Want to Stop Development? Buy the Land Yourself.
A group that wanted their city government to deny a zoning change request says that it would like to buy the land in question--but it's probably too late.

In the south suburbs of the Twin Cities, the Eagan City Council has paved the way for, well,
paving residential streets on what is now a golf course.

Here's the short version of the story: man buys golf course. Eventually wants to turn it into housing. Neighbors complain to city council, citing comprehensive plan and hinting at the use of eminent domain. Man files lawsuit against city, wins a preliminary ruling. Neighbors talk about buying the golf course. City comes to a settlement, agrees to change the plan to allow a scaled-back development.

A few days ago, news came out that opponents of the plan--the people who bought housing in newly developed area and then wanted to shut out everyone else--were assembling private financing to buy out the golf course. Too bad they didn't do that sooner, as I argued, at least as long ago as eleven months ago.

Labels: Golf

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Teacher Pay for Kansas City.
Is it true that everything's up to date in Kansas City? Pay scales for teachers there might enter the 21st century--if discussions of a merit pay plan actually get anywhere.

According to a report in the Kansas City Star, the board of education and the local chapter of the teachers union, the American Federation of Teachers, have agreed to discuss the matter.

Bill Eddy, of the board, says "ItÂ?s an idea whose time has come. I think it can benefit everybody."

Union officials, naturally, are less enthusiastic, and say that the move requires (what else), more money.

Rob Weil, an official at the AFT, says "If youÂ?re just changing the way you pay, youÂ?re not going to get where you want to get."

Au contraire, "changing the way you pay" is exactly what schools need. You do well, you get paid more. You don't do well, you don't get paid well--and perhaps you don't get paid at all.

But old habits die hard.

"[Local union president Judy Morgan] also cautioned against any suggestion that a pay-for-performance plan is needed to motivate quality teaching.

'All of our folks are working extremely hard,' Morgan said. 'No matter what their job, they give all they can give.'"


Oh my. Granted, Morgan's doing what a union president ought to do--defend the integrity of her membership. But anyone with a temp assignment's worth of work experience knows that in a workplace, some will give more, and some will give less.

But actually, work effort is not relevant. What counts is performance. And for too long, teacher pay has been tied not to performance, but longevity and credentials, not whether the teacher is effective.

Union leaders caution that "hard work" lays ahead. Of course. Any evaluation system requires some careful thought and consideration. But the need for up-front work should not in itself kill a move to performance pay. (permalink)

Adopt a Windmill, for Just Pennies a Day
My energy company is making me an offer I can, in fact, refuse: pay extra for energy generated through wind power.

In one of those commercials along the lines of "sponsor a third world child," the company tells me that my "commitment to a better environment can start immediately with a minimum purchase of a $2.00 block ... each money for only one year." Elsewhere on the brochure, I told that my green tax will "create long-term, skilled jobs in rural areas where such occupations are often in short supply."

But wait, there's more! Economic development and enhanced tax revenues await my purchase of super-premium juice:

"When wind turbines are installed, farmers earn leasing income from land that can still be used for crops. Counties also benefit through increased sales tax revenues that return to the citizens as community improvements."

If that's the value proposition of alternative energy, no wonder why we're still using coal and petroleum. (permalink)

Bribe Me to Be Stupid?
Health insurance, pensions, and Social Security all three major problems in public policy today. And all three carry a common thread, according to two short letters in today's Wall Street Journal.

According to the first writer, defined benefit plans are inherently unstable:

Arthur Levitt Jr. calls for "accuracy, transparency and accountability" in pension accounting and reform of "the regulatory incentives and accounting rules that encourage employers to make, and employees to accept, promises that can't be kept" ("Pensions Unplugged," editorial page, Nov. 10).

"Promises that can't be kept" are inherent in defined-benefit plans, which call for payments in the never-never, not the here and now. Instead of trying to fix defined-benefit plans, we should encourage defined-contribution plans, where contributions are made in the here and now. There is no "promise that can't be kept." There is no promise at all. The employer has no pension assets or liabilities. The employee does not look to his employer for his pension. He looks to a company in the business of administering money, not making cars or running an airline. Ideally, the account is portable, meaning the employee owns it, and the plan may give the employee broad-brush authority to allocate assets.

Universities provide portable, defined-contribution pensions through TIAA-CREF. Yet professors, many with seven-figure accounts, tend to favor a political party that opposes the same arrangement for Social Security. That opposition would presumably extend to pensions for auto and airline workers. The university elite may not consider free choice and the assumption of responsibility appropriate for those less gifted. Worse, portable defined-benefit pensions might turn workers into capitalists. How shocking.

S. Paul Posner
New York

And the second reminds us of the values of diversification--something that is actually discouraged by current tax laws.

Mr. Levitt outlines serious problems in both private and public employee pension plans, but his proposals are palliatives that miss the main point.

Any Wall Street Journal reader knows the need to diversify asset holdings, yet almost all of us rely on a single provider, our employer, for our wages, health care and pensions. (Even if employees directly contribute much of the funding, the employer usually is or selects the manager.) Why do we do that? Because our tax structure -- in which employers deduct benefit costs when paid and employees receive benefits tax free or tax delayed until retirement -- bribes us to be stupid.

No amount of regulation, especially by a federal government whose Social Security and Medicare benefit promises are far more unfunded than almost anything in the private or state and local government sectors, can be a true fix. The true solution is tax reform that removes the stupidity bribe and encourages people to provide for their own retirement and health care, either individually or in groups not connected with their employer.

Roger Nils Folsom
Professor Emeritus of Economics
San Jose State University
San Jose, Calif.

The common thread? Employer-based provision of a person's health and welfare.

Labels: Health care, Pensions

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Detroit: Blues City?
The Detroit Free Press says that Michigan is at the brink:

"Michigan could be a state of either upscale malls or shuttered factories. Right now, Michigan has both. But it could tip more one way or the other. And with its bedrock automotive industry going through unprecedented turmoil, the signs are worrisome."

The state is holding ground by some measures, but it's being outpaced by other states on others:

"The inflation-adjusted dollar value of Michigan's total output grew by 9% from 1997 to 2004. But the value of the U.S. output as a whole grew by 24%. Florida's output grew by 31%, California's by 38%, and Arizona's by 47%."

Unfortunately, the article concludes by mentioning two ill-advised projects that are favorites of Governor Jennifer Granholm: "cool cities" (pork by another name--call it dressing up the pig) and dumping a billion-dollar debt load on the state so that government officials can place large bets on winners in the next evolution of the economy.

Labels: Cool cities fad

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School Choice for New Orleans.


"Until recently, Louisiana's state school board had steadfastly opposed the idea of using public funds in the form of vouchers to pay for private-school tuitions. But with New Orleans school officials yet to reopen a single building, and some Catholic schools already welcoming students, the board and the Archdiocese of New Orleans are discussing a plan to pay parochial schools to educate as many as 3,000 displaced public-school students."

The Rev. William Maestri, school superintendent for the New Orleans archdiocese, has said to his schools "Let the kids come in, we'll sort out the finances later."

This move gets children into school. It's also a smart political move: imagine children having to leave school mid-year, when a political showdown makes it clear that taxpayer dollars won't go to those schools, and the archdiocese can't afford to give away tuition any longer.

The offer is also a pragmatic one; it points out an important fact often unstated in the school choice debate: what should be the goal of public education? Is it sending children to specific schools, run through a particular arrangement (what we call "public schools")? Or should it be that children receive an education?

Another step forward: federal money being sent to the area may prompt an increase in the number of charter schools. In addition, the governor may be on board: "if Louisiana Gov. Kathleen Blanco, a Democrat, has her way, New Orleans will become an even bigger laboratory for school choice. Since Katrina, the former public-school teacher has issued two executive orders easing the regulatory requirements for opening new charter schools."

Labels: Charter schools, Education, School choice

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Is There Hope for Michigan and Detroit?
Detroit, and to some extent, Michigan, has been in trouble for quite a while. Is it going to have to get worse before it gets better?

Though the auto industry is not as important to the state and metro region as it used to be, it's still a player. But the prospect for long-term success is challenging, at best.

Auto manufacturing is a mature industry; cars can be made in a lot of different countries, many times at a lower cost than in the U.S.

Costs for retirement and health benefits (and health benefits for retirees) are a significant burden on companies in the industry. If you want to look at the problems caused by third-party payment of health insurance costs, look no further.

The recent bankruptcy of auto supplier Delphi (a company spun off a few years ago by GM, in an attempt to get out from under some of the heavy legacy costs) suggests that current and former workers may have some "downshifting" to do in expectations for pay and benefits.

Who or what is responsible for the mess? There are a lot of possibilities, most of which can be lumped under "stupid management" and "overly generous union contracts." Don't forget federal tax and regulatory policy, which encouraged the third-party payer system for health insurance and the defined benefit approach for retirement planning. Add in environmental and safety regulations that drive up the price of vehicles, encouraging people to delay purchases. Subtract the benefit of those regulations, which raise the barrier to entry from other countries. (Companies in India can make autos, but they won't pass U.S. legal requirements.)

How lawmakers and the public respond to these problems will affect the state and region for years to come. The Democratic governor has dabbled in economic development fads such as "Cool Cities," and her Republican predecessor spent the latter part of his 12-year tenure plumping for government-directed economic development projects. Neither approach is promising.

Unions, of course, are important in the political system of the state, and not just unions in the auto industry. Include the MEA (the teachers union) and other government employee unions, and you've got a lot of people who have an incentive to lobby for traditional policies that may have worked for a while, but cannot last in an increasingly competitive economy. But the pressure for continued dependence and expansion of the regulatory, welfare, government-influenced economy is likely to continue if not increase.

The Rust Belt may rust some more--as has happened in upper New York State. I fear it's going to get worse before it gets better. Old ways of thinking die hard.

Labels: American automakers, Cool cities fad, Health care, Pensions

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Learning from Colorado's TABOR Experience.
The Taxpayers Bill of Rights did a fine job for Colorado's economy, but it wasn't perfect. Barry Poulson offers some thoughts on the recent election.

Colorado's requirement that voters approve increases in tax rates or debt is a good one, he says, but adds that Colorado has gutted TABOR, rendering it ineffective.

I was not a fan of the "ratchet effect," but it looks like the Colorado voters approved a measure that not only eliminated the ratchet effect, but, by creating a five-year window (see Poulson for an explanation) made an overcorrection. (permalink)

Kansas Board of Ed to Discuss Vouchers.
The Kansas Board of Education discussed using vouchers as a means of improving education through competition.

While the idea has the support of the new education commissioner and some in the legislature, there's still a long way for it to go.

Standing in the way of vouchers are several objections. One member of the board said "We don't have in this state any failed school systems." (I bet some parents who, for financial reasons, are unable to move from school districts in Wichita, Topeka, Kansas City, Kansas might think differently.)

The same board member objects to competition, on the ground that it produces "a winner and a loser."

Unfortunately, when you compare achievement rates of various schools in Kansas and across the country, there are already winners and losers. It's time to bring competition to bear so that all families can enjoy the benefits of competition, not just those wealthy enough to move or to pay private schools.

Labels: Education

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The Problem isn't Politicians' Pay, it's their Decisions.
A "survey" currently online with the Detroit News deals with taxes. While I agree with some of the readers who argue that we should be cutting taxes, not raising them, let's not forget that cutting pay and benefits for elected officials is chump change in the grand scheme of things.

Michigan's Governor Granholm suggested an overall budget of (PDF file) $41.2 billion for FY 2006.

Another (PDF) report from the state says that the Granholm recommended $62 million for the Attorney General's office, $5 million for the executive office, and $126 million for the legislature.

Add those numbers up, and you've still got well under 1 percent of the budget. Since this number comes from a very quick look at two documents, double that number, and you're still looking at less than 1 percent of the state budget being spent on the care and feeding of politicians. Double that, even, and we're still talking $2 out of every $100.

Now, you can argue that symbolism is important, and perhaps some economizing of legislative and executive departments is in order. But the problem with Michigan's economy is not how much its politicians get paid as much as it is what other obligations they incur for state taxpayers. (permalink)

Wal-Mart Health Plan Praised.
USA Today's editorials can surprise, as in this one which praises the big W for its new health care plan.

Most importantly, the plan uses high deductibles and a health savings account. For the last three years, the company's costs have increased 19 percent each year, enough to grab some attention. Wal-Mart will match employee contributions of up to $1,000. Unlike health reimbursement arrangements, the HSA is portable, a plus for workers though not necessarily employers. (permalink)

Can Small Government Units Survive?
Federalism and fragmentation of government is a fundamental part of the American political system--but when is "small" too small?

If you're not familiar with the number of small towns and school districts across the country, you may be amazed. Kansas, for example, has a total of 627 cities. Only 56 cities (9 percent of all cities) have 5,000 residents or more. On the other hand, 429 cities (68 percent of all cities) have fewer than 1,000 people. (The PDF version of Governor's Economic and Demographic Report has the details on page 56, if you're interested.)

The situation may be exaggerated in Kansas, but it's not unique. Minnesota has 852 cities; 60 percent of them (512) have fewer than 1,000 residents. More astonishing, 88 cities have fewer than 100 people. State aid to local governments, no surprise, has become a contentious issue in the state's politics.


A similar situation exists with school districts, with 35 districts in Kansas enrolling fewer than 200 students. But consolidation has been on a tear in the last 100 years. It continued during yesterday's election.

The Kansas City Star reports that voters in Jewell County in north central Kansas voted to consolidate two school districts

Says the Star: "The ballot issue, which won approval with an unofficial count of 731 to 164, spells the end of the White Rock and Mankato school districts, which have a combined enrollment of 312."

Writing in anticipation the vote, Denis Boyles offered a political lamentation of the move in National Review.

But are small schools doomed? Not necessarily.

Dr. Adrian Moore, vice president of the Reason Foundation, thinks that consolidation administration is a way to preserve school districts and still direct more money into the classroom:

"I helped a few of my colleagues write a report looking at how sharing services for non-instructional operations works in practice and can help many school districts cut costs and maintain local control. We found that saving just a quarter of the tax dollars spent by school districts on non-instructional operations could save $9 billion. That is equivalent to 900 new schools or more than 150,000 additional teachers."

The report, in a PDF file, is available here.

While some people advocate smaller districts on the grounds that they provide a community its identity, there are also educational advantages. If anything, bigger doesn't guarantee better when it comes to educational outcomes.

Labels: Education

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OCIB + NBA = VC?
The things people will do to bring a major league sports team to town.

Early in 2004, the mayor of Oklahoma City, Mick Cornett, decided that he wants his city to achieve "big league" status. So he started talking with major sports leagues, only to come up empty ... until Hurricane Katrina hit New Orleans.

As a result of the destruction brought by that storm, the NBA team in New Orleans had nowhere to play home games.

The Oklahoma Gazette tells the story of how Cornett lured the New Orleans (nee Charlotte) Hornets to OKC.

The Ford Center had been built a few years ago, so the city could move quickly.

But there were several financial maneuvers used to close the deal. The most interesting, perhaps, involved providing a funding source for a revenue guarantee. (What a business model! Taxpayers guarantee a floor on your revenues.)

Unfortunately, the Gazette provides only a snippet of the story online, but here's the main point:

Completing the deal would normally require legislative approval, but that would require a special session of the legislature, and Todd Hiett, Speaker of the House, was not inclined to support such a session. (It's not that Hiett opposed the plan, necessarily, but he "felt the issue could be resolved without a special session.")

So then Scott Meacham, the Oklahoma treasurer, "started checking the statutes and found a little-known agency with the power to provide investment funds without Legislative approval. The Oklahoma Capital Investment Board was created in the early Nineties as a way to stimulate economic development through venture capital investment. Through the years, the state had issued $100 million in transferable tax credits to the OCIB."

The city and the OCIB struck a deal. And taxpayers became, in a small way, venture capitalists, supporting that small, vulnerable, yet promising business known as an NBA franchise.

It's good to know that government is there to help the poor and helpless, especially when the private sector can't or won't come through. Right? (permalink)

Let the Tax on Telecommuters Begin.
As the cliche has it, they get you coming and going.

First, states are busy working to ensure that they can tax online commerce so that if you live in state A and make an online purchase from state B, you pay sales tax. In other words, the tax is based on the location of the resident, not the merchant.

But the logic may be reversed when it comes to income. Thomas Huckaby, a computer living in Tennessee (with no income tax) worked for a company in New York, occasionally visiting there for business. New York claimed the right to tax 100 percent of his income from the employer. The state's supreme court agreed.

Yesterday, the U.S. Supreme Court declined to hear a petition to review the case. The action establishes no new legal precedent, but it will certainly encourage more states to follow the example of New York. (permalink)