Another Government Management Report Card.
In response to the last entry on Indiana's financial situation, a reader points the PolicyGuy to the Government Performance Project's review of Indiana. There's a lot of interesting material in there, with the final grade being a C+.

Here's the first few sentences of the report for the Hoosier state:

Just a few years ago, the major criticism of Indiana?s finances was that they were simply too conservative. The state had no longterm investments beyond its pension program and had accumulated a gargantuan $1.6 billion of reserves between its rainy-day fund and year-end general treasury balances. Critics were concerned that the state might be denying its citizens some affordable services or tax cuts because of its insistence on keeping money under the fiscal mattress.

Oh, to have such problems again.

Scores for other Midwestern states:

Michigan: B+
Minnesota: B+
Ohio: B
Iowa: B
Missouri: B
Wisconsin: B-
Illinois: C+ (permalink)

What this University Needs is a Good Motto.
If you have a second-rate university, what do you need? A good motto or tag line. Seriously. "You deserve a break today." "When it absolutely, positively, has to be there overnight." Strong brand identification, strong companies.

Unfortunately, focus groups and "naming consultant" don't seem to deliver much when it comes to universities. Here's an article on the subject from The Guardian via Milt Rosenberg.

The use of competition in higher education (like anywhere else) is a good thing, and marketing is certainly part of competition. But it looks like some universities still have to get an education on the subject. (permalink)

Change in Party, Same-old Story: Indiana Residents Face Tax Hikes.
British Prime Minister Margaret Thatcher was famous for attacking the "ratchet effect," by which government spending went one direction (up). It looks like the ratchet is working well in Indiana, an alleged bastion of limited government.

Mitch Daniels, the former budget director for President George W. Bush, is the new governor of Indiana. His new budget proposal calls for a 29 percent tax increase on some taxpayers. The increase is allegedly "temporary." (Temporary tax increase? I've got a bridge ....)

Since 1989, Indiana government spending has risen more than double the rate of inflation (124 percent). It is often argued that rising costs simply reflect the fact that government buys a different, and more expensive, set of goods and services than the general economy. Fair enough, government budgets are top-heavy with professional staffers, though that's often an excuse to avoid hard choices.

As various reformers such as Peter Hutchinson and Stephen Goldsmith (a Democrat and Republican, respectively) have shown, there's a lot of room for injecting a healthy dose of smarter spending and competition into government. (The Performance Institute is a good resource, while we're on the topic.) This is on top of a healthy political debate over whether the current scope of government ought to be pulled back.

A Wall Street Journal editorial offers options on both the revenue and spending side, noting that governors in Florida, Maryland and Texas have balanced budgets without tax increases.

Spending half of the rainy day fund (which is twice the size of the expected take from a tax increase) could be one part of the solution. Says the Journal, dryly: "that "rainy day" has arrived." A tax amnesty program could bring in at least $60 million, nearly one-quarter of the budget shortfall of $250 million.

But that's only a temporary solution; the structural deficit is likely to continue without some attention to the spending side.

There is, says the Journal, certainly value in paying attention to the spending side: "a state with a vehicle fleet so large that it has more than one automobile for every three state employees is ripe for other cutting." (permalink)

Addicted to Private-Sector Bailouts.
The temptation for elected officials to "do something" about jobs is often so strong that it overrides economic sense. And in at least one case, it overrides the wounded national pride of a country that boasts of standing up to the Americans.

French politicians regularly complain about "American hegemony." Jacques Chirac has called American culture an "ecological disaster."

So what is the government in France doing to address an unemployment rate of 10 percent? Cutting taxes? Doing away with libraries of regulatory manuals?

No. Or rather, non.

A government-owned bank is investing $500 million in that demon missionary of America, Disney, to prop up the Euro Disney theme park. (permalink)

Social Security is a Monopoly Provider.
It's time to shake up the Social Security system. As I argue in the Detroit News today, it's a monopolistic system. The essay is printed below:

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Government policy has long called for punishing monopolies real (the old AT+T) and alleged (Microsoft). Large corporate deals, such as the proposed purchase of Gillette by (Proctor & Gamble ), are subject to regulatory review. Government oversight, the theory goes, is required to make sure that public welfare is not unduly harmed by a reduction in consumer choice.

One monopoly draws little attention, though it is the biggest monopoly of all. Its product is retirement funding. Nearly everyone who works for income must do business with this monopolistic organization. Talk about market power!

The monopoly? The Social Security system. It extracts 15 percent of everybody's paycheck (those "employer" contributions are really your money, you know). The result: many people have little money left to take to anybody else for retirement planning. For them, they have one choice, and that one choice is Social Security.

By law, you must "purchase" (through taxes) the "services" (retirement funding) of this provider. Further, you have no choice in how your money is "invested," unlike, say, at a bank, where you can at least choose between a checking account and a savings account. Want to put some of your retirement funds into the greatest stock market known in human history? Fat chance. Real estate? Dream on. How about something boring and safe, like U.S. Treasury bonds? Nope. It's like that TV commercial for the credit card company. The answer is always NO.

Your money will be taken from you and given to someone else. (Some of it will be diverted for overhead.) after some money for overhead. Will you get "your" money back? Only if you live long enough. And only if the politicians don't break their promises by the time you have reached retirement age.

Social Security, with a "customer base" that would in normal circumstances bring the curiosity, if not the wrath, of federal regulators, has long needed shaking up. Enabling individuals to use personal accounts is a timid but necessary first step in that direction.

After all, it's your money. (permalink)

Gambling is Still Attractive.
More Minnesota budget news that doubtless holds some relevance to other states: there's another attempt to close a budget gap by expanding gambling (registration required). It's making for some interesting (and depressing) political fights. (permalink)

Long-Term Care: Because That's Where the Money Is.
Minnesota's governor, Tim Pawlenty, has come out with a plan that cuts back on eligibility on the state's health care plan for non-elderly adults. But the real money in health care spending lies elsewhere.

The Minneapolis Star-Tribune says that Pawlenty plans to make changes to the eligibility limits to MinnesotaCare, without saying what they are. While no neighboring states have a plan this expansive, the money pales in comparison to long-term care.

Says the Strib: "According to the state Human Services Department, the state spent $270 million on MinnesotaCare in fiscal year 2004, but $1.1 billion on long-term care, including $428 million on nursing homes." That's a ratio of 4:1.

And the ratio is likely to remain unchanged, or perhaps increased:

Meanwhile, David Strom, president of the Minnesota Taxpayers League, had a concise explanation for why nursing homes would be protected while 27,000 people on MinnesotaCare would lose coverage. "Seniors vote," he said. "And they're a growing constituency. There's nothing shocking about that. In many rural communities, nursing homes are significant economic players. Nursing homes are sacrosanct in Minnesota politics." (permalink)

Just Say No to Stadium Welfare.
The desire to purchase a little "community spirit" as well "I"m a winner" self-help talk fuels all sorts of schemes to tax the people to pay for playplace palaces for professional athletes. Fortunately, the desire to say no to such folly is strong as well (though not always strong enough.)

a group in opposition to a stadium tax scheme for the Twin Cities has an informative web site at No Stadium Tax. The text is heavily geared towards last year's legislative session. But like a hardy perennial weed, stadium proposals need persistent oversight. Expect to see updates over time.

(Hat tip: Dayton v. Kennedy.) (permalink)

Medicaid Crisis Due in Part to Moral Hazard: Reverse Mortgages a Way Out.
One problem of public programs is that they run the risk of moral hazard, by which efforts to help somebody end up bringing negative consequences all around.

One such example of a moral hazard is long-term care. The desire that the elderly ill receive adequate care is a good one. But it has lead to a situation in which Medicaid, a state-federal program, pays a substantial portion of all nursing home care in the country.

The negative results are many: nursing home costs are soaring (arguably, because there is one party--the public purse--paying most of the tab), straining state finances. Seniors have difficulties getting into adequate homes, or even inadequate ones in some states. And countless dollars are spent in a cottage industry that enables middle class families to move and hide their assets around, shifting the cost of long-term care to "somebody else."

The National Council on Aging has just released a study on the use of reverse mortgages. In brief, it's a loan made against the build-up equity in a house. By the time many people need long-term care, their equity is substantial.

Here's a brief description of the report's findings, from the NCOA website:
Of the nearly 28 million American households age 62 and older, NCOA has found that almost half (48 percent), or about 13.2 million, are good candidates for a reverse mortgage. The amount that these older households could receive from a reverse mortgage is substantial ? on average $72,128. These funds can go a long way to pay for help at home and for retrofitting the home to make it safer and more comfortable. For some, they could be used to purchase long-term care insurance if they qualify. In total, an estimated $953 billion could be available from reverse mortgages for immediate long-term care needs and to promote aging in place.

Some policy changes within Medicaid are called for. So is a way out of the disincentive that even the civic-minded individual faces: each person who foregoes using the public fisc. and going self-pay will have no significant effect on the public treasury, but a significant effect on his own.

Labels: Medicaid

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Here's a Chilling Headline.
Also from today's Wall Street Journal: Governments Prod Microsoft to Slash Prices.

As it turns out, "prodding" means using the threat of going to alternative vendors (in this case, open-source software) in an attempt to gain concessions from Microsoft. Fair enough. Companies pit vendors against each other all the time, and it's just plain old business.

But governments "prod" not only as consumers, but as--much more importantly--parties that make the rules by which business operates. And when "prodding" turns away from tough procurement practices to "jawboning" prices used in private transactions, then you know we're heading for some trouble. (permalink)

Is Opposition to Social Security Reform Based in Redistribution?
The Wall Street Journal's David Wessel sheds some light on opposition to individual accounts within Social security. It is based, in part, on a preference for income redistribution.

Nothing new there, but it's good to be reminded.

Wessel interviews Edward Gramlich, a governor within the Federal Reserve System. Gramlich favors the worst of both worlds: keeping the current system, and government requirements that people save money on their own as well.

One reason he gives: "If we go to a retirement system that is entirely individual accounts, we also lose opportunities for income redistribution."

Otherwise, Gramlich makes some sensible points, including a call for raising the retirement age. "People in my grandfather's generation who got to age 65 paid into Social Security for 40 years and got benefits for about 10. People in my grandson's would collect benefits for more than 20 years."

Note, though, one of the fundamentally deceitful nature of Social Security: "people ... paid into." That sort of language suggests that Social Security is akin to a bank or investment account: you put money in, you have a property right to that money, it grows, and you get it back and then some after a while. Social Security is another matter entirely. No property rights. The money you "get back" is not yours, but is taken from your grandchildren and some of their work colleagues, and the entire arrangement is subject to change at the whim of politicians who, in other contexts, take it upon themselves to decide what private investment firms can and cannot do. (permalink)

Zero Tolerance, or Zero Intelligence?
The Texas Legislature is reconsidering the wisdom of zero-tolerance policies in K-12 government-run schools.

It's about time, though expanded school choice would address many of these issues as well. Let parents choose what sort of disciplinary system they want used in the children's school. The "zero-tolerance" approach stems, in part, from the difficulties of maintaining discipline when parents with widely disparate approaches to discipline are shoved into one school system by virtue of where their house is located.

A good resource for "horror stories," by the way, is Zero Intelligence, though a hat tip on this particular story goes to Shot in the Dark.

Labels: Education, School choice

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Private Schools Competing for Tutoring Money: Why Not?
No Child Left Behind is presenting private schools with an opportunity to get some income and help children learn at the same time.

Today's Wall Street Journal presents a story of ways that some private schools (pricey ones, in this case) are attempting to hold tuition increases at bay through finding alternative revenue streams.

They include real estate development, renting out chapels for weddings, and most interestingly and fruitful, going into the tutoring business.

One school in New York, the Journal says, has "launched Achieve, a nonprofit that will open a tutoring center in a suburban Buffalo strip mall in April -- the first outlet in what it expects to be a chain. With an eye on the tutoring requirements of the No Child Left Behind law, the school is planning its second center in inner-city Buffalo, where five schools don't meet federal achievement levels." The school expects to turn a profit of $100,000 on the efforts within a few years.

Says the principal of Buffalo-based Elmwood Franklin school, "Why shouldn't the [private sector] experts get involved in the education marketplace?"

Why indeed.

The article does go on to describe a phenomenon that critics of choice might see as ammunition in their cause: a facilities arms race that is pushing tuition out of sight at some private schools.

But that is in itself no argument against school choice. First of all, extravagant facilities are not unknown in public schools. (See Sports-crazed public schools.)

Second tax credits or vouchers could easily be kept at a reasonable level by capping their amounts at the average of all schools (government, non-government or both) in an area. In fact, the few existing choice programs that do exist typically set the funds available at a portion of funding levels of government-run schools.

Even without "virtual frog dissections," Chinese classes, and a new field house, parents of students in these programs -- the people whose opinions ought to count the most -- report a great deal of satisfaction with their current means of escaping the lack of competition that rules in most cities.

Labels: Education, School choice

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When Public Schools Compete Against Each Other.
Public schools competing against each other? Once in a blue moon. SCSU Scholars points to a case in Minnesota:

[Quoting from the St. Paul Pioneer-Press],
The Mounds View public school district has spent $15,000 to produce an infomercial to attract students to its schools.

Such marketing is not unusual among private schools, but it is a sign of changing times among public school districts with declining enrollments as they compete for students and the state money that follows them.

Labels: Education

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School Choice Expanding in Minnesota?
Minnesota was one of the early adopters of school choice, albeit on a meager scale. There is, for example, either a tax credit tax deduction (depending on one's income) for certain private expenses spent on education. Choice advocates are pushing for more.

Elizabeth Mische executive director of the Partnership for Choice in Education, brings to us, courtesy of Craig Westover, her thoughts on where school choice is headed during the current legislative session. The possibilities include expanding the income limits currently in place. Even more interesting: attacking the problem of taxpayer funds being used for lobbying against reform efforts.

(Note to non-Minnesota readers: the DFL, mentioned by Mische, is the "Democratic-Farm-Labor party." Just a little regional variety for you.)

Labels: Education, School choice

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More Than You Wanted to Know About Health Savings Accounts.
The Flint Hills Center for Public Policy recently held a workshop on health savings accounts, and now offers some documents that explain the benefits and details of this approach.

The U.S. Treasury Department (PDF), for example, has an overview that is, considering the source, quite readable.

The Kauffman Foundation offers an overview of the future of consumer-driven health care. If you don't know what that is, get ready: it requires more effort from consumers but also offers the potential for more rewards. In any case, the status quo of employer-sponsored paternalistic care is unsustainable. To view the Kauffman presentation you need a program that can read Powerpoint slides; the presentation is here. (permalink)

Health Savings Accounts Have a History.
Andy Laperriere of ISI group provides a quick review of Health Savings Accounts (HSAs) in today's Wall Street Journal. After explaining how HSAs work, Laperriere reminds us that HSAs are already proven:

Aetna recently initiated a consumer-driven health plan called HealthFund with incentives similar to HSAs and found that in 2003 costs in the consumer-driven plan went up 3.7% compared to a 16.2% increase for a similar patient population in traditional insurance plans. Patients in Aetna's HealthFund used the emergency room less, switched more quickly to generic drugs, and took greater ownership of their own health care by researching prices and medical information using Aetna's Web-based resources.

One thing governments can do to promote this innovation: make HSAs an option in health care coverage for public sector employees. Better yet, make it a mandatory part of any coverage.

Labels: Health care

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We're from the MOB.
Saturday night was the occasion of another semi-annual meeting of the MOB. The Minnesota Organization of Bloggers, that is. The MOB takes the computer-enabled social networking of, say, MeetUp.com, but moves the online side of communications from a centralized platform (e.g., MeetUp.com) to a decentralized one in which bloggers make comments on a number of different web sites, each of which reflects the personality or purpose of the individual publisher rather than a central planner.

The creator of Bogus Gold has a good write-up of the evening, as does the purveyor of Shot in the Dark. But a reading of these notices reminds me of all the people I did not get the chance to meet. Maybe next time. (permalink)

Health Care: The Third Party's Over
Health Savings Accounts promise to make a major difference in the way that we think about and finance health care treatment.

The Wall Street Journal explores some of the new financial and other institutions that will have to develop for HSAs to become a significant part of the health care market.

Paul Mango and Vivian Riefberg, partners of the consulting firm McKinsey & Company, predict that four kinds of businesses or occupations will be key players in the developing MSA market.

Underwriters will have to shift to risk evaluation for individual policies, something that is actually easier than for group policies.

Payment transaction specialists will handle things such as giving consumers the ability to get up-to-the-minute balances of their savings accounts.

Infomediaries (WebMD is an early prototype) will assist people in evaluating treatment options, as well as choosing among service providers, while

Asset managers will manage accounts much like 401(k)s.

All in all, a new world, but one with fascinating new possibilities for individual sovereignty and consumer choice. (permalink)

Get Thee a New Job: Disability Pension Plan Needs Reform.
A firefighter in California says that he has a phobia of entering burning buildings. In return he gets a disability pension.

In a commentary on the need of California to move its public employees to a defined-contribution benefit system, the Pacific Research Institute says "What this person needs is not a disability pension but a different job."

Labels: Public employee pensions

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Principles for Tax Reform.
Proposals for tax reform, such as a flat tax or a national sales tax, periodically get attention at the national level. But not less visible are proposals for state policy.

The John Locke Foundation offers "a flat rate 'consumed income tax'" for North Carolina . With some modifications, it may be applicable to other states.

Among the benefits, says the Foundation: "This would reduce the tax penalties against economic growth by making all saving and investment tax deductible and would reduce tax discrimination by abolishing the current 'progressive' rate structure." (permalink)

Money for Nothing
A private company in the Fortune 50 does $30 billion in sales in fiscal year 2003. It plans to invest $71 million in a new facility for its data processing needs, and it wants the new facility--which will employ (at most 25) people. The company as a whole employs some 16,000 people, and that's only in one state.

So what does North Carolina do? Give home improvement retailer Lowes $3.7 million. Paul Chesser says that when you consider that the new center would have ended up in the same location even without incentives, North Carolina gave away money for nothing. No word on whether there were any chicks involved.

By the way, this is just one example of corporate titans getting handouts from the taxpayers. North Carolina governments have also given $242 million to Dell, the computer company headed by a billionaire whose name graces the company's identity.

Dude, you're getting cash. (permalink)

Pursuing Educational Options on MLK Day
Today I write two commentaries on the Detroit News weblog about school choice, civil rights, and educational achievement.

Labels: Education, School choice

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Newspapers and Blogs: So Happy Together?
The buzz in the Minnesota Organization of Bloggers is development of a newspaper/blog experiment being conducted in Greensboro, North Carolina. The local paper, the News-Record, has several blogs linked to its site, including the editor's blog. Contributors include members of the newspaper staff, elected officials, and members of the non-political public.

(Thanks to the People's Republic of Minnesota for the tip.)

Oh yes, I should also mention that the Detroit News has a number of blogs as well, including the politics blog, where I write on a regular basis. (permalink)

Government-Owned Golf Doesn't Make the Cut.
A while ago, I wrote here, and in the Detroit News, about the folly of governments being in the business of operating golf courses. Today--the coldest day of the season to date--I press the point again in another Detroit News entry, which responds to criticisms of the original essay.

Labels: Golf

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Education: Time to Put Money to New Uses.
The Kansas Supreme Court has said that the state is not spending enough money to meet its own standards of a "suitable" education. In an op-ed in today's Wichita Eagle, I argue that the problem is bigger than "not enough money." It's a lack of competition, and a decision to impose a top-down definition of education.

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Add Choice, Not Just Money, to Education

The Kansas Supreme Court ruled last week that the Legislature has not fulfilled its constitutional requirement to finance what it had previously defined as a "suitable" education.

"It is clear increased funding will be required," said the court, but it did not specify how much.

One approach to the dilemma is to change the definition of a "suitable" education so that the state commits itself to purchasing a less expensive mix of services. Advocates of increased funding argue that this would "dumb down" schools. Gov. Kathleen Sebelius, in her State of the State address, opposed this approach and called it an "end run."

The ongoing controversy points out the trouble of relying on a government-driven system of defining education and delivering it through the political process.

Generally, Americans like to choose from a variety of providers when they buy important goods and services. But aside from paying full tuition at a private or parochial school, when one is available, there is only one provider in any given school district -- the tax-supported public school.

Our current system for delivering education depends on this one provider and a great deal of centralization. That was the approach used by planners in the old Soviet Union for all goods and services. They tried to decide the "right" mix of services, products and prices. It did not work very well -- producing shortages here, surpluses there and shoddy goods almost everywhere.

The American approach to funding education suffers its own flaws from centralization. The greatest flaw is that most of the benefits of competition are lost. The benefits of competition are captured best when the norm is voluntary interaction among buyers and sellers, not court rulings or legislative compromises.

The decision to determine the budget by using the current costs of a noncompetitive system relies on an imperfect set of calculations. Without competition in place, we are unlikely to get the cost-effective services that we all want.

If the Legislature decides to increase funding in response to the court, it has two choices. One is to simply add more money to the current, top-down system that tries to satisfy everyone through the political process.

More promising approaches direct money to students, not schools; increase competition; and let families personalize the education their children receive.

A voucher or refundable tax credit given to low-income families, for example, could be spent on tutoring, supplemental materials or even tuition at a private school. Not only would this approach direct spending to the desired students, it would also introduce a greater role for competition.

What is suitable for one child or family is not necessarily suitable for all.

Some students will benefit from direct instruction, while others will flourish in a more open-ended approach. Some will succeed with a business and career-oriented education, while others would do well to pursue the liberal arts. The needs of people in a rural community may differ from the needs of those in an urban one. A top-down system will not accommodate these differences very well.

The purpose of raising taxes for education is to make sure that children learn. It is not primarily to create one kind of school system.

Labels: Education, School choice

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The Structure of City Government: Minneapolis as a Case Study.
A while ago the Minneapolis Star-Tribune ran a review of the multi-headed government of the City of Minneapolis, Minnesota. Blogger Speed Gibson offers a long running commentary on the Star-Tribune's coverage.

Part one tells us that the city is largely dominated by ward politics (strong council, weak mayor system). In addition, there are many other forms of government (park board, etc.) that have some jurisdiction in the city, but which are not part of city government. Reform is required; spending, not including spending on schools, is roughly $4,000 per person. That's a lot for a city.

Part two contains the following language from a Star-Tribune editorial: City government is a bunch of fiefdoms from which it is difficult to wring savings, consolidate services, set proper priorities or communicate Minneapolis' needs and desires to other levels of government. Compounding the problem are the independent, frequently dysfunctional park and library boards.

Sounds like we have a good example of public choice theory going on.

Part three tells us that the city has a large problem with debt, due in large measure to generous pensions.

Part four reviews the city's standing with the state legislature. In two words: not good. The legislature believes (rightly so, I expect) that the city is a bloated mess, and that increased funding without reform will only delay the day when necessary changes are implemented. Speed Gibson calls for a strong mayor, which may be a good thing. How about some contracting out of government services? Load shedding? But that may take us back to the form of government (a ward system, for example), as well as the attitudes of the leadership. And of course don't forget the political culture: if people think it's a good thing for government to do all sorts of things for them, an expansive government is likely, regardless of form of government.

Part five mentions that council members perform constituent work. This brings to mind the classic of American political science, Congress: the electoral connection, by David R. Mayhew. Mayhew says that re-election is the primary goal of congressmen is to get re-elected. (I can hear someone asking: You needed a Ph.D. to tell you that?).

But what's most interesting, from my years-ago reading of the book, is that the key to re-election is not taking stands that represent your constituents, or serving as a careful, thoughtful overseer of the executive, or being the most thoughtful person, carefully examining public issues.(This model is given great rhetorical weight in Minnesota.) No, the key is to shower your constituents with favors from the executive branch, whether that mean pork-barrel politics ("bringing home the bacon") or simply helping people navigate the bureaucracy (having an aide call someone so that grandma gets her Social Security check on time.)

Political changes in the last decade (e.g., the change in Congress from Democratic to Republican control) may at first blush make this analysis obsolete, but they don't. Republicans came to power in large part through gerrymandering, driven by demographic changes favorable to them. And they have been quite capable and willing to practice the same politics of careerism as the Democratic congresses studied by Mayhew.

Part five of Speed Gibson's series, by the way, is notable for its review of two objections raised to proposals for reform. Naturally, they are raised by two politicians (library board and parks board, respectively) argue that folding their organizations into city government is a bad idea.

Part six blames some of the city's problems on what someone else celebrates as "unprecedented participation" of citizens in government.

Part seven finishes off with a condemnation of the current system by the Star-Tribune:
The problem with Minneapolis' current structure -- and political culture -- is that it values inefficiency and insularity; residents tend to think in terms of neighborhoods only, instead of a single, living, breathing, more broadly competitive city. The focus tends to become my park, my school, my council member, my ward, my intersection.

The original series of Star-Tribune articles and editorials can be found here. While Speed Gibson has given an overview of the articles that makes a case for the strong mayor system, I have not studied local government enough to make a definitive endorsement of one approach over the other. Still, from an intuitive point of view, structure does make a difference.

There's also a publication from the International Monetary Fund that bears further examination. In a working paper called "District and Government Overspending," Reza Baquir concludes (from the abstract):

Models predict that, other things being equal, greater political districting of a jurisdiction raises the scale of government. This paper presents new evidence on this and related predictions from a cross-section of city governments in the United States. The main finding is that one additional legislator is associated, on average, with 3 percent larger expenditures per capita. Evidence also suggests that forms of government with strong executives, particularly those with veto powers, break the link between districting and government size.

Minneapolis, with a population of roughly 380,000, has 13 wards, by the way. It's also very high on the list of cities in the state when it comes to per-capita spending. The Auditor's Big Book of Cities has a lot of data.

Labels: Public employee pensions, School choice

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An Electoral Parlor Game to Give You Headaches.
One of the arcane hobbies of academic political scientists and hobbyists is to dream up and contemplate different ways of deciding who wins elections. And no, I'm not talking about stuffing the ballot box.

In the U.S., we almost always use what is called a "first past the post" system. Get more votes than anyone else--even if it is not a majority--and you win. (Bill Clinton and George W. Bush were put into office with a plurality, not majority, of the popular vote.) Louisiana, true to its French heritage, does things differently. It holds run-offs between the top two vote-getters, if nobody snares a majority vote.

The conclusion of academic political science is that the methods used for deciding the winner do make a difference in the political system. It is generally thought, for example, that our approach is responsible for what many people think of as a "Tweedledee and Tweedledum" choice among presidential candidates. In some countries, coalitions are built among many parties; in the U.S., they are built within two parties.

Now in British Columbia there is a move to replace Canada's first past the post system with the "single transferable vote." I'm not going to explain it here, but it is an interesting concept.

Terry O'Neill explains the story in the Western Standard, and calls it unadvisable.

The new ballot being considered by B.C. is so complicated, says analyst David Schreck, a former provincial government adviser, that it will baffle most voters--and that can't be good for democracy. "Nobody's ever going to understand it," says Schreck. "It was designed by a mathematician."

Such a change is unlikely to come to Canada, much less the U.S. But if you're up for a little mind experiment, check out the article. (permalink)

School Choice is the Answer to Curriculum Disputes.
As mentioned previously in this space, deciding a school curriculum at the state level is going to give unsatisfactory results.

Today, Andrew J. Coulson says that school choice is the best way to defuse conflicts over curriculum. Though the ongoing conflict of what to each about human origins is back in the news again in Michigan, the re is an even more serious problem at hand:

Every aspect of the public school curriculum, not just science education, is inherently political. Decisions over what and how to teach are made by elected and appointed government officials. Because there is only one official state organ of education, everyone wants it to conform to their own views.

That is impossible.

In a pluralistic society, there are countless different and incompatible worldviews. Our effort to serve that diverse audience through a monolithic school system has not only failed to forge common ground; it has bred animosity and discord.

The way around this discord: school choice. And if social tolerance and civic-mindedness are your concern, Coulson closes with some interesting research that shows private school students may actually possess more of these characteristics than their public-school counterparts.

Labels: Education, School choice

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How Much Money is Adequate for Education? Do We Know?
Last week, the Kansas Supreme Court ruled that the Legislature was violating the state constitution by not providing enough funding for a suitable education.

In brief, the Legislature created a committee to draw up a list of specified classes and other features that would define a "suitable" education. ("Suitable" is used in the constitution, but is otherwise undefined in that document.) Then a consulting firm was brought in and said "If you want to deliver this kind of education, you've got to spend a lot more money." The Legislature didn't do it, some school districts sued, and now everyone is talking about whether, or how much taxes will be raised.

Today's Wichita Eagle reports that support for a tax increase is weak. Instead, the Legislature may change its definition of a "suitable" education. While this will might let the state off the hook (though what the Court will say about the matter is anyone's guess), it retains one fundamental flaw of the current system: it's a top-down, "we-define-what-you-need" approach carried out by politicians in the state capitol. It's time to expand parental choice (refundable tax credits, vouchers, even charter schools, which are in a weak position in Kansas), so that families can select their own educational programs in a competitive market.

Labels: Charter schools, Education, School choice

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Why Not Build a Great Pyramid?
Following in the great tradition of satire, Craig Westover provides a news account of a new public works project for Minnesota: a great pyramid.

[House Speaker Steve] Sviggum noted that not only will Great Pyramid construction create jobs for the building trades, but once complete, ongoing maintenance and administration will require additional tax dollars (which individuals otherwise might waste on themselves) and will pump those dollars into the "common collective good"

If you're not familiar with Minnesota politics, I'll give you two clues that may help in reading the piece. One, anti-smoking zealotry is at a fever pitch. Two, Indian tribes have a state-granted monopoly on casino gambling, the expansion of which is seen by some as a financial savior for the state treasury.

With those items in mind, read and enjoy. (permalink)

School Finance Survey Now Out.
Education Week (free registration required) is out with its annual all-state survey of school finance.

All sorts of data for you to chew on.

Labels: Education

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How Much Does that Health Care Cost You?
Citing the January/February 2005 edition of Health Affairs, the Wall Street Journal notes the following data bites about health care spending:

- Out of pocket expense went up 7.6 percent in 2003.
- One quarter of out-of-pocket expense are for prescription drugs. (That is one reason, perhaps the leading one, for the demand for cheap drugs.)
- Total health care spending in 2003 was $1.7 trillion, or $5,670 per person. (Consider that figure next time you think you are underpaid. Are you counting the value of any employer-paid insurance premiums?)
- Spending growth in Medicaid was 12.1 percent in 2002, and 7.1 percent in 2003. The similar numbers for Medicare were 7.6 percent and 5.7 percent.
- Insurance premiums rose 10.7 percent in 2002, and 9.3 percent in 2003.

Rising spending is not in itself a problem. As the country gets wealthier, it's natural to want to spend more on personal well-being.

On the other hand, some of it is the result of the price illusion, in which it's easy to say "Somebody else is paying for it." But as the example of employer-paid insurance premiums demonstrate, you pay for it one way or another.

Labels: Health care, Medicaid

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Is Demographics Destiny?
Writing in the Wall Street Journal, George Melloan reminds us that policy makers are limited by the constraints of demographic trends. In particular, he cites two domestic issues: retirement income, and immigration.

On the first issue, George Bush's "plan to protect young workers from the eventual collapse of an actuarially unsound Social Security system would give them private investment accounts. But opponents see this as an assault on the key New Deal concept of government as the guarantor of personal financial security. So expect a fight."

And on the second, "His plan to regularize immigration policy through amnesties for illegal aliens and a guest-worker program is under attack from the right. Opponents prefer to ignore the fact that attempts to keep Mexicans from sneaking across the border haven't worked. They are annoyed by having 20 million Mexicans in their midst -- even though most are doing the least-wanted sweat labor. Expect another fight."

Looked in this light, it's easy to be pessimistic, and doubt that any satisfactory resolution will be found. (permalink)

The Trouble with AARP.
A Stitch in Haste has a nice summary of the trouble with AARP. Among other things, they are make for a formidable opposition to any effort to reform Social Security away from its current redistributionist mode into one that emphasizes private ownership of retirement.

A few interesting facts:
- It has an operating budget of nearly $800 million. Only $200 million of that comes from membership dues.
- It also publishes the largest circulation magazine in the country.
- Its investment portfolio is over $900 million. (permalink)

Medicaid: Go Back to Cash.
My colleague at the Flint Hills Center, Matt Hisrich, writes to the Hutchinson (Kansas) news about the plight of Medicaid.

Though the numbers he uses are specific to Kansas, the problem exists in various forms at all states. Likewise, part of the solution--increased consumer participation in the management of health care dollars--applies to all states as well. "Medicaid," he writes, "is actuarially bankrupt, producing low-quality care and falling victim of fraud and abuse." It's also unsustainable in its current form. One alternative: Give people cash and help them buy appropriate services or insurance policies.

Labels: Health care, Medicaid

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On Teacher Tenure, He's No Girly Man.
Governor Arnold Schwarzenegger blasted some of his opponents in the California legislators by calling them girlie men.

The San Francisco Chronicle quoted the governor this way: "He also said: "They cannot have the guts to come out there in front of you and say, 'I don't want to represent you. I want to represent those special interests: the unions, the trial lawyers.' ... I call them girlie-men."

True to his style, Schwarzenegger has taken on the unions once again, specifically, the teachers union. Writing for the Pacific Research Institute, Lance T. Izumi says that the governor "Drops a Nuke on Teacher Unions" by calling for a repeal of tenure and linking pay to performance. Says Schwarzenegger, "This is a battle of the special interests versus the children’s interests. Which will you choose?" (permalink)

Schools for Students, or Students for Schools?
My post at the Detroit News today deals with the problem of confusing public goals (education for children) with public programs (government-run schools). It keys off an earlier entry on the PolicyGuy site about two teachers who have had to fight the education blob, which confuses its own well-being with the educational well-being of children.

On a similar note, some of my earlier entries on the Detroit News blog drew some sharp rebuttals, which again only confuse means and ends.

On December 22, 2004, for example [scroll way back], Chris Geerer argued thus:

Mr. LaPlante certainly loves to take every opportunity to slam teachers! This time he complains that "corporate America spends $3 billion a year to improve the writing skills of employees. While some of that money may be spent on specialized training, a good deal of it is simply due to the shortcomings of our current K-12 educational system."

In related comment, Geerer challenges me to read the tale of a new teacher, as if I did not appreciate the hard work that a teacher can go through.

But there's a big difference between slamming teachers and slamming a system. A teacher can be intelligent or not so; skilled at communicating or not so; caring or apathetic, and so forth.

Teachers, and would-be teachers, respond to the system. The system includes the business end of the school: How are teachers selected? How are they trained? How are they paid? How do schools get their students? How does the school get its funding?

Some teachers are bad. Some are great. But the bigger question is the quality of our way of providing education. In short, our system of running schools has got many things wrong. It rewards slackers and dull thinking. It fails to reward (or even punishes) innovators and those who succeed. Too often, it ignores parents, and it certainly doesn't give them the full range of power available to consumers in a competitive marketplace.

Good teachers in a bad system? Yes, they exist. Be grateful for the good teachers who emerge against the system, but recognize that we can do better. That starts by remembering that we want children to learn. That is non-negotiable. Much of how we do things, on the other hand, should be up for grabs. That the current system is the best means of achieving the goal of educating children is hardly obvious.

CORRECTION: A reader kindly wrote in to say that the Detroit News link was incorrect. It is now fixed.

Labels: Education

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Is the Right to Keep and Bear Arms Limited to the National Guard? White House Says No.
Today's Wall Street Journal (link may work, or not) reports that the Bush Administration "has issued a 109-page memorandum aiming to prove that the Second Amendment grants individuals nearly unrestricted access to firearms."

This may be one of John Ashcroft's most memorable legacies of his tenure as Attorney General. If it serves instrumental in advancing the position that the right extends to people as individuals, Ashcroft will have secured a place in constitutional history. As the Journal notes, whether the right extends to individual citizens or only to state militias (often argued as meaning National Guards) has been a long-standing dispute.

Historically, in a 109 page memo released by the Department of Justice last year, the definition of militia, while extending to a large segment of the population and not simply a government-organized unit, was limited to "able-bodied white men." Perhaps, like the right to vote, the right to keep and bear arms will eventually be universally recognized as extending to every non-felon. (permalink)

So Much for Technological Isolation: Blogging Brings People Together
A few years ago, Robert Putnum wrote, worriedly, that Americans were Bowling Alone. His concern was expressed in the book's subtitle: The Collapse and Revival of American Community. (For some reason concern for "community" is often hijacked as a tool to promote political solutions to individual and social problems, but that's another essay for another day.)

About the same time as Putnam's book was published, the Pew Internet Project addressed (and refuted) the contention that the increasing use of the online world was leading to social isolation.

Online communication can strengthen existing relationships, of course. Many people send e-mails to parents, children, siblings, friends, and so forth. But online communication can also create new relationships, especially when combined with subsequent "real" meetings of individuals.

The two worlds have been combining for months now in various locations, including a Minneapolis watering hole, where Minnesota bloggers meet to match wits in a trivia contest and swap stories about writing, work, politics, and life.

Bogus Gold offers photos from last night's edition, which I attended.

It's an interesting mix. Some of the folks in Minnesota blogdom knew each other before entering the self-publishing business--such as two cousins (I think it is) who are part of a local group glob. Others, however, meet first through exchanging e-mails and making comments on each other's web sites.

While the social life of Minnesota bloggers may not be in itself that interesting, it is another chapter in the story of how worries of doom ("technology will isolate us all!") can be greatly overwrought, and simply wrong.

Some time ago, I argued that Keeping the Internet Free Can Help, Not Harm, Community. Despite the continued use of the Net for less-than-admirable purposes, the theme holds true today. But if anything is different five years later, the chief public policy obstacle to increased use of the online world is not content regulation, but excise taxes that help price these services out of reach for some people. (permalink)

A Few Good Guys Making a Difference In Education
This is an old story, but the Washington Post had a review of the Knowledge is Power Program, started by two newly-minted Ivy League college graduates.

They set off to make a difference in K-12 education, and stumbled along the way. Over the course of a decade, the Post says, Mike Feinberg and Dave Levin found a "way of teaching low-income children that actually works in 36 public middle schools, producing the largest and fastest learning gains around the country."

As with any story involving heroes, there must be a place for a villain. In this case, that included protectors of the status quo. Because of resistance to change (some self-interested, some not), the duo's approach "barely escaping strangulation at birth."

It's easy for the poor to feel powerless up against the public school system that allegedly serves their interests, but fails miserably. So it's no wonder that Feinberg and Levin ran into difficulties when they tried to enlist parents in providing a disciplined atmosphere for students:

The two neophyte teachers kept visiting the homes of their mostly Hispanic and African American students. A child would open the door and then slam it in shock at seeing a teacher.

The parents were used to being ignored. Fortunately, the conversation did not stop there. After much whispering and laughter, the door would open again and parents would invite them in. So started the road to improving school and student performance.

Of course, if those same parents already had vouchers or refundable tax credits that they could take to the principal of a private (or even public) school, their involvement in education would not have had to wait for the invitation of two naive, intrepid young teachers. It would have been built into the business plan of any school that depends on voluntary enrollment.

The Washington Post story also contains a tidbit about how public school managers sometimes short circuit attempts to ensure accountability and engage in what is delicately called CYA: "Levin became so confident of his progress at Bastian Elementary School that he defied a principal's order to exempt several of his low-scoring Hispanic students from state tests, a popular technique for getting the school's average scores up."

Levin's reward: "At the end of the 1993-94 school year he was fired for what his principal called insubordination."

It gets even more interesting from there, but it reads, inadvertently, as a powerful case of why the public school establishment needs some competition.

Labels: Education

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Regulations Inhibit the Construction of Private Schools.
Given the success of the private sector in giving us more for less, why aren't more people taking advantage of private schools?

The cost of paying tuition on top of taxes to support the government-run monopoly is an obvious reason. But the story is more interesting than that. The Reason Public Policy Institute recently offered a report (PDF file) explaining how regulations unnecessarily drive up the cost of construction, and operating, buildings for private schools. One private school operator estimated, for example, that complying with various requirements sent the cost of his new building soaring $400,000 to $1.2 million.

Labels: Education

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Do Your State's Teachers Know This?
The Colorado-based Independence Institute reminds public-school teachers that they have the right to request a partial refund of union dues spent on political purposes.

It's only worth the value of a couple of large pizzas, which may be one reason why more teachers don't opt-out. Nonetheless, it's worth passing along this page, which is a model for other states.

Labels: Education

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Lean Times? Time for Politicians, Government Managers, to Be Innovative.
Advocates of smaller government, as well as anyone looking for simply smarter government, can use budget crunches as an occasion to improve public sector productivity and clear away dead wood.

Jon Caldara, president of the Denver-based Independence Institute, offers a strong presentation of that philosophy in a column he wrote for the Boulder Camera. Here it is:

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We brought it down to the 5-yard line. Now Republicans want to punt?

As we talk about Colorado's relatively minor budget shortfall, there are a few words the media and the spending lobby never use, words like "productivity," "innovation" or "outputs."

Bear with me as I talk like your old econ professor for a minute. One of the reasons we enjoy the most remarkable standard of living in the history of man is that, through competition, we find productivity.

Productivity is the reason we do more with less. Your company has to automate, find efficiencies, and rearrange its equity to produce a bigger return. If it doesn't, your competition certainly will.

But what if you have no competition? Well, then you have little incentive to innovate. You can increase profits by merely raising prices without the pain of finding efficiency.

Government has no competition. The only pressure it feels to increase productivity is political pressure. What are you going to do, give your taxes to the other government?

Since well before Milton Friedman, free-market types have been arguing that there are better, more productive ways to achieve the needed outputs of government. The tools in the productivity toolbox are barely used: competitive contracting, privatization, selling unused assets, personnel reform, priority-based budgeting.

These are the things Republicans often claim they are working for. Unfortunately they often just spout off about such reforms to sing to their base and invoke images of Reagan and Thatcher. When in office, making market reforms a reality is much more difficult. Entrenched interests have the incentive of self-preservation to make sure business is done as it has always been done.

So politically, when do you cowboy-up and take on market reforms? The motivation to increase productivity in government only comes when government resources are tight.

Like now.

Because of its constitutional mandate to spend more every year on K-12 education, no matter what the condition of the budget, Amendment 23 and not your Taxpayer's Bill of Rights has caused a budget crunch. And we should use it.

Those with the stagnant mindset look at the shortfall, only about $250 million out of a $12 billion budget, and ask "how do we squeeze more money from taxpayers?" Those with a dynamic mindset ask, "How do we provide the same governmental outputs with a little less? How do we find productivity now that we have the incentive?"

Amazingly, it is not the Republicans asking the questions. It is some brave-thinking Democrats.

The Democratic Leadership Council said in its May 7 edition of its Blueprint magazine, "Government can compete ? and stay relevant ? only by delivering more value per dollar. But the only way to accomplish this is to reinvent the way we do the public's business. Our public institutions must learn to work harder, but more important, they must learn to work smarter."

They highlighted the work of Washington State Governor Gary Locke and his Priorities of Government budget model as the key. Locke was able to close a $2 billion gap without raising taxes.

Locke told his budget makers to ask and answer some basic questions: What does the state want to accomplish? How will the state measure its progress in reaching those goals? What is the most effective way to accomplish the state's goals with the money available?

Listing goals? Measuring outputs? Finding efficiencies? Outrageous!

This thinking changes the bureaucratic paradigm from "how do we get X amount more money from taxpayers?" to "how do we measure and achieve our goals with the money we have?" The answer is to open up the productivity toolbox.

In a Christmas gift to the new Democratic Legislature this week Colorado Gov. Bill Owens endorsed the tax-increase plan of House Speaker-elect Andrew Romanoff. It calls for a small income-tax-rate cut to disguise a much larger $500 million a year tax increase via a TABOR override. That's twice as much needed to fill the hole created by Amendment 23. It also alters our Taxpayer's Bill of Rights to increase the state's spending limit.

TABOR has saved Colorado's fiscal fanny from the devastation of the recent economic downturn. Without it, Colorado's budget woes would look more like California's. The governor's plan doesn't even touch the real problem, Amendment 23's voracious spending mandate.

While the media and the spending lobby applaud the governor's "first step toward a workable compromise," I am disappointed.

I say it is time to expect more from government, not more from taxpayers.
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By the way, that DLC article that Caldara referred to is Budgeting for Outcomes. (permalink)

Universal Preschool is a Bad Idea.
Lisa Snell, of the Reason Public Policy Institute, hears an increasing call for universal preschool.

She explains here why it's not a good idea, at least if it's run like Head Start:

Head Start continues to receive funding for low-income students even after repeated violations of state preschool regulations. The parents of children in Head Start have little incentive to find a better performing child-care provider because Head Start funds will not follow a child unless the child enrolls in a Head Start program.

Monopolies are often vilified, sometimes appropriately so. Government monopolies are even worse, since dislodging them requires not technological or business innovation, but political combat.

Meanwhile, the Alliance for School Choice applauds, in a mass e-mail, the creation of a parent-centered preschool program in Florida. Since the announcement does not appear to be on their web site, here is the bulk of the message. Would that this be a model for future reforms.

PHOENIX—The Alliance for School Choice, the nation’s leading organization committed to providing school choice for economically disadvantaged schoolchildren, applauds the new universal pre-K program that will allow Florida's 4-year-olds to attend a pre-kindergarten program of their parents' choice.

"This program will be the largest private school choice program in the nation," said Clint Bolick, president and general counsel of the Phoenix-based Alliance for School Choice. "It provides a cutting-edge model for expanding pre-K educational opportunities without huge capital investments."

Gov. Jeb Bush signed the bill Sunday. An estimated 130,000 new students could enroll when the program begins in August, mostly at existing preschools and private day-care centers. The voluntary program would provide 540 hours of instruction during the school year with no more than 18 students in a classroom and a more intense 300-hour summer option with a maximum of 10 students per classroom.

Labels: Education, School choice

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Newspapers and Blogs: Friends, Foes, or Something Else?

Editor and Publisher, a trade magazine for what used to be called newspapermen, considers the ways that newspapers might capitalize on blogs.

In particular, what should newspapers do when blogs send readers their way? The editor of the New York Times' web site summarizes the challenge: "a good percentage of our readers are not seeing the homepage; they are coming in because of search engines or RSS feeds, any number of avenues ? our own e-mails, other links. They're coming in to an article page. Once they get to an article page, we need to redesign how else you engage the site and travel through it."

Meanwhile, the editor of the web site of the Washington Post acknowledges that the format for print may not necessarily work in an online world infused with blogs.

One promising development the E&P article notes: the Wall Street Journal is punching a few small holes in its available-by-paid-subscription-only wall, so that bloggers can more freely link to the paper.

E&P promises a follow-up article tomorrow. (permalink)

Talk About Prescription Drug Policy, Get Spammed for Prozac.
The mysteries of Internet commerce continue to amaze. Write about government regulation of (and payment for) prescription drugs, and everyone beats a path to your door offering lucrative (!) new (!) franchises (!) for distributing Prozac, Viagra, and the like.

Capital punishment, anyone? Other options? (permalink)

Medicaid Expenses Rising; Reform Required.
When it comes to domestic political affairs, Social Security, Medicare, and education get a lot of ink. Less visible, but more important, is Medicaid, a federal-state health program that covers some of the poor, as well as pays for most nursing home stays of the elderly.

Medicaid hasn't got a lot of press, but the National Center for Policy Analysis (NCPA) points out today that it's going to get a lot more in the future. It better. Whether you care about welfare programs, K-12 education, higher-education, job training programs, or cutting back on the size and scope of government, you're going to have to pay attention to Medicaid.

Why? As the NCPA says, "Medicaid costs exceeded elementary and secondary education costs in states’ 2004 budgets." That's the first year that this program--which goes by different names and faces in the states--took more out of the public purse than K-12 education, traditionally the single largest budget item.

Unfortunately, much of the policy attention paid to Medicaid has sought to address its problems in one of three ways: squeezing more money out of health care providers, limiting the number of people enrolled in the program, or cutting back on the services covered.

But Medicaid suffers the traditional problem of all government health care programs: it's not a rational system. As the American Legislative Exchange Council has put it, Medicaid is a system of perverse incentives. Even if you wanted to, it would be hard to come up with a system that more poorly services taxpayers, patients, and physicians.

Labels: Medicaid

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