Detroit Continues to Implode.
Detroit News columnist and fellow blogger George Bullard notes that Detroit is officially the poorest city in the country.

Inept city governance, a leading industry that has taken a long time to global competition, and many other factors contribute to a state where one in of every three city residents lives below the federal poverty level.

"Meanwhile," Bullard says, "taxes remain high, assuring that more business will split for more friendly climes."

Taxes, yes, but also a barely functioning education system in the death grip of a teachers union, blocks and blocks of abandoned buildings ... the list goes on. (permalink)

Government Helps Consumers By ... Requiring Price Increases.
Minnesota, like many states, requires a minimum markup on gasoline. A chain of stations is challenging the state law in court.

While one path to success in retail is to buy at wholesale and sell for ever-thinner margins over wholesale, the state law stands in the way. (permalink)

Has the National Governors Association gone pro-school choice? The Alliance for School Choice says yes, with this announcement:

FOR IMMEDIATE RELEASE
Aug. 29, 2005

Contact: Laura Devany
602-468-0900/ 602-615-8897 (cell)


NATIONAL GOVERNOR'S ASSOCIATION REPORT RECOMMENDS GREATER SCHOOL CHOICE
New Report Encourages Tuition Assistance for Private Schools


PHOENIX - A bipartisan task force of the nation's governors, has issued a best practices guide for their colleagues recommending states expand the range of educational choices available for families by embracing charter schools, virtual schools and tuition assistance for private schools.

"Increasingly, policy leaders are concluding that providing quality education options can raise student achievement and improve existing schools," states the report released this month. "Given the slow pace of achievement and graduation rate improvements, many policy makers have concluded that assisting public schools and assessing the results are not enough. These policymakers have begun giving families and students greater choices in education options."

These recommendations, which, according to the report's authors, should be considered as part of a coherent and comprehensive public education system, include offering tuition assistance for choice participation. The report states, "By providing state tax or financial assistance for students to attend private or parochial K-12 schools.... more students can access these options."

The report states that greater school choice can help meet the goals of:
* higher graduation rates,
* meet No Child Left Behind Act requirements to offer choice options,
* encourage innovation and improvement across the education system,
* satisfy parental demands for options, and
* reduce segregation by race and income.

"School choice is moving into the mainstream of American politics, as reflected by growing bipartisan support. Serious policymakers recognize that a conversation that doesn't include school choice is not a conversation about meaningful education reform," declared Clint Bolick, president and general counsel of the Alliance for School Choice, the Phoenix-based organization that leads the national effort to support school choice programs to expand opportunities for disadvantaged schoolchildren.

The governors who issued the report are: Janet Napolitano (Ariz.), Tim Pawlenty (Minn.), Haley Barbour (Miss.), Bill Richardson (N.M.), Mark Sanford (S.C.) and Jon Huntsman (Utah). Five of the six governors have advocated or signed bills providing private school choice options. Read the full report at: http://www.nga.org/Files/pdf/EDUCATIONCHOICE.PDF.

The sixth, presumably, is Gov. Napolitano, who vetoed school choice measures earlier this year.

Labels: Charter schools, Education, School choice

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You are Invited to Be a Pain in the Neck.
The city invites me to pontificate on the remodeling work of one of my neighbors.

The neighbor in question lives a few blocks away. He (or she) wants to do some remodeling, and the city asks if I want to prattle on about it at a hearing that will appear on the public access cable station. A chance to be a star!

Here's the memo:

TO: Property owners within 350 feet of (stated address)

Applicant: (Name of remodeling company)

Request: A variance of 1 percent to the maximum lot coverage of 20 percent for a four season porch.

Time of hearing: ( )

Place of hearing: City Hall Council Chambers (address given)

How to participate:
1. You may attend hearings and testify.

2. You may send a letter before the hearing to the Community Development Department (address given) or fax to (number given)


I got not one, but two copies of this memo, meaning that as a taxpayer I paid twice, not only for postage but for staff time. I have no idea why I got two copies; they came to the same address, and I own only one parcel of land in the city.

More importantly, if my neighbor wants to update and improve his house, great! He certainly doesn't need my permission. If he's running a meth lab out of the porch, I would be concerned.

But exceeding some arbitrary ratio for lot coverage? Going from 20 to 21 percent? When the said porch can logically go in one place--the back yard, where I won't even see it on those rare days I drive or walk in that direction?

Spare me.

Local government offers too many opportunities for busybodies. (permalink)

Goodbye, Mr. Smiley, or the Trouble With Public Art
This is rather old news, but still remarkable: Kentucky's new license plate caused so much public loathing that the state is going to retire it early. Drivers have been known to cover up portions of the plate with duct tape, or otherwise deface it, so the government's going to surrender its design ahead of time.

Unofficially dubbed Mr. Smiley, the plate features what some commentators call a Teletubbies-style sunrise. USA Today provided a write-up of the decision to sunset the sunrise, while KentuckyRoads.com provides a legislative history. It also has a good image of the plate; keep scrolling until you reach the bottom of the page.

The magazine Business 2.0 points out that the early phaseout will cost the state $3.5 million. (permalink)

Private-Public Parks Partnership.
Partly in response to some work that I was part of a couple years ago, the state of Michigan contracted out the alpine ski operations at a state park. Though there was some time required for the local community to adjust to the changes, it looked as if we have a reasonably successful example of contracting out.

A commercial vendor took over the alpine ski operations in Michigan's Porcupine Mountains. A not-for-profit group took over the responsibility for maintaining the cross-country trails.

But contracting out a function (such as running a ski hill) is not the same as privatization, in that the function is still supported (at least in law) by government. Full privatization would be for government to get out of the picture entirely, and let the operation sink or swim.

It turns out, though that when it comes to the cross-country ski operations at the Porkies, what we have is not the state getting out of the business, or even the state turning over the business to someone else in return for a cut.

Instead of the State of Michigan employees doing trial grooming, the state is sending tax dollars to a non-profit group to do the work. (See the PDF version of the Friends of the Porkies newsletter from Winter 2005, PDF, see page 3.) Salaries have been replaced by grants.

Still, the money does seem to being well-spent, as this report from the Ironwood Daily Globe puts it:

EDC praises park supporters
Published Thursday, August 11, 2005 1:59:08 PM Central Time

By JAN TUCKER

Globe Staff Writer

ONTONAGON -- The Ontonagon County Economic Development Corporation got a thank-you and a pat on back for being instrumental in saving buildings at the Porcupine Mountain State Park which were slated for demolition. Jim Bradley, president of the Friends of the Porkies, told the EDC that it was the EDC and other groups in the county that helped convince the state to use the buildings.

The Friends of the Porkies alerted groups in the county last year that the former manager's home, carpenter shop, a garage complex, and two other residences would be torn down. The county, chamber of commerce, tourist groups, and others protested to state legislators about the plans.

[Snip]

Bradley also reported that the Friends of the Porkies are working on a grant to continue the grooming of the cross-country trails at the Porcupine Mountain Ski Hill. "It looks good that we will be doing the job again this season and we have had many good comments about our work," Bradley said. (permalink)

More On State Labels
The Oxford University Press reminds us of some rules that might be used to determine what to call the residents of a given locale:


Loose guidelines do exist for naming denizens. George R. Stewart, a historian, developed seven guidelines that H.L. Mencken called "Stewart's Laws of Municipal Onomastics." They were cited in the best up-to-date work on this subject, Paul Dickson's Labels for Locals (1997):

(1) if the place name ends in "-a" or "-ia," add "-n" (Alaska, Alaskan) (California, Californian);

(2) if the name ends in "-i" or a sounded "-e," add "-an" (Hawaii, Hawaiian) (Albuquerque, Albuquerquean);

(3) if the name ends in "-on," add "-ian" (Oregon, Oregonian);

(4) if the name ends in "-y," change the "-y" to an "-i" and add "-an" (Albany, Albanian);

(5) if the name ends in "-o," add "-an" (Chicago, Chicagoan);

(6) if the name ends in a consonant or a silent "-e," add either "-ite" or "-er," depending on euphony (Maine, Mainer) (New Hampshire, New Hampshireite);

(7) if the name ends in "-polis," change that to "-politan" (Minneapolis, Minneapolitan). (permalink)

Welcome to the Hotel California, or the Path to More Expensive Municipal Governance.
While government can expand through the conscious decision-making process, sometimes it grows simply through incentives built into laws. This pro-growth bias is at work in Eagan, the eighth-largest city in Minnesota.

Over the last few years, the topic of local debate is whether Eagan should become a "charter city" instead of a "statutory city." A charter is akin to a "city constitution," giving city government more flexibility to design its own affairs. The proposed charter for Eagan included, among other things, the establishment of a ward system.

Not one but two groups developed to oppose the effort. The hot-button issue even drew a response from Governor Tim Pawlenty, a city resident. He took the side of the "no" groups.

As a policy brief I wrote for one of the "no" groups points out, charter cities spend more than non-charter cities. (The brief reproduced here). There are a number of possible reasons for this, the most important of which lie in the realm of public choice and interest-group politics.

Despite the efforts of the official, pro-charter group, when city voters were asked in November 2004 whether they wanted to adopt a charter, 80 percent said no. (Local news report, with applicable spin from both sides, here.)

So is the issue dead and buried? Nope. The charter commission lives on, free to fight another day, as an official or (take your pick) quasi-official advocate of a policy soundly rejected at the polls.

Why does the commission live on? Not because the voters want it to, but because the members of the commission want it to. City residents, who opposed the charter by a lopsided margin in an election that saw an 81 percent turnout, have found themselves checked into the Hotel California, where you "can check out anytime you like but you can never leave." In this case, the commission won't be leaving anytime soon--at least if its current members decide.

The applicable state law, has a pro-charter bias that enables the charter group to continue indefinitely. Briefly put, once a charter commission is established (after meeting a fairly low threshold), it stays in place until members of the commission decide to vote their own work out of existence.

In the last week--over 9 months after the charter's rejection at the polls--the commission is still going, prompting one of the charter opponents to sue the charter commission, forcing it to disband. (He has also sued the city, since whether or not the commission is "part of" the city is a matter of legal dispute.)

The Saint Paul pioneer-Press reports, in part,

Resident Thomas King --— helped by lawyer and longtime charter opponent Paul Bakken -- sued the commission earlier this summer to force it to disband. Last week, King included the city in the lawsuit.

King says the commission's own bylaws require it to disband if voters reject a charter. Eagan voters defeated the proposal 25,080 to 6,159.

"The long and short of it is that the commission should have terminated, and it didn't," Bakken said.

King could not be reached for comment.

Commission Chairman Jon Felde called the lawsuit "frivolous" and accused Bakken and other detractors --— including members of the City Council -- of launching a protracted political vendetta against the charter group.

"It's surprising that there would be this continuing effort to diminish the work of the charter commission," Felde said. "It's part of an effort to de-legitimize it."


One would think a 4 to 1 rejection at the polls would be enough to delegitimize the commission. Apparently not, at least in the eyes of its own members. And the state law appears to be standing behind them, serving as a prod to a form of government associated with higher rates of taxation and spending. (permalink)

State Labels: Where Are You From?
What do you call the residents of X? An e-mail from the Oxford University Press weighs in:

The preferred names for residents of some places are not immediately obvious. Listed below are some of those terms that are associated with U.S. states and cities. USGPO refers to the U.S. Government Printing Office Manual of Style.

Arkansas: Arkansan, Arkansawyer, Arkie.
Connecticut: Nutmegger, Connecticuter (USGPO).
Delaware: Delawarean.

Illinois: Illinoisan /il-uh-NOY-uhn/ (pref. not Illinoisian).
Indiana: Hoosier, Indianan, Indianian.
Iowa: Iowan, Iowegian.

Massachusetts: Bay Stater (by state law), Massachusettsan (USGPO).
Michigan: Michigander (by popular consensus), Michiganian (official), Michiganite (USGPO, but rare).

New Jersey: New Jerseyan, New Jerseyite (USGPO).
North Carolina: North Carolinian, Tarheel.
Oklahoma: Oklahoman, Okie.

Tennessee: Tennessean, Tennesseean.
Utah: Utahn (preferred), Utahan.
Wyoming: Wyomingite.

Annapolis: Annapolitan.
Baltimore: Baltimorean.
Buffalo: Buffalonian.

Cambridge: Cantabrigian.
Canton, Ohio: Cantonian.
Corpus Christi: Corpus Christian.

District of Columbia: Washingtonian.
Grand Rapids: Grand Rapidian.
Hanover, Pa.: Hanoverian.
Harrisburg: Harrisburger.

Independence, Mo.: Independent.
Indianapolis: Indianapolitan.
Knoxville: Knoxvillian.

Las Cruces: Crucen.
Las Vegas: Las Vegan.
Lawrence, Kan.: Lawrentian.
Lawrence, Mass.: Lawrencian.
Lebanon, Pa.: Lebanonian.
Los Angeles: Angeleno, Los Angelean.
Louisville: Louisvillian.

Madison: Madisonian.
Memphis: Memphian.
Minneapolis: Minneapolitan.

Newark: Newarker.
Omaha: Omahan.
Phoenix: Phoenician.
Pittsburgh: Pittsburgher.
Pontiac: Pontiacker.
Providence: Providentian.

Saginaw: Saginawian.
Santa Fe: Santa Fean.
Saratoga Springs: Saratogian.
Saugus: Saugonian.
Sault Sainte Marie: Sooite.
St. Paul: St. Paulite.

Taos: Taoseno.
Troy: Trojan.
Wilkes-Barre: Wilkes-Barrean (permalink)

A City Income Tax? Watch Lest You Be Run Over.
A candidate for the mayoral office of Saint Paul, Minnesota, wants to implement an income tax.

Elizabeth Dickinson, a candidate for the Green Party (a reasonably important force in Minneapolis and Saint Paul), says that such a move would "bring in more revenue to the state and make it fairer for everyone."

Fortunately for city residents, the current mayor opposes the idea. So does the president of the city council, who says that an income tax "would drive people, running," from the city.

Meanwhile the Tax Foundation reports that Minnesota has slipped a bit (though only a bit) in its reputation as a high-tax state, with its state-local burden falling from sixth place, where it hovered in the 1990s, to tenth this year. (permalink)

Michigan: Why Being #1 is Bad.
Sometimes it isn’t good to be the leader. But that’s the situation that Michigan faces as it
tops the charts of the unemployed, and today’s 7 percent rate is projected to increase to 7.4 percent by next year.

Instead of pursuing frivolities such as rebranding pork-barrel spending as a "Cool Cities" campaign, risking public money in start-up companies, or handing out selective breaks on the Single Business Tax (SBT) through the Michigan Economic Growth Authority, whose track record is less than stellar, Michigan needs to take another path.

Simply put, it’s time for public officials to stop chasing after fads and trying to micromanage Michigan commerce. Stick with the basics: provide a predictable business climate that does not drive business away.

There are many element that make a state business friendly or hostile, including its legal system and the productivity of its people. One factor that public officials can influence is the tax climate, which is one place where Michigan could improve.

The Tax Foundation ranks Michigan as a lowly 36th place among the 50 states, beating only Wisconsin, ranked at 41, in the region. Other states in the region doing better than Michigan are Indiana (12th), Illinois (23rd), and even scandal-ridden Ohio (29th).

On the plus side, Michigan beats its neighbors when it comes to small business, pulling in a ranking of 6 out of 50 from the Small Business and Entrepreneurship Council, whose Small Business Survival Index for 2004 can be seen in this PDF file. (Indiana is 10, Illinois is 19, Wisconsin is 27, and Ohio is 40).

But Michigan still depends a lot on large business. The auto industry, chief among them, is subject to global competition. Taking stands for the home team makes for striking symbolism. Better yet would be Michigan’s congressional delegation doing what it can to lessen the grip that federal fuel efficiency standards have on the industry, which would allow Michigan’s companies to adjust to market demand in a more cost-efficient (and job-saving) way.

Labels: Cool cities fad

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When Socialism is Good.
While free-market advocates rightly criticize taxpayer subsidies to professional sports teams, their understanding of the leagues themselves leaves something to be desired.

Take, for example, this short commentary from the Institute for Policy Innovation:


------------------------------------------------------
You're as Cold as Ice
The National Hockey League has settled its year-long labor dispute. The owners finally achieved their dream of a salary cap – otherwise known as wage controls.

Sports Illustrated.com noted, "Under the new (NHL Collective Bargaining Agreement), players are guaranteed to receive 54 percent of league-wide revenues – projected to be between $1.7 billion and $1.8 billion next season."

That means that each team will average salaries totaling about $58 million per year. Guaranteed! Who’d have thunk it? Isn’t the free market great?

But the truth is that salary caps are designed to help maintain the existence of small-market teams that have trouble competing against the New York and Los Angeles markets. There is nothing "free market" about the NHL, and that’s just the way the owners like it.

That’s why there are tight entry and exit requirements. Just try to start an NHL team in your local community. Even if you have an unlimited supply of cash and can attract the best players in the world, you won’t have anyone to play.

To be admitted to this league of extraordinary owners requires almost unanimous owners’ approval, and the incumbents aren’t about to further dilute the talent or the market without significant guarantees of how your entry will contribute to their bottom line.

When the NHL has expanded, it has extracted very large entry fees from the prospective franchises. What other business requires that you compensate the profession in order to be allowed to participate?

But the owners don’t stop with socialist economic policy; they have also turned to socialist politics: robbing from the poor to give to the rich. Most NHL franchises now play in palaces whose construction was heavily subsidized by the taxpayers. And in most cases the owners reap not only the benefits of the amenities and gate, but some also have extracted development rights to surrounding properties.

Wage controls, restricted entry and fleecing the taxpayers. And we waited 18 months for this?!


------------------------------------------------------
A lot could be said in response, but here's the essential point: owners of professional sports teams need each other. Without the Oakland Raiders, there would be no Denver Broncos. Without the New York Yankees, there would be no Boston Red Sox. Call it socialism, communism, vegetarianism, or what you will, but sports teams do not exist independently of each other. They are able to play cities off each other in the tax subsidy game, but cities can (and should) "just say no."

Maybe a salary cap is nothing more than a zero sum game in which the owners gain at the expense of the players. Or--given the positive correlation between talent and salaries, talent and athletic achievement, and athletic achievement and fan popularity and perhaps financial success--a salary cap is the best way to ensure the long-term financial future of a professional sports league, to the benefit of team owners and the players themselves.

(People earning millions of dollars to play a game. What an amazing economy we have!) (permalink)

State Laws Prevent Disintermediation.
One trend of the last 30 years, disintermediation (cutting out the middle man) is being resisted by state lawmakers, pushing up the cost of housing.

While web-enabled commerce provides greater choice and lower prices on many goods or services, some states are keeping prices on real estate brokerage services at a higher- than-market rate.

Here's an excerpt from an editorial in last Friday's Wall Street Journal, "The Realtor Racket:"

"The problem is that state lawmakers are squashing such competition through two types of laws. First, they make it illegal for brokers to provide rebates on their commissions, which is an overt impediment to price competition. So, for example, LendingTree.com is prevented under these laws in about 10 states from continuing its popular practice of providing several thousand dollars of rebates and coupons at Home Depot to homeowners who use its real estate services. Discount real estate agents would also be prohibited under many of these laws from advertising their lower prices in newspapers.

The second legal device used to restrain trade are "minimum service requirements," which prevent real estate brokers from providing limited services to home sellers for a negotiated fee. These rules outlaw the increasingly popular choice of home sellers who contract with an agent to list their homes for a flat fee of typically around $500, but then handle all the other aspects of the home sale themselves in order to save $5,000 to $10,000 in additional fees." (permalink)

Is that a DVD You're Watching on the Road?
It had to happen eventually: driving while visually entertained.

More parents are using portable DVD players to divert junior and Jane's attention during long trips by auto. But it's also possible for the drivers themselves to combine driving and a film.

Several states are creating new laws on the subject, or revising old ones. Says the Wall Street Journal, "Just last month, Illinois passed a law expanding banned front-seat technology from just the television receiver that the law mentioned previously. Oregon and Virginia passed similar legislation this year to update their laws, as have California and Louisiana in recent years. Meanwhile, similar bills are pending in a number of states, including Massachusetts, New York and Vermont."

The easy objection to these laws is to say "Hey, are you going to ban the use of radios? The eating of cheeseburgers?"

Yet the medium can be the message, and in the case of videos, adding a visual distraction to the audio distraction long enjoyed (radio) may be too much for safety's sake. (permalink)

Look for the Union Label on Your Tax Return.
State government workforces have been a growth market for labor unions. Now, a few governors are responding.

The Wall Street Journal reports that one in twelve private sector employees are in a union. Among state government workers, the number is one in three.

In some states, government unions have the right (through legislative or executive action) to engage in collective bargaining.

But recently, Gov. Matt Blunt (R-Missouri) "rescinded collective-bargaining rights for state employees this year, undoing an executive order issued by a Democratic predecessor, and has eliminated a state board overseeing union elections for public employees. Indiana Gov. Mitch Daniels, a former Bush White House budget director, overturned an executive order that for 15 years provided collective-bargaining rights for that state's public employees." (permalink)

School Pensions Must Be Reformed.
The Detroit News calls on Michigan to turns its defined benefit pension system for teachers to a defined contribution one.

Yawn?

Here's something to make it more interesting: the current approach is leading schools across the country into fiscal trouble, meaning that overall spending is going to increase, or money spent on other items in the school budget will go down.

Labels: Public employee pensions

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Education: Does School Consolidation Save Money?
Does consolidating school districts save money? Maybe not.

Says John Hood, president of the John Locke Foundation:

The financial argument for school-district mergers has a long pedigree. That doesn’t make it valid. Eliminating “redundant” administrative functions is supposed to result in lower per-pupil costs, which can either be returned to taxpayers as tax cuts or invested in better-quality education. Unfortunately, there isn’t a lot of empirical support for this proposition. Theoretically, one can see the potential for savings, but also in theory [a] merger reduces healthy competition for residents and students while also pushing the governance of the system further away from local neighborhoods and communities.

Not only is competition healthy for the finances of taxpayers, it also tends to increase academic achievement. So says a report in 2002, and followed up just this year, by the Manhattan Institute.

Even when many school districts exist within a given population, competition is still weaker than optimal, given the transaction costs of moving from district to district. Still, some competition is better than no competition--for both taxpayers and for students.

Labels: Education

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Sin Tax for Teaching Syntax.
On the heels of smokers lighting up to Pay for a Better Minnesota comes a proposal in Kansas to tax pornography. Call it a sin tax so that children can learn syntax.

In response to several edicts from that state's supreme court, the Kansas legislature increased the budget for K-12 education by roughly 10 percent, in one year. It's widely expected that the court will demand, and obtain, more increases on top of that.

How will the legislature find the money to pay for the increased spending? One way is to cut spending elsewhere. But that's politically difficult. Raising income or sales tax rates is also politically difficult (as well as bad policy).

There's been a lot of discussion in Topeka about a casino, but that faces an uphill fight as well. So it's perhaps not surprising that someone has tossed out the idea of a sin tax on pornography. After all, there's a lot of money to be made in blue shops.

So what will be taxed? We don't know yet. Says a report in the Kansas City Star, "how a sexually oriented business would be defined, the amount of the tax or how it would be enforced" are among the unanswered questions.

Given the size of the business (and opposition to it in some quarters) and the ever-growing demand for tax revenue, it's surprising that something like this has not been enacted by any state. (permalink)

All Blog, All The Time.
A lot of blogs are about the news. The Detroit News has news about blogs. It's an ongoing feature. (permalink)

Privatization More Useful than Ever as Government Tool.
The Reason Public Policy Institute is out with their latest edition of the Annual Privatization Report.

The report covers state and federal action, and offers lessons learned. (permalink)

Resources for Reforming eminent Domain.
Want to reform eminent domain? The Reason Public Policy Institute has a few resources that may be of use.

RPPI includes (PDF format) model legislation at the municipal level and at the state level.

Their Eminent Domain Resource Center is worth a look, too. (permalink)

Go With the Third Way to Determine Cost of Education: Competition
The Salina (Kansas) Journal has published a short essay I wrote for it about price, competition, and K-12 education. I'd link to this op-ed, but it's limited to paid subscribers. (Archives, even one day old, are limited to paid subscribers, as is most of the content for the current edition.)

Here's the version that was submitted to the Journal; the printed version may have been slightly altered. Apologies in advance for the quirks in the type, which did not translate to blogger very well.

Currently there are two major approaches to determine how much Kansas taxpayers ought to pay for public schooling. Perhaps it'?s time for a third.

One approach is to ask superintendents "?How much money do you need?"? Who wouldn'?t answer "more?"? It'?s part of the human condition to want more. A second approach is to decide what schools are already successful, then ask "?What does it cost you do to this?" Roughly speaking, those were the approaches used by the consultant'?s report that the Kansas Legislature and the Kansas Supreme Court relied on in making their decisions. Both approaches were used by the Augenblick & Myers consulting firm

On the other hand, what if Kansas education needs something besides more money? What if our estimates of how much education costs are incorrect, not because of faulty math or human error, but because we do not know what the public schools would do when faced with the competition that American businesses face every day?

Any given school can report its current costs of doing business. There is a fund for teacher compensation, another for supplies, still another for administrators, and so forth. But are these the "right"? costs? Is the money being distributed among the funds in the right proportion? Are school managers getting the best results for the money they have on hand? The best way to answer those questions is to use the same logic that we use as a society in deciding the "right" amount to spend on food, clothing, housing, and many other goods and services: competition.

Under widespread competition, we have many buyers, many sellers, and the best framework for knowing the "right" price of a service. When companies face increased competition, they find ways to both reduce costs and increase quality. As Americans are exposed to increased competition from other countries, their training ground for work--?education--?must be subject to the same competitive forces.

Roughly 90 percent of Kansas students are enrolled in traditional public schools that operate in a non-competitive market: the child'?s school is determined by the family address. We need to provide more competition, through tax credits, vouchers, and charter schools. To prepare children for life in today'?s economy, and to determine the "?right"? amount of money to spend on schools, American education needs to embrace competition.

Labels: Charter schools, Education

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(Re)Connecting to Small Town Life.
Here's one way that a small-town newspaper is making use of the Internet age: the Salina (Kansas) Journal hosts a white pages listing where former and current residents can leave messages for each other.

Since the vitality of many small towns might be boosted by the return of former residents, such an effort stands as an interesting experiment in economic development, as well as a branding tool for newspapers. (permalink)

Tax Foundation Says "Not So Fast" on Tax Holidays.
While I've previous praised sales tax holidays, the Tax Foundation has come out against them.

Their arguments are fine, as far as they go. Still, a tax cut is a tax cut, and tax holidays are more widely distributed than, say, "economic development incentives" that go to a handful of companies.

One argument that the Tax Foundation could have made, but did not: if we have any "tax holidays" at all, it ought to be on income; the American tax code is already biased towards consumption, which has some negative implications for growth. (permalink)

This Little Piggie Went to The Treasury.
The Buckeye Institute and Citizens Against Government Waste are going to release the 2005 Ohio Piglet Book, on August 9.

It ought to be fun. And appalling.

See the 2004 Oklahoma Piglet Book for an idea of what the effort is likely to turn up.

... and then the taxpayer can cry all the way home. (permalink)

Shakeup in the Detroit Newspaper Market.
There's a new kid in town. Or rather, some big names from elsewhere.

Gannett (owner of USA Today and many only-game-in-town newspapers) is shedding the Detroit News and is acquiring the Detroit Free Press. Knight-Ridder (owner of the Miami Herald, among other properties, and second-fiddle to Gannett nationally) is selling the Detroit Free Press. NewMedia, a company that owns the Denver Post and 50 other newspapers, is buying the Detroit News.

The Detroit News offers the basic outline of the deal, which means, among other things, that the News will be free to return to a more logical position as a morning paper. (It was restricted under a Joint Operating Agreement with the Free Press to publish in the afternoon.)

On the other hand, the News gives up its Sunday edition, which sounds like a bad deal for the new owners.

The News also has a brief write-up of its new boss, his plans, as well as a Q&A on what it all may mean for readers.

The initial review at the Free Press points out that its new owners will take a "much larger share" of the profits in a reconfigured joint operation. There had been a 50-50 split before. (permalink)

Eat Locally
When it comes to thinking about business, muddled thinking can come easily. Among the fantasies: "shopping locally" is a wonderful means of growing the economy. In other words, if a company's headquarters lie outside your metropolitan area, it's bad.

Now, I confess to preferring locally-owned shops, perhaps out of the delusion that they are more aesthetically pleasing. Sometimes the familiarity of a chain operation is useful, a time-saver in a complex marketplace. There are certain hotel chains I prefer to stay in during travel, for example. Plain vanilla may be boring, but at least it limits the number of unpleasant surprises.

Speaking of vanilla, Darcy Olsen, president of the Goldwater Institute, comments on critics of chain stores and big box retailers.

Ice Cream Anyone?
by Darcy Olsen
August 1, 2005

Like millions of Americans, Donald and Susan Sutherland love ice cream. In fact, they like ice cream so much they decided to open their own ice cream store in Tempe. What started out as a single Cold Stone Creamery 18 years ago is today a growing company with outlets in 47 states and even the Caribbean.

Everyone can probably agree that the world is a better place with more ice cream in it.

But if you were to listen to Arizona Chain Reaction, we'd all be better off without "chains" like Cold Stone Creamery.

ACR says chains hurt the local economy because they export profits, whereas independent businesses spend profits locally. "When you shop locally owned businesses," ACR says, "your money is recirculated over and over and creates up to 75 percent more tax revenue to our community."

As it turns out, the 75 percent claim appears to be based on a single report on three bookstores in Austin, an underwhelming sample to say the least. What's more, the authors withheld from the report "the underlying data, assumptions and methodology," making the calculations impossible to verify.

On the meta level, if we bought this muddled reasoning, every city and state should pursue economic autarchy. Let's call it a North Korean economic growth strategy. You could say goodbye to companies like Cold Stone Creamery and to the improved products, services and lower costs that accompany competition.

The "shop locally" idea also raises some thorny questions. When does a business become a chain? After it opens a second store, a third store, a 10th? And what about a store founded in Arizona like Cold Stone Creamery? By ACR reasoning, those profits will return to Arizona. Should consumers in Florida have to forgo Arizona ice cream for that reason?

At its core, the assumption that local businesses spend profits in-state while chains export them just doesn't square. Local entrepreneurs can spend profits on Wall Street, just as chains can spend locally. Wal-Mart, for instance, spent $1.5 billion for merchandise and services with 939 suppliers in the state last year.

ACR may not like the "homogeneity" of places like Wal-Mart, but consumers apparently do. Wal-Mart has 70-plus stores in Arizona that handed over $248 million in sales taxes to the state last year. And more than 28,000 Arizonans are employed in local stores. Would these Arizonans be better off without Wal-Mart?

Fuzzy economics aside, there is something to like in the group's appreciation for businesses that "create a unique atmosphere that set Arizona apart." There is something fun in discovering out-of-the-way venues with the character that local entrepreneurs put into their businesses.

But you can take a good point too far. ACR says independent businesses appeal to customers "who value choice, individuality and quality service more than the occasional discount." That's a fine sentiment for those who can afford it.

But there are plenty of consumers who rely on that "occasional discount" to make ends meet. When you have a family to feed and clothe, Target isn't an option, it's salvation.

ACR has backed bills to end what it calls "big-box subsidies," and on that point we agree. Skewing the playing field by subsidizing particular companies is unfair.

On the other hand, backlash against chain stores is so intense in some states that legislators have proposed additional taxes, called the "Big Box Tax," on large stores. That's not right, either.

Fair competition requires a level playing field with all players operating by the same rules. Government should enforce the rules and let the players play.

Perhaps the New Times said it best when it included ACR on a "Best of" list, saying, "We know the nice folks from Arizona Chain Reaction are flipping through 'Best of' right at this very moment, clutching their heads . . . whenever they see mention of a chain store or restaurant. Sorry, guys . . . but sometimes bigger is better. Not always, though. . . . We're still giddy over the impending arrival of Ikea, but we're thankful for you, too, Arizona Chain Reaction."

As one of the fastest-growing states, Arizona has plenty of room for all kinds of businesses. So enjoy your Lux or your Starbucks. I'm going out for some ice cream.

This article was originally published by the Arizona Republic July 31, 2005. (permalink)

Medicaid: The Program that Ate All Others.
Budgeting is the classic economic problem: unlimited wants, limited resources. The growth of Medicaid will make this problem obvious to all in a few years.

Matthew Hisrich, of the Flint Hills Center for Public Policy, writes that Medicaid Could Swamp State Budget. Though the emphasis in the article is Kansas, the lessons apply elsewhere. An aging population, soaring health care costs, and a third-party payer system are elements of a perfect storm that will leave little room for anything else in state budgets.

One useful resource for ideas on fixing Medicaid's budget and service is the Center for Long-Term Care Financing.

Labels: Medicaid

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Detroit School Election: Reminder of the Need for Choice.
There was an election for the Detroit Public School board. There were 51 candidates in the primary election.

Who can possibly keep track of that number of candidates?

There's got to be a better way for parents to have a say in what kind of education their children receive.

The current approach says "Scrutinize, if you can, the records of a bunch of people you have never heard of, and try to determine if they would make good members of the school board. Then hope that they follow through." The other option of the current approach: move to another school district, if you're willing and able to pay the price and put up with the hassles of moving.

A better approach is to give parents tax credits or (for those without enough income to pay taxes, a voucher) and say "Here, you take a look at the schools, and pick one for your child, based on what you see in their record."

In an age when people complain about not having the ability to pay their cable TV company only for the networks they watch, it's amazing that we make it so difficult for parents to pick a suitable school for their children.

Labels: Education, School choice

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Are Businesses Low-Tax Advocates? Not quite.
Advocates of low taxes are often accused of being in the pocket of business, especially "big business." Here is just one reason why that is (often) a false claim: sometimes it is business itself that is responsible for a tax.

Tarrifs (raising the prices on foreign goods to protect inefficient domestic companies) are one obvious example. But today's Wall Street Journal notes a more obscure example.

Congress has imposed a federal excise tax on fishing equipment. Currently it is 10 percent: $6 on a $60 rod, $60 on a $600 rod. A proposal buried in the federal highway bill working its way through Congress will cap the tax at $10, regardless of the retail value of the equipment. While this has no effect on gear costing $100 or less, it is a tax break for the consumer who buys anything costing more.

So where did this tax come from in the first place? Greedy politicians looking for another source of tax revenue? Not quite.

The Journal paraphrases Jim Range, a lobbyist for the American Fly Fishing Trade Association: "sport-fishing manufacturers lobbied for the 10 percent excise tax in 1984, hoping the federal government would fund local efforts to preserve the habitats on which their business developed."

Preserving fish habitat through tax dollars may or may not be a worthy policy goal, but it's obviously useful for the business of making and selling fishing gear.

If the federal excise tax on fishing equipment is good for business, why is the trade association now asking for it to be lowered? Because the tax cut will give it an advantage over offshore producers, who can produce fishing rods at lower costs. An excise tax that is a percentage of the sale price puts domestic (higher-priced) manufacturers at a disadvantage. Putting a cap on the tax is a small advantage to producers of high-end gear.

Conclusion: business isn’t always anti-tax; sometimes it’s pro-tax. (permalink)

Save Money, Courtesy of State Government: Tax Holiday Season.
The Federation of Tax Administrators (FTA) reports that ten states are setting aside one or more days this year for a sales tax holiday: buy a specified item (clothing and school supplies seem to be the most popular) on the designated day, and pay no sales tax.

The FTA points out that savings are modest, and a poor form of tax cuts. Still, if you are in the market for the goods in question within waiting distance of the relevant day(s), it's a tax cut all the same.

(Hat tip: Wall Street Journal). (permalink)