Missouri’s budget, fiscal policy and economy are the subject of this feature. Both the Missouri Budget Project (MBP) and the Show Me Institute (SMI) have been kind enough to respond to the same questions about the economic issues that affect Missouri today.

The answers from the Missouri Budget Project were provided by Amy Blouin, Executive Director, Tom Kruckemeyer, Director of Fiscal Policy and Chief Economist and Ruth Ehresman, Policy Specialist.

The answers from the Show Me Institute were provided by Timothy Lee, Editor.

I encourage you to visit the websites of both of these public policy research organizations.

From the Show Me Institute’s website:

“SMI is a non-profit, non-partisan public policy research organization. Our mission is to research, develop, and advance public policies that enhance economic growth and opportunity for all residents of Missouri.”

More information about the Show Me Institute can be found at: http://www.showmeinstitute.org

From the Missouri Budget Project:

“The Missouri Budget Project is a nonprofit, nonpartisan, statewide fiscal analysis organization that informs the public about the states budgetary and tax policy options and their impact on moderate and low-income Missourians.

More information on the topics below is available on our website: http://www.mobudget.org.

In his State of the State Address, Governor Blunt stated that 28,000 jobs have been added to Missouri's economy over the past year. Sen. Maida Coleman, in the Democratic response, stated that Missouri has actually lost 20,000 jobs over the same time period. Which claim is more accurate?

MBP: “While the governor cited large job growth in Missouri since January 2005, the Bureau of Labor Statistics figures show only a 2,718 increase in total employment when comparing November 2004 with November 2005. The ‘total employment’ number is more a comprehensive and better statistic because it measures the growth in agricultural employment and the growth in self-employment.

“While the Governor points to job growth, Missouri's unemployment rate of 5.6% in November puts us at the bottom nationally with only nine states having a higher unemployment rate; two of these are hurricane-ravaged Louisiana and Mississippi. In addition, the full economic impact of the state budget cuts--particularly for health care services-- has not been realized yet.”

SMI: “I haven't studied the job record over the last year, so I'm not really qualified to comment on that specific question. However, the longer-term trend is clear: Missouri is a slow-growth state. If you look at virtually any indicator--personal income growth, population growth, GDP growth, etc--Missouri's economic performance is mediocre. Reforming the state's tax and regulatory policies would give it a much-needed shot in the arm.”

Both the Governor and the Missouri Development Finance Board are supporting a plan to provide about $50 million in tax credits for renovation projects at the Truman Sports Complex (Arrowhead and Kauffman Stadiums, Jackson County is asking voters to approve over $400 million in additional funds through a proposed local tax increase) saying the credits are an investment in economic development. Do you support or oppose the plan? Why or why not?

SMI: “It doesn't sound like a good idea to me. If sports teams in Kansas City think it makes sense to renovate their facilities, they can raise the money to do that themselves. It's their risk, and they can reap the profits if they succeed. If private investors aren't willing to take that risk, why should the taxpayers step in to subsidize a project that private investors don't think is worth financing themselves?

“Supporters claim that stadium subsidies promote "economic development," but they always look at only one side of the coin. Obviously, if you spend $400 million to build a stadium, you're going to get some economic benefits from that. But the question is whether the benefit outweighs the $400 million in taxes necessary to fund it. Most economists who have studied the subject have found just the opposite. For example, here's a study published by the Cato Institute last October that looks at stadium subsidies around the country and finds that they tend to reduce per capita income in the region that builds them:

http://www.cato.org/pubs/briefs/bp89.pdf

MBP: “The Missouri Budget Project opposes the plan for tax credits to benefit Kansas City's professional sports teams; this should not be approved by the Missouri Development Finance Board. There is no need to provide the Kansas City Royals or Chiefs with $50 million in state tax credits. We cannot justify this loss of revenue when elementary, secondary and higher education are significantly under-funded and 240,000 low-income Missourians have lost Medicaid health insurance due to budget cuts in the last several years.

“The Chiefs and Royals already receive $3 million annually from the state, play in first-rate facilities and receive strong fan support. There is a high probability that both the Chiefs and the Royals will stay in Kansas City regardless of whether they receive the proposed tax credits. We recognize that Kansas City's professional teams are tremendous economic and cultural assets. However, these teams are able to maintain and improve their stadiums without additional state funds.

“The Chiefs have achieved strong financial results and community support. The team had an average annual profit of $26.3 million for the past seven seasons (1998-2004), according to estimates by Forbes magazine. For the 2005 season, the Chiefs ranked third of 32 NFL teams in home game attendance and, beginning in the 2006 season, will gain about $42 million more per year in revenue from the new national television contracts. They would be hard-pressed to find a more attractive situation in another city.

“The Royals play in 33-year-old Kauffman stadium which is a first-rate facility. The Royals suffer from Major League Baseball's inadequate revenue-sharing system which makes it difficult for small-market teams to be competitive. For the 2005 season, the Royals' player payroll was about $37 million, approximately half of the average Major League Baseball team player payroll of $73 million.

“A positive factor is the Royals' strong fan support; average attendance was about 20,500 per home game for the last 16 seasons. It would be difficult for the Royals to find a more attractive location than Kansas City.

“The Missouri Budget Project analysis, ‘Misplaced Priorities: Additional Subsidies Not Necessary for Professional Sports Teams’, is available at www.mobudget.org.”

Among the most emotional issues likely to be debated in the 2006 Legislative Session is the reform of eminent domain practices in Missouri. Should Missouri enact new restrictions on the practice of using eminent domain to, as an economic development tool, acquire private property for private development? Why or why not?

MBP: “The Missouri Budget Project does not take a position on this issue.”

SMI: “The United States Constitution, as well as the Missouri Constitution, restrict the taking of private property to public use. ‘Public use’, as it was understood by the Founders and for more than 150 years afterwards, meant facilities owned and used by the public: roads, courthouses, public schools, etc.

“Missouri law (including, ideally, the Missouri Constitution) should be revised to make clear that eminent domain cannot be used to benefit private parties. Takings for ‘economic development’ and to deal with ‘blight’ are not public uses. The mere fact that a neighborhood is rundown, or that a new property owner would generate additional tax revenue, does not justify taking someone's property.

“It's worth commenting a bit more on the blight issue because it's an issue that's not well understood. People often ask ‘how can we deal with blighted neighborhoods without the power of eminent domain?’

What they don't realize is that the governments already have police powers to deal with neglected and hazardous properties that don't involve the use of eminent domain. Local governments can enact public nuisance laws requiring property owners to maintain their property. And they can use those powers to condemn properties that have become a threat to public health and safety.

“What they can't do without eminent domain is blight entire neighborhoods and ‘clear cut’ them to make room for more upscale development. But that's a good thing. Such ‘redevelopment’ projects often destroy affordable housing and displace poor people who then have to scramble to find new housing elsewhere in the city. Sure, the neighborhood looks nicer when the project is over with, but that's just because you've moved the problem to another part of the city.”

An effort is underway to significantly raise taxes on cigarettes in Missouri and use the projected revenue to fund health care services. Is this sound economic policy for Missouri? Why or why not?

SMI: “I see this less as an issue of economic policy and more as a matter of fairness. The fact is that smokers already pay more than enough in taxes to cover the costs of the health care services they receive.

The tax increase proposal--which would more than quintuple the tax burden on smokers--is clearly designed to be punitive. There's no doubt that smoking is bad for you, but in a free society people have a right to take risks with their health if they want to, and it's not right to single out politically unpopular groups for higher taxes.

“Moreover, the cigarette tax is one of the most regressive taxes around. Excise taxes are always regressive, because the poor spend a larger share of their income on consumer goods subject to them. But cigarette taxes are especially hard on the poor because poorer Americans are more likely to be smokers.”

MBP: “While the Missouri Budget Project supports the proposal to increase the cigarette tax, this is only one relatively small part of the solution to providing access to health care for all Missourians. The revenue generated by the higher tax will fall well short of restoring coverage to the 240,000 Missourians affected by the Medicaid cuts since 2001. We must find solutions to the over-arching problem all Missourians face--access to affordable health insurance for our working families, seniors and those with disabilities.

“That said, raising the cigarette tax will be one step to addressing health care accessibility. Missouri's cigarette tax of 17 cents per pack ranks 49th in the nation; the tax has not been raised since 1993. A tax increase would bring much-needed revenue to Missouri. Also research shows that raising the prices on cigarettes is a successful way to deter youth from smoking. In addition, the proposal, which may be on the November ballot for voter approval, would allocate about $60 million to anti-smoking programs.

“The proposal also would allocate about $275 million to enhance health care access which will help many Missouri families. The Missouri Budget Project urges that health care resources be used to restore Medicaid insurance for those who lost it over the past three years. Investing resources in Medicaid is cost effective since Missouri receives federal matching money. For every dollar Missouri spends on Medicaid, 61cents comes from federal funding. In addition, individuals with insurance are more likely to utilize preventive care, address health problems promptly, and reduce expensive emergency room care.

“The proposal would not harm the state economy. The new cigarette tax of 97cents per pack would be close to the national average of about 92 cents. Futhermore, declining cigarette sales would have little economic impact in the state. Missouri has no cigarette manufacturing and only a small amount of tobacco production. It is also reasonable to assume that current smokers who may induced to quit or reduce smoking by virtue of the tax increase would spend a like amount of money on other consumer products that may well have stronger linkages to the Missouri economy. In addition, the tax money to be restored to Medicaid will create jobs in the health care sector.”

Some legislators and activists are proposing that Missouri add a "Taxpayers' Bill of Rights" (TABOR) to the state Constitution. Proponents claim it is a good way to limit the growth of government by limiting both state revenue collections and spending. Opponents say it harms the state's ability to react to changing economic conditions and endangers government services. Do you support a Missouri TABOR? Why or why not?

MBP: “The Missouri Budget Project strongly opposes a TABOR Amendment. (see our website:

www.mobudget.org for detailed information). Placing a Constitutional lid on state spending would be extremely harmful to economic development in Missouri. A recent report from the Economic Policy

Institute indicates that the quality of state services - including education, transportation and healthcare—are more important to corporations than tax incentives when deciding whether to locate in a state.

“Missourians who want healthy economic development for our state and access to quality education and healthcare should pay close attention to Colorado. Voters there passed a referendum recently to suspend the artificial spending limits that have been imposed since 1992 by the state's TABOR Amendment. The five-year suspension will allow Colorado to recover from devastating budget cuts during the past 14 years.

“In Colorado the impact of TABOR on vital services has been dramatic. The state: dropped from 35th to 49th in the nation in K-12 spending as a percentage of personal income; raised in-state tuition by 21 percent at its colleges and universities over the last four years; and dropped to last among the 50 states on the share of low-income children covered by health insurance.

“Missouri cannot afford additional budget cuts. State aid to local schools is $800 million below what is Constitutionally required. Funding for higher education has dropped by more than $60 million, resulting in average tuition increases of more than $2,000 at state universities; cuts to Medicaid in 2005 alone resulted in 100,000 more Missourians losing access to basic health care services.

“If Missouri had passed a TABOR Amendment in 1992 when Colorado did, the state would have been required to cut spending by an additional $792 million in the current fiscal year alone. This would have been on top of the cuts already made to healthcare and education.

“Any more cuts will directly result in more severe deterioration of basic services for all citizens, including healthcare, education and infrastructure. Missouri needs sound ideas and common sense strategies that focus on our priorities and help solve our difficult problems. Imposing artificial constraints that limit our ability to grow with the economy and to meet the needs of our families is unwise fiscal policy.

“Missourians deserve to live in a state where the quality of life is a priority. We must invest in our young people by ensuring excellent public education. We must foster economic development by providing services that attract businesses. For the well-being of all Missourians and the strength of our economy, we cannot afford to adopt TABOR.”

SMI: “The real question with TABOR and other spending limits is: who should decide? Right now, Missouri has a fairly week spending limit. Under the Hancock Amendment, any time the average Missourian gets a raise, Missouri's government can give itself a raise without asking the taxpayers for permission.

“A better spending limit would require the government to go back to the taxpayers and ask for their approval before they're allowed to give themselves a raise. That way, voters can decide whether they'd like to pay higher taxes in order to get more and better services, or if they'd prefer to keep their taxes low. That's what happened in Colorado last November: Governor Owens asked the voters to allow them to spend more money over the next 5 years, and they said yes. It wasn't a defeat for TABOR, but rather, an illustration of the way the system ought to work.

“There's no reason to think a stricter spending limit would threaten government services. Under Rep. Bearden's proposal, the limit would be adjusted for population and inflation, so it would allow state government to continue to spend as much as it had always spent in real, inflation-adjusted terms. And if the state finds that it needs more money to improve the quality of its services, it can always do

that--it just needs to ask the voters for permission first by putting it on the ballot.”

Governor Blunt is asking for a law that will require all gasoline sold in Missouri to be 10% Ethanol. Among his reasons for the plan is a desire to support Missouri farmers. What impact would a 10% Ethanol standard for gasoline have on Missouri's economy?

SMI: “I'm not an expert on the subject, but I don't see any reason to think this would be beneficial to Missouri's economy. Gas prices are at record highs. If ethanol producers still can't produce ethanol cheaply enough to make it a cost-effective alternative to gasoline, then it probably doesn't make economic sense to use it.”

MBP: “The Missouri Budget Project does not take a position on this issue.”