 million government jobs for Americans, he will be re-tracing the exact same miss-steps and making the exact same mistakes as did FDR – growth will come from government not private industry, private industry that pays taxes and is the hallmark for innovation and true prosperity. Volumes have been written on how the New Deal eviscerated American competitiveness and created the hydra-headed monster of big business collusion.

In 1937 even Roosevelt admitted  the ineptness of his decision as a secondary depression crippled the economy. “The disappearance of price competition,” he said, “is one of the primary causes of the difficulties.”

I think, no, I know this is a bad idea. For a “very” short term gain, we will be strapping future generations of Americans with trillions of dollars in debt, as the treasury money presses go into hyper-drive. We will increase the government size in ways that can not even be imagined. If anyone thinks this is a good idea, go back and reread your history books. Look at New Jersey, now, a state that government has become the largest industry in that garden state, ditto for California. Citizens are fleeing those states faster than rats off of a sinking ship.

The same government that got us into this mess is now going to deliver us from it? I don’t think I am buying this horse hockey sandwich. This “Stimulus Package” was not good for America in 1933 and is not good for America in 2009.

Guy Midkiff. ………….. .COMMENTS BELOW SENT TO MY EMAIL ACCOUNT:

Guy,
I just wanted to vent a little on the Mayors comment on the Camp Street Bridge possibly being funded by the bailout funding. He said it will not cost the taxpayers anything. Where does he think its coming from? (THIS PORTION OF THE WRITERS EMAIL HAS BEEN REDACTED>>GWM)? It may be Federal Tax money or State Tax money but in the end it is still TAX MONEY.

Please forward.

Thanks,

• Washington: A Bright Future

3-28-08
Guy W. Midkiff

When someone runs for a political office, they usually speak in vague generalities, almost the way a fortune teller does, so that their message has broad appeal and collects the most favorable opinions possible, but rarely is there any substance in their message.

I am not a professional politician. I am an airline Captain, with a military background, and a business owner. I have a degree in economics (agriculture economics) from Texas A&M University. I make no excuses for my conservative beliefs and am a fervent student of Reaganomics. And unlike my opponent, I am very clear about what I stand for.

Specifically:

1. reduce the growth of government spending,
2. reduce marginal tax rates on income from labor and capital,
3. reduce regulation,
4. control the money supply to reduce inflation.

I believe the City of Washington has strayed dramatically from our fiscally conservative heritage and quite possibly may be causing serious problems for our future. On a micro-economic scale, we can do nothing about item “4.” But we can certainly address items 1-3, though.

Speaking of regulation, it comes in several forms. Regulation is necessary to ensure the public good, but can quickly over-reach. Here we must have balance. Many good construction jobs have been lost to surrounding communities because some builders find the Washington regulatory environment too restrictive. This is not my opinion, but based on actual conversations I have had with builders and developers.

Part of the problem comes from the fact that very few people in our city government has ever run a business or had to meet a payroll. No doubt, all are extraordinary people in their own right, but have never had to develop a budget or analyze complex projects based on returns on income or generally accepted accounting principles.

One only needs to read the local newspaper to see the recent and many wrong turns on capital expenditures, this city government has taken. We have and are spending money in areas that can either wait or be tabled permanently. The water sewer treatment plant is a classic example. No doubt we will need the plant, but…did we go about the financing of the project in the proper manner? Is it possible that we could have avoided the almost tripling of water/sewer rates and the $20M bond financing? Did we consider the dramatic affect a near tripling of water/sewer rates will have on those of us on fixed incomes??

Maybe we could have spent less on other projects and focused more on the basics – things we need, as opposed to things we want. The spending spree we have been on for the last 5 years is not conservative, it is big-city-ways, that will get us in big-city-problems. To show how far we have strayed, our city council actually tried to pass an ordinance requiring a certified arborist to trim our own trees – give me a break.

We must begin by rolling back the tax rate, each and ever year. Are we conducting city business as efficiently as possible? The first thing a corporation does when belt tightening begins is slashing costs. One dollar cut from cost is significantly more valuable than one dollar of tax revenue raised. Dollars cut goes directly to the bottom line, one tax dollar brought in, does not translate to one full dollar because of the inherent inefficiencies of the tax collecting and distribution process. So, taking in less money will force new efficiencies in the system.

Also, while we lavish dollars on large corporations through corporate welfare handouts, let’s not forget that one-dollar spent on an indigenous business keeps three times as much of that dollar in the local community, than does a dollar spent on a nation chain. (The local business: buys a local car, eats in a local restaurant, and uses a local bank, doctor, lawyer and mechanic. I could go on and on.

Also, never forget that that fancy fortune 500 corporation will not hesitate giving pink slips to 500 people and moving their jobs to Mexico – over night.

So go ahead and build them their $6.5 Million dollar runways, but never forget the vital importance of local businesses.

As we move into the future, I would like to see varied businesses develop here. We all ready have:

• Outstanding work ethic.
• Natural proximity to the Missouri River and a major interstate.
• Geographically centered.
• In place banking industry.
• In place industrial park.
• Dramatically growing medical facilities.
• Nearby university.

Some new areas we should consider:

• Bio-technology
• Medical-technology
• Hi-Tech
• Communication
• Research
• Alternative Energy

We should aggressively pursue developing the infrastructure and framework to attract such companies. I would like to see a venture capital forum convene here next year and begin committing to the type of venture capital such businesses need for seed money.

A fresh look should be given to developing Initiative Teams to develop new, successful, growth strategies. We absolutely must make sure our core competencies are well represented at the state and federal levels.
Washington must be seen as a business friendly community that not only caters to corporate America, but also the boutique and entrepreneurs that will retrench larger portions of their profits, back in our community.

If we want to keep our child and children’s children, in our community, we simply must make a huge commitment to advanced educational programs.

Better Education = Better Jobs

Our Future is Bright!
Guy W. Midkiff

• Red Light Cameras Increase Accidents

•Arizona: Speed Camera Under Investigation in Fatal Crash[click]
•Rome, Georgia Red Light Cameras Increase Wrecks, Profit[click]
•Bakersfield, California Red Light Camera Accidents Up[click]
Stockton, California Report Shows Accidents Jump With Cameras
Houston Red Light Cameras Fail to Prove Safety Benefit

Red-Light Cameras Increase Accidents: 5 Studies That Prove It

From the National Motor Association: January 8th, 2008 Posted in Red-Light Cameras The NMA has been contending that red-light cameras (RLCs) are a detriment to motorist safety for many years.

People, both in the media and in the general public, often dismiss this claim as opinion, suggest that there isn’t enough data available yet, ask why we support people who run red lights (we don’t), or write off the organization as being biased.

The only way to combat this is through hard facts and independent research. Luckily, we have both.

We reiterate our challenge: If it’s not about the money, then prove it.

No community has accepted, which shouldn’t be surprising considering the facts.

Here are five independent studies that demonstrate the failure of red-light cameras as a safety measure:

1) A Long Term Study of Red-Light Cameras and Accidents
David Andreassen
Australian Road Research Board
February, 1995

This study examined the long term effect on accident-types of red-light cameras at 41 signalized intersections in Melbourne, Australia. The cameras were installed in 1984, and reported accidents for the period 1979 to 1989 were used in the detailed analysis.

Quotes from the study:

“The results of this study suggest that the installation of the RLC at these sites did not provide any reduction in accidents, rather there has been increases in rear end and adjacent approaches accidents on a before and after basis and also by comparison with the changes in accidents at intersection signals.”

“There has been no demonstrated value of the RLC as an effective countermeasure.”

Download The Full Study

2) The Impact of Red Light Cameras (Photo-Red Enforcement) on Crashes in Virginia
Virginia Transportation Research Council
June 2007

The Virginia Transportation Research Council released a report expanding upon earlier research into the safety effects of red light cameras in Virginia. Despite showing an increase in crashes, this study was instrumental in the return of red-light cameras to the state of Virginia. With a proven negative safety impact, the clear incentive to bring back the cameras was money.

Quotes from the study:

“After cameras were installed, rear-end crashes increased for the entire six-jurisdiction study area… After controlling for time and traffic volume at each intersection, rear-end crash rates increased by an average of 27% for the entire study area.”

“After cameras were installed, total crashes increased.”

“The impact of cameras on injury severity is too close to call.”

“Based only on the study results presented herein and without referencing other studies, the study did not show a definitive safety benefit associated with camera installation with regard to all crash types, all crash severities, and all crash jurisdictions.”

Download The Full Study

3) The Red-Light Running Crisis: Is It Intentional?
Office of the Majority Leader
U.S. House of Representatives
May 2001

This report was prepared by former House Majority Leader Dick Armey’s staff. It looks at the problems of red-light cameras and how to really deal with traffic-light violations.

Quoted from the study:

“And one should ask the question, if there’s a problem with an intersection, why don’t safety engineers in the field just go out and fix the timing?

In fact, before red light cameras arrived in the United States, that’s exactly what our regulations instructed them to do. If too many people enter on red at an intersection, engineers were supposed to lengthen its yellow time. But in the year that red light cameras first started collecting millions in revenue on our shores, those entrusted with developing our traffic safety regulations dropped the requirement to fix signal timing, instructing engineers to “use enforcement” instead.

Indeed, according to the Federal Highway Administration, these problem intersections serve as a great location to hold a press conference. The agency offers a script for local officials to exploit a tragically mistimed intersection to call for the installation of additional red light cameras and tout their safety benefits.

But none of the reports that are supposed to tell us that red light cameras are responsible safety benefits actually say that. First, they dismiss increases in rear-end collisions associated with red light cameras as “non-significant,” despite evidence to the contrary. Second, they do not actually look at red light intersection accidents. The latest accident study in Oxnard, California, for example, only documents accident reductions “associated with”—not caused by— red light cameras. Although that statement has little scientific value, it does have great marketing appeal if you don’t look too closely.

Every study claiming red light cameras increase safety is written by the same man. Before joining the Insurance Institute for Highway Safety (IIHS), he was a top transportation official in New York City at the time the city began looking into becoming the first jurisdiction in the country to install red light cameras. In other words, the father of the red light camera in America is the same individual offering the “objective” testimony that they are effective.

A similar conflict of interest affects those entrusted with writing safety regulations for our traffic lights. The Institute of Transportation Engineers is actively involved in lobbying for, and even drafting legislation to implement, red light cameras. They are closely tied to the Insurance Institute for Highway Safety (IIHS), which in turn is funded by companies that stand to profit handsomely any time points are assessed to a driver’s license.

In short, the only documented benefit to red light cameras is to the pocketbook of local governments who use the devices to collect millions in revenue.”

Download The Full Study

4) Investigation Of Crash Risk Reduction Resulting From Red-Light Cameras In Small Urban Areas
Mark Burkey, Ph.D. & Kofi Obeng, Ph.D.
North Carolina Agricultural & Technical State University
July 2004

A study prepared by the North Carolina A&T State University’s Urban Transit Institute for the United States Department of Transportation.

Quoted from the study:

“Using a large data set, including 26 months before the introduction of RLCs, we analyze reported accidents occurring near 303 intersections over a 57-month period, for a total of 17,271 observations. Employing maximum likelihood estimation of Poisson regression models, we find that:

The results do not support the view that red light cameras reduce crashes. Instead, we find that RLCs are associated with higher levels of many types and severity categories of crashes.”

Download The Full Study

5) Evaluation of the Red-Light-Camera-Enforcement Pilot Project
Ontario Ministry of Transportation
December 2003

This report from Ontario, Canada’s Ministry of Transportation’s concluded that jurisdictions using photo enforcement experienced an overall increase in property damage and fatal and injury rear-end collisions. The report also concludes that there was an overall reduction in serious accidents and angle collisions. However, a closer look at the data found in this government-sponsored report show that intersections monitored by cameras experienced, overall, a 2 percent increase in fatal and injury collisions compared to a decrease of 12.7 percent in the camera-free intersections that were used as a control group (page 21).

In fact, the non-camera intersections fared better than the camera intersections in every accident category.

Quoted from the study:

“Exhibit 2 indicates the red light running treatments have:

* Contributed to a 4.9 per cent increase in fatal and injury rear-end collisions; and
* Contributed to a 49.9 per cent increase in property damage only rear-end collisions.

The rear-end collision results are similar to findings in other red light camera studies.”

Download The Full Study

This is by no means an exhaustive list. You can find more studies on the NMA website here: Photo Enforcement Studies.

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• Red Light Camera MYTH



Guy W. Midkiff
February 27, 2008
Red Light Camera Myth

The following is the result of a large statistical study done on red light cameras (RLC’s). While many communities make anecdotal claims of magical reductions in accident rates at intersections, these results are most often self-serving and anything but scientific. I am only paraphrasing the entire document of several hundred pages. You are welcomed to go to the North Carolina A&T State University School of Business and Economics to download the full study. (click here to download entire pdf file )

Executive Summary

This paper analyzes the impact of red light cameras (RLCs) on crashes at signalized
intersections. It examines total crashes and also breaks crashes into categories based on both severity (e.g., causing severe injuries or only property damage) and by type (e.g., angle, rear end). Prompted by criticism of the simplistic methods and small data sets used in many studies of red light cameras, we relate the occurrence of these crashes to the characteristics of signalized intersections, presence or absence of RLC, traffic, weather and other variables.

Using a large data set, including 26 months before the introduction of RLCs, we analyze reported accidents occurring near 303 intersections over a 57-month period, for a total of 17,271 observations. Employing maximum likelihood estimation of Poisson regression models, we find that:

The results do not support the view that red light cameras reduce crashes. Instead, we find that RLCs are associated with higher levels of many types and severity categories of crashes.

An overall time trend during the study indicated that accidents are becoming less frequent, about 5 percent per year. However, the intersections where RLCs were installed are not experiencing the same decrease. When analyzing total crashes, we find that RLCs have a statistically significant (p<0.001) and large (40% increase) effect on accident rates. In addition, RLCs have a statistically significant, positive impact on rear-end accidents, sideswipes, and accidents involving cars turning left (traveling on the same roadway).

The one type of accident found to experience a decrease at RLC sites are those involving a left turning car and a car traveling on a different roadway. When accidents are broken down by severity, RLCs were found to have a statistically significant (p<0.001) and large effect (40-50% increase) on property damage only and possible injury crashes. There was a positive, but statistically insignificant estimated effect on severe (fatal, evident, and disabling) accidents.

These results run contrary to the many studies in the RLC literature. Previous studies have sometimes found an increase in rear-end accidents, but often find offsetting decreases in other types of accidents. While this study incorporated many advances in methodology over previous studies, additional work remains to be done. Because accident studies rarely use a true experimental design and data are not perfectly observable, additional careful study of RLCs is warranted to verify our results.

*This is an update to the October 2003 version of this report. Using the latest available data, we include an additional 12 months of accident data. Additionally, several data coding errors were discovered in the original data set, and corrected for this report. Therefore, results from the October 2003 report should be disregarded.

1.1 Problem Statement
Nearly half of all accidents in the U.S. occur at or near intersections (US DOT, 1999, p. 50). Consequently, many studies have been conducted that relate various aspects of intersections to safety and accident rates to develop improvement strategies. One such strategy is automated enforcement of traffic signals using cameras, i.e., red light cameras (RLCs), which has been suggested and used in some cities to reduce red light running. The potential of these cameras in reducing accidents and improving safety have been reported in few studies, with most studies reporting mixed results. For example, Retting et al. (1999a), Retting and Kyrychenko (2002), and Milazzo et al. (2001), using before and after data found RLCs reduce crashes at intersections. On the other hand, Andreassen’s (1995) longitudinal study spanning a 10-year period found reductions in crashes at high accident sites and increases in crashes at low accident sites. McFadden and McGee (1999) add another twist in their review of studies on automated enforcement of red light running.

While accepting reductions in violations and cost savings as benefits, they suggested that improved methodology and more data are needed to validate and quantify the effects of RLCs on crashes, thus casting some doubts on prevailing views on the benefits of RLCs.

__________________________________________________________________________
The following gives one of the best studies I have yet read on RLC’s:

If you haven’t already done so, please read highwayrobbery.net’s Home page

Back to highwayrobbery.net’s Links page

Cong. Armey’s Website & His Report: “The Red Light Running Crisis – Is It Intentional?
___________________________________________________________ Also, if you follow the following link, you will find one of the better arguments against RLC’s. I will caution the reader that the link will take you to an ACLU website, where the data was compiled. As a disclaimer, I have major philosophical differences with this organization, but I do believe the information, there, to be accurate. CLICK HERE

For another report, go to the Washington Post: DC Red Light Cameras fail to Reduce Accidents.

• Windfalls

pigout3thumbnail.jpg
2-10-08
Guy W. Midkiff
*****

In December, 2007, the city of Washington reported an unexpected windfall of $420,000 as a result of resolved telecom litigation.

The funds will be used for:

1) Merit Pay Raises Reinstated for city employees, $115,00 (Click here for full story in local news paper).

2)”Relieve pressure on the city budget.”

One of the issues that I hear from people in Ward 3 is that they want to keep their children in the city they grew up in, after finishing school. Others want to have more volunteerism in the community.

What if we offered incentives for our children to return to our hometown after finishing college. We could offer scholarships, grants or special loans that budding entrepreneurs could use to invest in the community in new technology companies, medicine, or engineering, instead of being held corporate hostage to large companies that demand airports and other freebies before they agree to move here.

And instead of using the money in ways that some have described as patronage programs for city employees, we invest in new volunteer programs such as one that could make sure our seniors and handicapped are looked after.

It is worth debating whether or not more consideration should have been given to doing more with “our” windfalls than using it to feed the government.

Remember, government works for you, not the other way around.

• Camp Street Bridge?

Does Camp Street Bridge Makes Sense?
Guy W. Midkiff
Saturday, January 26, 2008

Washington, Missouri: Does the Camp Street justify the cost (about $1million tax payer dollars) of its resurrection? When one looks at a Map of Camp Street, it is clear that there are some problems with the project:

  • It appears to be a “Bridge to No Where.” It will not provide conduit traffic flows North and South, to make traffic arteries. You will not be able to go in a straight line from 5th Street to Highway 100.
  • It will increase, substantially, traffic on local neighborhood streets, increasing the possibility of children being hit by speeding cars and stress on local neighborhoods.
  • As the project stands now, it does not pass my litmus test of, “Is it good for Washington?”
  • “Safety.” This logically can not be the default answer for every project the city decides to pursue. And safety, as the final arbiter, works both ways. There is a very real and increased chance that additional traffic through residential areas, will result in a child being injured by a car that would have otherwise taken a different route.

Guy W. Midkiff

Published in: on January 26, 2008 at 11:04 am  Comments (2)  

• Open City Council Meetings

Open City Council Meetings, Vision 08
by Guy W. Midkiff
Saturday, January 26, 2008

Washington, Missouri: Currently, City Council meeting minutes are made available via the City Website and are in document files that are down loadable. It is virtually impossible to capture the full texture of a City Council meeting by just reading minutes. There are examples of terse responses from Council Members and the referencing minutes that failed to mention the specific Councilman’s name. Two hour meetings reduced to a couple pages of minutes begs the question of accuracy and detail.

I feel it important that “all” citizens be given the right and opportunity to view these proceedings on video. It may not be convenient for the people to make a meeting or view the live broadcast.

I would move to insure all meetings are recorded on DVD and made available to the public through library check-out and master copies archived in a fire proof vault.

I would also move to make the proceedings viewable off of the internet through “podcast” technology or other similar formats.

Guy W. Midkiff

Published in: on January 26, 2008 at 10:35 am  Leave a Comment  
Tags: ,

• Rep. Threlkeld on Property Tax Increases

Dear Mr. Boland:

Thank you for your letter expressing your concern regarding the difficulties we all face as we continue to be required to pay higher and higher property taxes without a vote of the people. I agree with many of your observations and am frustrated, too.

When I came to the Missouri General Assembly over three years ago, I had high hopes of playing a major role in correcting this problem. I asked for and received appointment to the Senior Security Committee. This committee handled the hearings for multiple bills that would have corrected the property tax problem. I had a ringside seat for every bill and watched as the education lobby opposed every one.

Though this opposition could not derail my support for property tax reform, unfortunately, I cannot say the same for many of my colleagues. I hope that the voters in each of their districts will ask them why they are not willing to do what is fair and what is right. It is still possible to provide healthy funding for our public schools using other sources of revenue, and I have not given up on eventual reform. While the Legislature is too weak to act, there appears to be two more options.

First, there is a ballot initiative which may go to a vote of the people in November if enough petition signatures are obtained. I’m told that this initiative would eliminate use of the local property tax for school funding, and require the state to provide all funding for public schools.

Second, while I am not a fan of lawsuits, this issue appears to me to be ripe for one. Article X of the Missouri Constitution appears pretty clear about not taxing Missourians at higher levels without their approval. I have been researching and collecting information regarding this. If all else fails, litigation may be the last option. I’ll know more after the November elections.

Sharing your frustration,

Rep. Kevin Threlkeld

Published in: on January 21, 2008 at 11:01 pm  Leave a Comment  

• Hancock Amendment Loophole Explained

Guy W. Midkiff
1-20-08
Guy W. Midkiff

Hancock Amendment Loophole Explained

Taxing districts have a tax rate ceiling and a tax rate levy. The tax rate ceiling is the maximum authorized voter approved levy. However, taxing districts may levy a rate below their tax rate ceiling. During a reassessment year, if the taxing district levies a rate below their tax rate ceiling, the taxing entity could leave the rate the same on the sometimes higher assessments. The Hancock Amendment requires that the tax rate ceiling roll back, not necessarily the tax rate levy. Senator Gibbons and other legislators are trying to close this loophole by requiring taxing districts, in a reassessment year, to roll back their prior year’s tax rate levy regardless if the taxing district levied a rate the same as the ceiling. In a non-reassessment year, the taxing district could increase their tax rate levy to their tax rate ceiling. The intention behind this change is to prevent the process of reassessment, which is the equalization of the tax burden of the property owners in taxing districts, from causing tax increases.

An example is as follows:

Tax district X has a 2006 assessed valuation of $100,000,000, a tax rate of $1.00, and a tax rate ceiling of $1.50.

Tax Rate: ($100,000,000/100) X $1.00 = $1,000,000

In 2006, tax district X collected $1,000,000.

Tax Ceiling: ($100,000,000/100) X $1.50 = $1,500,000

In 2006, the taxing district could have collected $1,500,000 if they levied a rate equal to their tax rate ceiling.

In 2007, the properties in taxing district X were reassessed at a value of $125,000,000. $5,000,000 of the increase is new construction and improvements, which is not factored into the rollback, and $20,000,000 of the increase is due to the value of the properties increasing in value. The growth in the consumer price index in 2007 was 2.6%.

Under current law, only the tax ceiling is required to rollback in accordance with the Hancock Amendment and tax district X’s ceiling would rollback as follows:

$1,500,000 X 1.026 = $1,539,000

$125,000,000 – $5,000,000 = $120,000,000

$1,539,000/$120,000,000 = .01285

.01285 X 100 = $1.285

The tax rate ceiling for tax district X would be $1.285. Tax district X could legally keep the tax rate $1.00 and receive a windfall from reassessment.

Senate Bill 711, however, would require the taxing district to rollback its 2006 tax rate as if it were its tax rate ceiling in a reassessment year.

$1,000,000 X 1.026 = $1,026,000

$125,000,000 – $5,000,000 = $120,000,000

$1,026,000/$120,000,000 = .00855

.00855 X100 = $.855

Under Senate Bill 711, tax district X could have levied a maximum of $.855 in 2007.

The taxing district would be able to levy up to its tax rate ceiling in the non-reassessment year.

Another loophole that Senator Gibbons is trying to close relates to the manner in which taxing districts apply tax increases.

Currently, taxing districts can apply new voter approved levies to future and unknown assessments, many times reaping an unaccounted tax increase in addition to the newly approved tax increase. Senate Bill 711 closes this loophole by requiring taxing districts to apply the new approved levy to the assessments most recently certified by the State Tax Commission.

An example of how this works is as follows:

In 2006, tax district Y had an assessed valuation of $500,000,000, a tax rate of $1.00 and a tax rate ceiling of $1.00.

In November of 2006, tax district Y submits a tax increase to its voters which passes, increasing its tax rate ceiling to $1.25 for the 2007 tax year.

$500,000,000/100 = $5,000,000

$5,000,000 X $1.00

$5,000,000 X $1.25 = $6,250,000

Residents of tax district Y approved a tax increase of $1,250,000 for a total of $6,250,000.

In 2007, the properties in tax district Y are reassessed producing a total assessed valuation of $625,000,000. $25,000,000 of the increase in assessed value is due to new construction and improvements and $100,000,000 of the increase in assessed valuation is due to the value of the properties in the district increasing in value.

Legally, however, because of how state law is currently written, taxing districts can apply the new approved $1.25 levy to 2007 assessments. The $1.25 tax rate ceiling does not rollback in 2007 to account for the changes in assessed valuation.

$625,000,000 -$25,000,000 = $600,000,000

$600,000,000/100 = $6,000,000

$6,000,000 X $1.25 = $7,500,000

The voters of tax district Y have unsuspectingly approved a tax increase of $2,500,000, $1,250,000 more than they thought they had approved.

Senate Bill 711 would require the $1.25 tax rate for tax district Y to rollback according to the increases in assessed valuation in 2007.

$6,250,000 X 1.026 = $6,412,500

$6,412,500/$600,000,000 = .0106875

.0106875 X 100 = $1.0688

Under SB 711, the most the tax district Y could levy in 2007 would be $1.0688, not $1.25.

This loophole has been in effect since 2003 (when the interpretation of the law was changed, the result of an Attorney General memo, 107-2003). Taxing districts have taken advantage of the loophole in the past, but SB 711 closes this loophole and ensures that taxing districts will not gain windfalls from reassessment.

• Hancock Amendment Loophole

Missouri’s Hancock II Amendment:

The Case For Real Reform

by Dean Stansel

Dean Stansel is a fiscal policy analyst at the Cato Institute.


Executive Summary

In November 1980 Missouri voters approved the Hancock amendment, a constitutional amendment intended to prevent the Missouri state budget from growing faster than the Missouri family budget. Since then the effectiveness of that amendment has been eroded as legislators have discovered ways to evade its restrictions by exempting certain revenues from the cap. Those evasions have cost Missourians $5 billion in higher taxes.

On November 8 voters in Missouri can repair the Hancock amendment by enacting the Hancock II amendment. Because it more precisely defines “total state revenue,” Hancock II would be more difficult for politicians to evade.

The opposition’s scare tactics–claiming that Hancock II will require a $1-billion tax refund and necessitate massive spending cuts and service disruptions–are inaccurate and misleading. Any reduction in spending that may be necessary to comply with Hancock II would be only about one- eighth the size of the opposition’s alarmist predictions.

Introduction

Missouri is one of 23 states that have some form of tax and expenditure limitation (TEL) to restrict the growth of the state budget. In November 1980 Missouri voters approved a constitutional amendment–called the Hancock amendment after its sponsor, Mel Hancock–that prevents the state government from increasing the percentage of residents’ incomes taken as state revenues without voter approval.

Like most TELs, the Hancock amendment was initially effective at restraining the growth of state taxes and spending. However, over the years that effectiveness has been eroded as legislators–aided by sympathetic court rulings– have discovered ways to evade the voter-imposed restrictions by exempting certain revenues from the cap.(1) For example:

* In 1982 only 2 percent of Missouri state revenue was considered exempt from the revenue limit. In 1993 the uncapped portion was nine times higher, or 18 percent.

* Increasing the amount of revenue excluded from the revenue limit has allowed Missouri’s state politicians to collect $5 billion more in revenue over fiscal years 1982- 93, than the Hancock amendment would have permitted.

* Since the Hancock amendment took effect, state own- source revenue, on a per capita basis, has risen 56 percent, the third fastest rate of state tax growth in the nation.

* Though state revenue was not supposed to rise faster than Missouri residents’ incomes, between 1982 and 1993 state revenue grew by 134 percent while Missouri personal income grew by only 112 percent.

* In FY95 alone, due in part to state senate bill 380– a $310-million tax hike passed in 1993 but not approved by the voters–state revenue will rise 9.4 percent, more than double the 4.1 percent rise in Missourians’ incomes.

Many Missouri residents would like to restore the integrity of the original Hancock amendment (Hancock I hereinafter). To that end, a new amendment, Hancock II, has been placed on the ballot this year. Because it provides a more precise definition of “total state revenue”–the item being limited–Hancock II would plug the loopholes that have substantially undermined the effectiveness of Hancock I.

One of the leading critics of Hancock II has claimed that the measure will require an immediate taxpayer refund of $1 billion and that it will “completely change the way the state does business.” However, as this analysis shows, the opposition’s scare tactics are inaccurate and misleading. Any reduction that might be necessary to comply with Hancock II’s restraints would be only about one-eighth the size of the opposition’s alarmist predictions. Such a cut would not be as much evidence that Hancock II is a draconian measure as it would be indicative of just how successfully state politicians have been able to evade the voter-imposed restrictions of Hancock I. Hancock II would simply enforce the constitutional requirement that the Missouri state budget not grow faster than the Missouri family budget.

How Politicians Avoid the Constraints of Voter-Imposed Tax and Spending Limits

In 1978 the passage of California’s revolutionary Proposition 13–which rolled back property taxes and severely restricted their rate of annual growth–launched a grassroots citizens’ tax revolt that swept across the nation. By 1982, 20 states–including Missouri–had adopted some form of TEL. Although those measures were initially effective at reining in the growth of state government, over the years their effectiveness has been eroded as big-spending politicians have discovered ways to evade the restrictions.

For example, since many TELs apply (or are interpreted as applying) to only the general fund, one common way of circumventing a spending cap has been to set up new “special funds,” which, by definition, are exempt from the cap. Similarly, state legislatures have enacted “earmarked” taxes, the revenue from which is set aside in a separate fund, exempt from most voter-approved caps. Such end-runs around the will of the people have eviscerated nearly all of the Proposition 13-era tax and spending limits, including Missouri’s Hancock I.

Evidence that the effectiveness of TELs declines over time can be found by examining spending growth in the 15 states that had binding TELs in place by 1980.(2) From 1980 to 1985 the real growth rate of per capita state spending in those states was 3.5 percentage points below the U.S. average (6.3 percent vs. 9.8 percent). However, from 1985 to 1990 spending in those states actually rose faster than the U.S. average (16.7 percent vs. 16.3 percent).(3)

It seems that no matter how explicitly voters try to constrain the tax and spending powers of state government, politicians eventually find ways to circumvent those constraints.

Missouri’s Hancock Amendment (1980): A History of Evasion

Missouri’s original Hancock amendment, passed by the voters in 1980, has been routinely thwarted by the Missouri legislature. Hancock I was intended to prohibit the state legislature from increasing the percentage of Missourians’ income taken as state revenue. (In that way it was similar to many of the other Proposition 13-era TELs.) Beginning with fiscal year 1982 (the first full fiscal year after Hancock I passed), that ratio was not allowed to rise above its level in FY81, when total state revenue consumed 5.64 percent of personal income.(4) In each fiscal year thereafter, the revenue limit was to be determined by multiplying the relevant personal income amount by the original ratio of 5.64 percent.(5)

Hancock I defined the specific item it intended to limit, total state revenue, as follows.

“Total state revenues” includes all general and special revenues, licenses, and fees, excluding federal funds, as defined in the budget message of the governor for fiscal year 1980-1981. Total state revenues shall exclude the amount of any credits based on actual tax liabilities or the imputed tax components of rental payments, but shall include the amount of any credits not related to actual tax liabilities.(6)

Apparently, that language was not explicit enough for state officials. In its first annual review of Hancock I, the state Auditor’s Office described the situation as follows.

The amendment, beyond the language above [section 17 (1), above], is not specific as to the types of revenues that are included or excluded in determining TSR [total state revenue]. Further, the amendment does not specify the methodology to be used in determining TSR. Consequently, the division (7) [Missouri budget office] established procedures to calculate TSR. The division also had to make certain decisions as to items that would be either included or excluded, except for items ruled on by the attorney general or the Missouri courts. (8)

Much of the confusion stemmed from the failure of the legislature to enact implementing legislation. That left unanswered the question of which agency was responsible for enforcing and monitoring the state’s compliance with the amendment. The Missouri budget office, an executive-branch agency under the control of the governor, took upon itself the responsibility of fulfilling that crucial role. Nevertheless, the state Auditor’s Office has also tried to define the revenue limit by producing its own annual reports on Hancock I. Those reports have often been in disagreement with the findings of the budget office. As a result, there is no consensus on what “total state revenue” is each year, nor on whether or how much the limit has been exceeded. Much of that confusion could have been avoided if the legislature had simply passed implementing legislation, something it still has not done after 14 years.

The problem was complicated by the passage, in November 1982, of Proposition C, the first major voter-approved tax hike since the passage of Hancock I. Proposition C was a $0.01 sales tax hike, 1/2õ of which was earmarked to roll back local property taxes and the other 1/2õ of which was devoted to public schools.(9) The Missouri budget office asserted that since Proposition C was approved by the voters, it was not subject to the revenue limit. The state Auditor’s Office concurred, stating that “including voter approved increases as TSR achieves the illogical result that voters agreed to additional taxes so they could receive a refund.”

That analysis misses the point. Proposition C did not include a provision excluding its revenue from the Hancock limit. Thus, all that voters approved in passing Proposition C was a statutory $0.01 sales tax hike earmarked for particular purposes. They clearly did not endorse excluding that revenue from the limit. Further, as a statute, Proposition C can have no bearing on the constitutional revenue limit that voters approved when they passed the Hancock amendment in 1980. If Proposition C had caused total revenue to exceed the limit, the legislature could have complied with Hancock I by cutting other nondedicated taxes.

Nevertheless, the Missouri Supreme Court, in Goode v. Bond (1983), agreed with the budget office’s contention that voter-approved tax increases–even statutory ones–should not be subject to the revenue limit.(10) That ruling created a loophole in the Hancock amendment. Further, it indicated to state politicians who disliked the constitutional constraints of the Hancock amendment that they could evade those constraints without actually amending the constitution. That could be achieved by sending statutory tax increases–for example, ones dedicated to high-priority programs such as schools, roads, and prisons–to the voters for approval. If approved, those sources of revenue, as Proposition C was, would be exempt from Hancock’s constitutional revenue cap. In essence, Goode v. Bond told politicians that they could amend the state constitution with a statute.

Not surprisingly, since that court ruling, numerous tax-hike proposals have appeared on the ballot. Three such proposals were approved by the voters as constitutional amendments, the language of which clearly excluded their revenues from the Hancock revenue limit.(11) However, like Proposition C, Proposition A–a motor fuel tax–was statutory and did not contain any provision for excluding its revenue from the Hancock revenue limit. Thus, although voters did approve those specific tax hikes, they did not approve excluding those revenues from the limit. Stated differently, by approving Propositions A and C, voters did not approve an overall increase in the tax revenue limit under Hancock, though in effect that is what they have gotten.

In FY95 alone those two sources of revenue that the court excluded from the limit are expected to cost Missouri residents over $650 million in extra taxes.(12) That amounts to $125 in higher taxes for every man, woman, and child in Missouri. The next section will shed more light on just how damaging the court’s ruling in Goode v. Bond has been to Missouri’s taxpayers.

The Cost of TEL Evasion

Most observers agree that the current tax burden in Missouri is lower than it would have been without the Hancock amendment.(13) Nevertheless, over the years, thanks to the loophole described above, the amendment’s effectiveness at restraining the growth of taxes and spending has been substantially reduced. As a result, despite the fact that voters approved a constitutional limit to the growth of the state budget, taxes and spending have continued to climb in Missouri.

As Table 1 shows, from 1982–the year the Hancock amendment went into affect–to 1992, Missouri’s spending growth far outpaced that of its Plains State neighbors and the rest of the country.(14) After adjusting for inflation:

* Missouri’s state budget grew by 63 percent–the 15th fastest in the United States–while the Plains State average grew by only 40 percent.

* Per capita state spending in Missouri rose by 54 percent–8th fastest in the nation–compared to only 31 percent for the Plains State average.

* State spending as a share of personal income rose by 22 percent in Missouri–11th fastest in the country–while the Plains State average rose by only 13 percent and the U.S. average by only 12 percent.

As Table 2 indicates, the same pattern holds true for state revenue, which Missouri residents voted to cap in 1980.(15) From 1982 to 1992, after adjusting for inflation:

* Total own-source revenue in Missouri rose by 65 percent–15th fastest in the U.S.–while the Plains state average rose by only 45 percent.(16)

* On a per capita basis, state own-source revenue in Missouri climbed 56 percent–3rd fastest in the nation– compared to only 31 percent for the Plains State average.

* State own-source revenue as a share of personal income soared by 24 percent in Missouri–10th fastest in the country–while the Plains State average rose by only 13 percent and the U.S. average by only 10 percent.

Clearly, taxes and spending continue to spiral out of control even with the Hancock limit. That growth of taxes and spending is not what Missouri voters intended when they approved Hancock I in 1980. Excessive growth has been caused largely by the court’s ruling on the definition of revenue, which excluded revenue from voter-approved tax hikes. Table 3 shows the effect of that redefinition of “total state revenue.” (Note: these figures are in current dollars, that is, they have not been adjusted for inflation. Thus the accumulated cost to the taxpayer of evasions of the Hancock limit is actually substantially larger than it appears herein.)

* The percentage of state own-source revenue(17) considered exempt from the cap skyrocketed from 2 percent in 1982 to 22 percent in 1987. Since then that figure has leveled off at about 18 percent, nine times higher than in 1982.

* Over the period FY1982-93, the redefinition of “total state revenue” exempted $4.9 billion in state revenue from the cap.

As Table 4 shows that , contrary to the voters’ stated intent in passing the Hancock amendment, political end-runs and anti-taxpayer court decisions have allowed state revenue growth to significantly outpace the growth of Missourians’ personal income. (Note: as in Table 3, these figures are in current dollars.)

* Total state revenue was supposed to increase only as fast as Missouri residents’ incomes. However, between 1982 and 1993 state revenue grew by 134 percent while Missouri personal income grew by only 112 percent.(18)

* Beginning in FY83, only one year after the Hancock amendment went into effect, total state revenue has exceeded the cap every year. The most recent final budget numbers show that the cap was exceeded by nearly $400 million in FY93 alone.(19)

* If the intended definition of “total state revenues” had been adhered to, Missouri residents would have paid $3.7 billion less in taxes over the period 1982-93.(20)

* In FY95 alone, due in part to Senate Bill 380–a $310-million tax hike for education, passed, but not approved by the voters, in 1993–state revenue will rise 9.4 percent, more than double the 4.1 percent rise in Missourians’ incomes.(21)

In sum, state politicians have been very successful at ignoring the original Hancock amendment’s call for budget discipline. That amendment merely asked the state government to prevent the budget from growing faster than Missouri residents’ ability to pay for it. Indeed, several states have more stringent caps, such as those that restrict revenue growth to the rate of population growth plus inflation. Nevertheless, even Missouri’s modest provision could not be adhered to. Despite the clear pattern of abuses, Missouri’s legislators continue to claim that the Hancock revenue limit has never been exceeded.(22)

Hancock II: Requiring Voter Approval for New Taxes

In Missouri, as in some 20 other states, politicians have thwarted the will of the people by plainly violating voter-imposed tax and spending limits. In many of those other states voters have approved new amendments to plug the loopholes that were created in their existing TELs. For example, just last year voters in Washington state approved an amendment that limits the growth of state spending to the growth rate of population plus inflation. A similar measure was passed in Colorado in 1992.(23)

This November Missouri’s taxpayers will have an opportunity to tighten the constraints of Hancock. As the previous section has documented, the original Hancock amendment has been severely weakened, costing Missouri’s taxpayers billions of dollars in higher taxes over the past decade. Those taxpayer losses continue to rise every year. In an attempt to restore the integrity of the original Hancock amendment, the Hancock II amendment has been offered. Hancock II would close many of the loopholes that court rulings and political end-runs have created over the years, thereby making it more difficult for politicians to defy the will of the people.

The new amendment is very similar to the first one. However, as have taxpayer activists in many states, those in Missouri have learned from past experience and written an amendment that is more precise and thus more difficult for politicians to evade. Hancock II would make two main changes:

1. Its definition of “total state revenue”–the specific item being limited–is significantly more precise. Unlike the original amendment, Hancock II explicitly provides that the constitutional revenue limit cannot be exceeded simply by the voters’ passing a statutory tax hike (as occurred with Propositions C and A).

2. As did the original, Hancock II contains a voter approval requirement. If politicians wish to increase the percentage of residents’ incomes taken as state revenue, they must first obtain the permission of the people who pay those taxes, the voters of Missouri. Such provisions are increasingly popular; they have recently been adopted by several other states and will be on the ballot in many more this year and in the years to come.

The Opposition to Tax Restraint

Despite the reasonableness of measures such as Hancock II, which cap revenue at the rate of income growth, the opposition to such measures is enormous. The most vocal opposition comes from those who benefit directly from government spending, including career politicians, lobbyists, teachers’ unions, and government workers. Since those groups have a stake in seeing that government revenue and spending grow, they have tended to campaign strongly against fiscal limitations in Missouri and elsewhere.(24) To overcome the populist appeal of TELs, the opposition frequently resorts to trying to scare voters about the consequences of such measures. They often claim that the TEL would force politicians to make massive cuts in essential government services.

In Missouri the opposition to Hancock II is led by various Missouri educational associations, public employee unions, and organizations that do business with the state. Those groups have organized and funded the Committee to Protect Missouri’s Future. That group commissioned a report estimating the impact of Hancock II on the state budget. The report, written by James Moody, a lobbyist in Jefferson City, has become known as the Moody report. Moody’s clients have included several organizations seeking to do business with the state government (for example, firms seeking contracts or leases with state agencies). Moody has worked as a state government administrator for both Democratic and Republican administrations. He is the furthest thing from an unbiased observer.

The Moody report claims that, because Hancock II implements the original intent of Hancock I by eliminating existing loopholes in the definition of “total state revenue,” the new measure will require a spending cut–and revenue refund–of $1.024 billion in FY96.(25) After accounting for monies that are constitutionally earmarked for specific purposes or otherwise exempt from spending reductions, Moody alleges that the result will be an across-the-board cut of 32.36 percent in spending for many of the most popular government services, such as highways, schools, colleges, and prisons. The report goes on to editorialize about the potential impact of those budget cuts. For example, Moody claims:

With this reduction, it appears certain that Missouri will not match all available federal [highway] funds, thereby eliminating necessary improvements to Missouri roads and sending the federal funds for Missouri to other states.(26)

Elementary and Secondary Education will be reduced by $284.6 million, and this reduction could renew litigation regarding the inadequacy of funding for this purpose.(27)

The quality and delivery system for higher education in Missouri would be shaken to its very foundation. The only feasible approach may to be consider the complete closure of state colleges or universities or community colleges.(28)

The likely policy reaction to a reduction of $55.42 million [for corrections] would be an enormous reduction in prison bed spaces and shorter sentencing due to a lack of capacity.(29)

The impacts on every department listed above would be dramatic, and may bring their activities nearly to a halt.(30)

The Moody report paints a frightening picture of what would happen if Hancock II passed, one that virtually no one would like to see become a reality. Those conclusions have received widespread media attention all over the state.

Fortunately for Missouri’s taxpayers, Moody’s analysis is seriously flawed. His assertion that the passage of Hancock II will require massive cuts in state services is inaccurate and misleading.

Assessing the Moody Report

The Moody report claims that the passage of Hancock II will require a tax refund (and thus a spending cut) of $1.024 billion in FY96. Table 5 shows how that number was derived. As discussed earlier, the main purpose of Hancock II is to return to Hancock I’s intended definition of “total state revenue.” As a result, certain revenues that the court has interpreted as exempt from the cap are intended to be brought back under Hancock II’s cap. In Table 5, Moody’s estimates of those amounts are shown as “new revenues included by Hancock II.” According to Moody’s calculations, adding that “new” revenue to “total state revenue” (as currently defined by the Missouri budget office) causes the sum to exceed the revenue limit by $516.7 million in FY95 and $507.2 million in FY96.

Moody assumes that Hancock II will take effect immediately and that the excess revenue from both FY95 and FY96 will be returned to the taxpayers in the form of tax refunds in FY96. (As Moody concedes, however, “an argument could be made that [the FY96] refund would be made in Fiscal Year 1997.”)(31) Combining the FY95 and FY96 figures, Moody thus arrives at the sum of $1.024 billion, which he concludes must be refunded to the taxpayers and cut from the state budget in FY96.

Moody further estimates that the $1.024-billion budget cut would require a 32.36 percent cut in spending. Table 6 shows how that number was derived. Moody first assumes that, in response to Hancock II, the legislature will repeal two taxes that would have brought in $182 million in revenue in FY96.(32) Thus, that $182 million is subtracted from both the projected level of FY96 revenue and the amount of the spending cut. Moody then excludes $3,882.7 million in spending that he asserts is protected from spending cuts.(33) That reduces the pool of “unprotected spending,” from which $841.9 million must be cut, to $2,601.6 million. As Table 6 indicates, and as the Moody report asserts, accomplishing that feat would require spending to be cut by 32.36 percent.

Flaws of Moody Report

Moody’s analysis contains four major flaws. Table 7 indicates how those flaws inflate Moody’s estimate of the FY96 tax reduction necessary to comply with Hancock II.

1. Moody incorrectly assumes Hancock II applies to FY95. As the text of the Hancock II amendment clearly states, it becomes “effective the first full fiscal year after adoption.”(34) Since FY95 is already in progress, it cannot be the first full fiscal year after adoption. Thus, Hancock II would not take effect until FY96. Adjusting for that error lowers Moody’s tax reduction estimate by $516.7 million, the amount of his FY95 tax reduction estimate.

2. Moody’s “cut” is not what most people think of as a cut (i.e., it is not an actual reduction from the prior year’s level). Moody’s analysis employs the misleading “current services baseline” methodology made famous by the U.S. Congress. That is, when Moody claims that Hancock II will require spending to be “cut” by $1.024 billion, he does not really mean that after the cut the level of spending will be $1.024 billion less than the year before. Instead, he merely means that spending would be $1.024 billion lower than it would have been if politicians had continued to let the budget grow unchecked. Adjusting for that misleading accounting trick lowers Moody’s estimate of the necessary tax reduction by $311.2 million, the amount that the Missouri budget office and the Moody report assume revenue would grow from FY95 to FY96 without Hancock II (see Table 5).

3. Moody ignores the 1 percent refund threshold. Hancock II stipulates that a refund is required only if total state revenue exceeds the limit by more than 1 percent.(35) (That is true of Hancock I as well.) Moody’s estimates of the “required refund” ignore that 1 percent threshold. Moody incorrectly assumes that to avoid triggering a “required refund,” FY96 revenue must be reduced to the level of the revenue limit, when in reality it must merely fall below the refund threshold. Adjusting for that discrepancy by subtracting the amount of the 1 percent refund threshold lowers Moody’s estimate of the necessary tax reduction by $61.6 million.

4. Moody ignores one of his own assumptions. In calculating spending cut estimates, he makes the assumption that, in response to Hancock II, the legislature will repeal two taxes.(36) Those taxes were expected to bring in $182 million in revenue in FY96. Since by Moody’s own assumption, that $182 million will never be collected, his estimate of FY96 revenue, and thus of the tax reduction necessary to comply with Hancock II, should have been reduced by the same amount.(37) (Note that since adjustment 2 above essentially employs a baseline of FY95 revenue rather than projected FY96 revenue, subtracting $182 million from Table 7’s adjusted tax reduction estimate would involve an element of double counting, thus it is listed separately.)

In sum, as Table 7 indicates, the total effect of adjusting for the three main flaws in Moody’s analysis would lower his estimate of the tax reduction necessary to comply with Hancock II by $889.5 million. Rather than $1.024 billion, the necessary tax reduction would be only about one-eighth of that amount, or $134.4 million.

Furthermore, even ignoring the first three flaws, under Moody’s own assumptions, his $1.024-billion estimate of the tax reduction necessary to comply with Hancock II is incorrect. The correct figure is $841.9 million, nearly 20 percent lower than Moody claims.

Finally, Table 8 recalculates Moody’s FY96 percentage spending cut estimate (from Table 6), correcting for the flaws described above. Assuming that 58.2 percent of the budget is protected from spending cuts (as Moody assumed for FY96),(38) and employing an FY95 baseline of $6,355.1 in revenue (the Missouri budget office’s projection used in the Moody report), the amount of unprotected spending in FY95 would be $2,656.4 million. Using the corrected spending cut reduction figure of $134.4 million from Table 7, the percentage cut in unprotected spending necessary to comply with Hancock II would be 5.06 percent, less than one-sixth of the 32.36 percent cut Moody claims is required.

To summarize, while Moody asserts that Hancock II would necessitate revenue refunds and spending cuts of over $1 billion in FY96, in reality those cuts need be only $134.4 million. That is a far cry from a $1-billion cut. In addition, Moody’s claim that a 32.36 percent reduction would have to be made in all areas of unprotected spending, including schools, colleges, prisons, and highways, is overstated by a factor of six. That reduction need be only about 5 percent.

Furthermore, reductions are only necessary because, despite the Hancock amendment’s provisions, the Missouri legislature has refused to rein in the growth of the state budget. In fact, in FY95 alone, due in part to state senate bill 380–a $310-million tax hike for education, passed, but not approved by the voters, in 1993–state revenue will rise 9.4 percent, more than double the 4.1 percent rise in Missourians’ incomes.(39) Thus, over the past two years Missouri state revenue has gone up by over $700 million. That amounts to a 12.2 percent tax increase, nearly double the U.S. average for that period.(40)

Conclusion

The Moody report claims that the passage of Hancock II will require a tax refund of $1.024 billion, or $194 for every resident of Missouri. Although that may sound very enticing to Missouri’s taxpayers, those numbers are sheer fantasy. The huge tax refund and the corresponding deep spending cutbacks that Hancock II’s opponents are predicting if the measure is passed are vastly overstated. Voting for Hancock II will not put a check for $194 into the hands of each Missouri resident. Nor will it require the massive cuts in government services that its opponents are alleging. In reality, the actual reduction required by Hancock II would be, at most, 5 percent. That cut would be necessary only to compensate for the years of accumulated overspending outlined in this paper.

Despite the alarmist claims of its opponents, by linking state revenue growth to the growth of state personal income, all Hancock II would really do is require politicians to live under the same set of rules that Missouri’s taxpayers have been struggling under. Hancock II would merely restrain the ability of politicians to raise taxes and the budget faster than the growth of state taxpayers’ incomes. It would not require legislators to make drastic reductions in revenue and expenditures. In fact, it would not even prohibit them from raising taxes faster than personal income. If the state legislature wanted to pass a budget with a larger than allowed increase in revenue, Hancock II would not prevent them from taking that action. All Hancock II would require is that the legislature first obtain the permission of the people who must pay those higher taxes, the voters of Missouri. That seems a sensible response to 12 years of inflated state budgets and rapidly rising tax burdens in Missouri.

Table 1
Growth of Missouri State Spending Since Enactment of Hancock Amendment,
1982-1992
  Real Increase U.S. Rank Real per Capita Increase U.S. Rank Increase Per $1,000 Personal U.S. Rank
Missouri 63% 15 54% 8 22% 11
Plains States Avg.* 40%   31%   13%  
U.S. Average 55%   38%   12%  

*”Plains States” refers to the Census Bureau’s “West North Central” region which is made up of seven states: Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota.
Source: U.S. Census Bureau, State Government Finances, 1982 & 1992 editions.

Table 2
Growth of Missouri State Revenues* Since Enactment of Hancock Amendment, 1982-92
  Real Increase U.S. Rank Real per Capita Increase U.S. Rank Increase Per $1,000 Personal U.S. Rank
Missouri 65% 15 56% 3 24% 10
Plains States Avg.* 45%   31%   13%  
U.S. Average 51%   34%   10%  

*Total revenue minus intergovernmental revenue from the federal government.
**”Plains States” refers to the Census Bureau’s “West North Central” region which is made up of seven states: Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota.

Table 3
The Effect of the Court’s Redefinition of “Total State Revenue”
  FY1982 FY1983 FY1984 FY1985 FY1986 FY1987
Actual Amount of Total State Revenue (TSR) Under Differing Definitions
Missouri budget office’s definition* $2,397 $2,603 $2,841 $3,120 $3,326 $3,583
Hancock-I’s intended definition** $2,397 $2,710 $3,157 $3,461 $3,688 $3,968
Amount of revenue exempted from Hancock-I’s intended definition.*** $0 $107 $316 $341 $362 $385
Percentage of State Own-Source Revenue Exempted from the Revenue Limit Under Differing Definitions of TSR
Missouri budget office’s definition* 2.1% 6.5% 15.5% 14.5% 15.9% 22.1%
Hancock-I’s intended definition** 2.1% 2.7% 6.1% 5.2% 6.8% 13.7%
  FY1988 FY1989 FY1990 FY1991 FY1992 FY1993 1982-93 Increase
Actual Amount of Total State Revenue (TSR) Under Differing Definitions
Missouri budget office’s definition* $3,917 $4,175 $4,422 $4,630 $5,011 109.1% 109.1%
Hancock-I’s intended definition** $4,445 $4,726 $4,993 $5,201 $5,531 $5,620 134.4%
Amount of revenue exempted from Hancock-I’s intended definition.*** $528 $551 $571 $571 $586 $609 $4,926
Percentage of State Own-Source Revenue Exempted from the Revenue Limit Under Differing Definitions of TSR^
Missouri budget office’s definition* 18.7% 16.8% 17.3% 16.0% 17.1% 17.9%  
Hancock-I’s intended definition** 7.7% 5.9% 6.6% 5.6% 7.2% 7.9%  

*Refers to TSR as defined by the Missouri budget office (Office of Administration, Division of Budget and Planning).
**Hancock I’s intended definition differs from the budget office’s definition only in that it includes the amount of revenue from Proposition C and Proposition A.
***Equals the amount of revenue from Proposition C and Proposition A.
^”State Own-Source Revenue” excludes only federal funds. Note: Unless otherwise indicated, all figures are in millions of current dollars (i.e., not adjusted for inflation).
Source: Office of the State Auditor of Missouri, annual Hancock reports, FY1982-1993. Figures for 1989-93 taken from 1993 report, 1988 from 1992, 1987 from 1991, 1986 from1990,1985 from 1989, 1984 from 1988, 1983 from 1987, and 1982 from 1986 report.

Table 4
Contrary to the Intent of the Hancock Amendment, Total State Revenues Have Outpaced Personal Income Growth
  FY 1982 FY 1983 FY 1984 FY 1985 FY 1986 FY 1987 FY 1988
State Personal Income* $43,698 $47,697 $50,423 $54,817 $60,466 $66,605 $70,503
Annual Increas   9.2% 5.7% 8.7% 10.3% 10.2% 5.9%
Total State Revenue under intended definition of Hancock I (TSRH)** $2,397 $2,710 $3,157 $3,461 $3,688 $3,968 $4,445
Annual Increase   13.1% 16.5% 9.6% 6.5% 7.6% 12.0%
Revenue Limit*** $2,480 $2,706 $2,860 $3,110 $3,430 $3,776 $3,998
Annual Increase   9.1% 5.7% 8.7% 10.3% 10.1% 5.9%
Amount TSRH exceeded the limit   $4 $297 $351 $258 $192 $447
Percent TSRH exceeded the limit   0.2% 10.4% 11.3% 7.5% 5.1% 11.2%
TSRH as a share of personal income 5.49% 5.68% 6.26% 6.31% 6.10% 5.96% 6.30%
  FY 1989 FY 1990 FY 1991 FY 1992 FY 1993 FY 1994
State Personal Income* $74,825 $79,458 $84,864 $89,611 $92,733  
Annual Increas 6.1% 6.2% 6.8% 5.6% 3.5% 112.2%
Total State Revenue under intended definition of Hancock I (TSRH)** $4,726 $4,993 $5,201 $5,531 $5,620  
Annual Increase 6.3% 5.6% 4.2% 6.3% 1.6% 134.4%
Revenue Limit*** $4,242 $4,507 $4,814 $5,082 $5,258  
Annual Increase 6.1% 6.2% 6.8% 5.6% 3.5% 112.0%
Amount TSRH exceeded the limit $484 $486 $387 $449 $362 $3,716
Percent TSRH exceeded the limit 11.4% 10.8% 8.0% 8.8% 6.9%  
TSRH as a share of personal income 6.32% 6.28% 6.13% 6.17% 6.06%  

*As stipulated by Hancock I, the personal income figures used for FY 1982 are from calendar year 1980, for FY 1983: from CY 1981, etc. This is done because fiscal years end before calendar years.
**Hancock I’s intended definition differs from the budget office’s definition only in that it includes the amount of revenue from Proposition C and Proposition A.
***As defined by the Missouri budget office (Office of Administration, Division of Budget and Planning).
Note: Unless otherwise indicated, all figures are in millions of current dollars (i.e., not adjusted for inflation).
Source: Office of the State Auditor of Missouri, annual Hancock reports, FY1982-1993. Figures for 1989-93 taken from 1993 report, 1988 from 1992, 1987 from 1991, 1986 from 1990, 1985 from 1989, 1984 from 1988, 1983 from 1987, and 1982 from 1986 report.

Table 5
Moody Report’s Estimate of “Tax Reduction” Necessary to Comply with Hancock II
        Annual Growth
  FY 1994 FY 1995 FY 1996 1994-95 1995-96
State Personal Income* $98,963 $102,995 $108,668 4.1% 5.5%
Total State Revenue** $5,170.1 $5,657.2 $5,946.0 9.4% 5.1%
New revenues included by H-II**   $697.9 $720.3    
TSR plus new revenues**   $6,355.1 $6,666.3   +$311.2
Revenue Limit** $5,610.3 $5,838.4 $6,159.1 4.1% 5.5%
Amount TSR would exceed the limit**   $516.7 $507.2    
Tax reduction necessary to comply with Hancock II***     $1,023.9    

*As stipulated by Hancock I, the personal income figures used for FY 1994 are from calendar year 1992, for FY 1995: from CY 1993, etc. This is done because fiscal years end before calendar years. Figures are official U.S. Department of Commerce projections used by Missouri budget office and in the Moody Report.
**Figures are Missouri budget office projections of total state revenue subject to Hancock II used in the Moody Report.
***This figure is merely the sum of the excess revenues from FY 1995 and FY 1996. Moody assumes that this amount would have to be refunded to the taxpayer in FY 1996.
Note: This is an adaptation of Table 3 of the Moody Report. The Moody Report uses the term “required refund” for the amount which revenue is projected to exceed the limit. However, a refund would be required only if the legislature votes to collect that excess revenue, in violation of Hancock II. All figures are in millions of current dollars (i.e., not adjusted for inflation).
Source: Moody Report, Table 3, p. 7.

Table 6
Moody Report’s Estimate of “Spending Cuts” Necessary to Comply with Hancock II
  FY 1996
Total state revenue subject to Hancock II* $6,666.3
Spending cut necessary to comply with Hancock II** $1,023.9
Projected FY 1996 revenue from taxes Moody assumes would be repealed*** $182.0
Total state revenue subject to Hancock II (adjuste)^ $6,484.3
Spending cut necessary to comply with Hancock II (adjusted)^ $841.9
Moody’s estimate of “protected expenditures” ^^ $3,882.7
Amount of FY 1996 “unprotected spending”+ $2,601.6
Spending cut as a % of “unprotected spending”++ 32.36%

*Missouri budget office projection used in the Moody Report and in Table 5 of this report.
**Same as “tax reduction” figure from Table 5 of this report.
***In calculating his spending reduction estimates, Moody assumes that certain taxes will be repealed. The expected revenue from those taxes must be subtracted from both “total state revenue subject to Hancock II” and “spending cut necessary to comply with Hancock II.” According to the Missouri budget office projections used in Moody’s report, those taxes would have brought in $182 million in FY 1996. (Moody Report, pp. 14-15.)
^These figures exclude the $182 million in FY96 revenue that Moody assumes will not be collected.
^^This figure refers to spending on “a reasonable estimate of programs which are protected by federal law, the Missouri Constitution, federal courts, or Missouri state law or courts.” (Moody Report, p. ii, and Table 4, pp. 13-14.) +This figure is merely “total state revenue subject to Hancock II” minus “protected expenditures.”
++Note that this corresponds with Moody’s estimate of the required cut in non- exempted areas of spending. (Moody Report, p. 15.)
Note: All figures are in millions of current dollars (i.e., not adjusted for inflation).
Source: Moody Report, Tables 4 and 5, pp. 13-15.

Table 7
Adjustments to Moody’s Estimate of the Tax Reduction Necessary to Comply with Hancock II
  Amount of Adjustment FY 1996 FY 1996 Tax Reduction
Moody’s estimate of the tax reduction necessary to comply with Hancock II   -$1,023.9
Adjustments:    
1) Hancock II does not apply to FY95 $516.7  
2) Projected FY 1995-96 revenue growth* $311.2  
3) Amount of 1% refund threshhold in FY 1996** $61.6  
Total Adjustments $889.5  
Corrected estimate of the tax reduction necessary to comply with Hancock II   -$134.4
Moody’s estimate of the tax reduction necessary to comply with Hancock II   -$1,023.9
4) Uncollected revenue from Moody’s assumed tax repeals^ $182.0  
Moody’s estimate of the tax reduction necessary to comply with Hancock II, under his assumption of tax repeals   -$841.9

*Moody’s FY 1996 “required reduction” is a reduction from the projected level of FY 1996 revenue, rather than from the FY 1995 level. Since part of that “reduction” represents the elimination of projected 1995-96 growth, it does not measure the actual reduction from the prior year’s level of revenue. The number listed here represents the projected growth in “TSR plus new revenues” from FY 1995 to 1996, used in the Moody Report. Subtracting that growth from Moody’s reduction makes it an actual reduction. See Table 5 of this report.
**Hancock II (and Hancock I) allows revenue to exceed the limit by up to 1% without requiring a refund. The number listed is simply the amount of that 1% refund threshhold by which FY 1996 revenue could exceed the limit without requiring a refund.
^In calculating his spending reduction estimates, Moody assumes that certain taxes will be repealed, however his “required refund” estimate of $1,023.9 billion does not exclude that revenue. According to the Missouri budget office projections used in this report, those taxes would have brought in $182 million in FY 1996. Note that since adjustment #2 above essentially employs a FY 1995 baseline (rather that Moody’s baseline of expected FY96 revenue), subtracting this $182 million, together with that adjustment, from his estimated tax reduction would involve an element of double-counting, thus it is listed separately. (Moody Report, pp. 14-15.)
Note: All figures are in millions of current dollars (i.e., not for inflation).

Table 8 How Moody’s Flawed Tax Reduction Estimate Affected His Spending Cut Estimate
  FY1995
Moody’s estimate of the percentage cut in FY96 spending necessary to comply with Hancock II* 32.36%
Revised Estimate of Spending Cut  
TSR plus new revenues, FY 1995** $6,355.1
Total “protected expenditures,” FY 1995*** $3,698.7
Amount of FY 1995 “unprotected spending” ^ $2,656.4
Spending cut necessary to comply with Hancock II ^^ $134.4
Spending cut as a % of “unprotected spending” 5.06%
Published in: on January 18, 2008 at 8:11 am  Leave a Comment  

• On Occupancy Inspections

The following quote is an excerpt linked to the Missourian News Paper from:

Quote from the story:

“Guy Midkiff asked the council if they’d read and fully understood the codes. Only three raised their hands. This set off another man to criticize the city council for voting without knowledge.”

“How can you pass an ordinance you haven’t read?” said Harvey Mohesky. “Two people know what’s going on. I’ve lived in Washington 43 years and I think this is a bunch of bull.”

Published in: on January 15, 2008 at 10:25 pm  Leave a Comment