Job claims in Kansas addresses

From January 2014.

Kansas CapitolHow can conflicting jobs claims made by two Kansas leaders and candidates for governor be reconciled?

Listening to the State of the State Address and the official response might cause Kansans to become confused, or worse. The claims made by Sam Brownback and Paul Davis appear to contain conflicting views of Kansas employment.

In the State of the State Address, Brownback said “Since December 2010, Kansas has added on average, more than a thousand private sector jobs every month.”

Davis, in the official response, said “According to the latest jobs report — released just a few weeks ago — there are 16,000 fewer Kansans working than when Governor Brownback took office.”

First, Davis made a mistake. He cited a number that measure the labor force and said it represented the number of Kansans working. But the labor force, according to the Bureau of Labor Statistics, is “the sum of employed and unemployed persons.” In other words, it is the number of people working plus the number of people looking for work.

bureau-labor-statistics-logoAside from this, who is correct? The answer is not easy to provide. That’s because there are two series of employment data provided by the Bureau of Labor Statistics. The two series don’t measure exactly the same thing, and each of these candidates for Kansas governor has chosen to use the series that benefits their campaign. Nearby is an example of just how different the two series can appear.

cps-ces-difference-example-2013-12

A document from BLS titled Employment from the BLS household and payroll surveys: summary of recent trends explains in brief: “The Bureau of Labor Statistics (BLS) has two monthly surveys that measure employment levels and trends: the Current Population Survey (CPS), also known as the household survey, and the Current Employment Statistics (CES) survey, also known as the payroll or establishment survey. … These estimates differ because the surveys have distinct definitions of employment and distinct survey and estimation methods.”

Another BLS document explains in detail the differences between the CPS and CES data. For example: CES: “Designed to measure employment, hours, and earnings with significant industrial and geographic detail” CPS: “Designed to measure employment and unemployment with significant demographic detail.”

Another difference: CES: “Self-employed persons are excluded.” CPS: “Self-employed persons are included.” (See Understanding the employment measures from the CPS and CES survey.)

I’ve prepared a table showing the claims made primarily by the Davis campaign in December (since it provided the most detail) and gathered data from both the CES and CPS series. I’ve also showed the seasonally adjusted data compared to the raw data when available. Sometimes the numbers match exactly with the claims made by the campaigns, and sometimes the numbers are a little different. Click here for the full table.

cps-ces-jobs-compared-2013-12
I’ve also created an interactive visualization of the CPS and CES data for Kansas. Click here to open it in a new window.

Each campaign uses the data that best makes its case. Generally speaking, the CES data shows larger employment gains.

We still have this question: Who is correct? Here’s something to consider. On the national level, a widely-watched number each month is the count of new jobs created. This number, which is universally considered to be important, comes from the CES survey. That’s the number that shows quite a bit of job growth in Kansas.

Kansas education a topic on ‘This Week in Kansas’

From January 2014. Since this article, there has been a new round of NAEP tests. The results were similar, and the same conclusions apply. The good news is that now Kansas has better standards than described in this article. See After years of low standards, Kansas schools adopt truthful standards: In a refreshing change, Kansas schools have adopted realistic standards for students, but only after many years of evaluating students using low standards. But the fact remains that for many years the Kansas public school administration and establishment lied to us about the performance of Kansas schools. This includes the Kansas State Department of Education, the Kansas Association of School Boards, the Kansas National Education Association, and nearly every local school board member and superintendent.

Unfortunately, “This Week in Kansas” was canceled by KAKE in December 2016.

Kansas education issues were a topic on a segment of KAKE TV “This Week in Kansas.”

Opening the show, Representative Jim Ward made a small but potentially consequential mistake when he said the “legislature has violated their constitutional duty to provide for an adequate or sufficient education.”

The Kansas Constitution actually says this in Article 6, Section 6(b): “The legislature shall make suitable provision for finance of the educational interests of the state.”

It’s too bad that the Kansas Constitution doesn’t mandate that the state provide an “adequate or sufficient” education, as that would provide the basis for a lawsuit that would actually — potentially — benefit Kansas schoolchildren.

The performance of Kansas schools that the education establishment touts wilts when examined under a statistical microscope. If we compare Kansas NAEP scores to those of Texas, we have what seems to be four contradictory statements, but each is true.

  • When considering all students: Kansas scores higher than Texas.
  • Hispanic students only: Kansas is roughly equal to Texas.
  • Black students only: Kansas scores below Texas.
  • White students only: Kansas scores below Texas in most cases.

(For more on this, see Kansas school test scores, in perspective.)

Furthermore — and this is important considering the significance given to the current school finance lawsuit: At a time when Kansas was spending more on schools due to an order from the Kansas Supreme Court, the state lowered its already low standards for schools.

That is the conclusion of the National Center for Education Statistics, based on the most recent version of Mapping State Proficiency Standards Onto the NAEP Scales. NCES is the primary federal entity for collecting and analyzing data related to education in the U.S. and other nations, and is located within the U.S. Department of Education and the Institute of Education Sciences.

The mapping project establishes a relationship between the tests each state gives to assess its students and the National Assessment of Education Progress, a test that is the same in all states. As explained in Kansas school standards and other states, Kansas standards are relatively low, compared to other states. This video explains.

Sample conclusions of this analysis for Kansas include:

“Although no substantive changes in the reading assessments from 2007 to 2009 were indicated by the state, the NAEP scale equivalent of both its grade 4 and grade 8 standards decreased.

Also: “Kansas made substantive changes to its reading grade 8 assessment between 2005 and 2009, and the NAEP scale equivalent of its grade 8 standards decreased.

In other words, NCES judged that Kansas weakened its standards for reading performance.

Mark Tallman of Kansas Association of School Boards also appeared. His focus is primarily on spending, but also makes the same mistakes when citing the performance of Kansas schools.

Wichita’s legislative agenda favors government, not citizens

From January 2014. Since then a few things have changed. The elections have been moved to fall, and local governments must ask voters for permission to raise taxes beyond a certain level. Other than this, the City of Wichita still advocates for more government and less personal and economic freedom.

city-council-chambers-sign-smallThis week the Wichita City Council will consider its legislative agenda. This document contains many items that are contrary to economic freedom, capitalism, limited government, and individual liberty. Yet, Wichitans pay taxes to have someone in Topeka promote this agenda. I’ve excerpted the document here, and following are some of the most problematic items.

Agenda: Existing economic development tools are essential for the continued growth and prosperity of our community.

First. The premise of this item is incorrect. We don’t have growth and prosperity in Wichita. Compared to a broad group of peer metropolitan areas, Wichita performs very poorly. See For Wichita’s economic development machinery, failure for details.

Second: In general, these incentives don’t work to increase prosperity. Click here for a summary of the peer-reviewed academic research that examines the local impact of targeted tax incentives from an empirical point of view. “Peer-reviewed” means these studies were stripped of identification of authorship and then subjected to critique by other economists, and were able to pass that review.

Third: Wichita leaders often complain that Wichita doesn’t have enough “tools in the toolbox” to compete effectively in economic development. The city’s document lists the tools the city wants the legislature to protect:

  • GWEDC/GO WICHITA: Support existing statutory records exemptions
  • Industrial Revenue Bond tax abatements (IRBX)
  • Economic Development Exemptions (EDX)
  • Tax Increment Financing (TIF)
  • Sales Tax Revenue (STAR) Bonds
  • Community Improvement Districts (CID)
  • Neighborhood Revitalization Area (NRA) tax rebates
  • Special Assessment financing for neighborhood infrastructure projects, facade improvements and abatement of asbestos and lead-based paint.
  • State Historic Preservation Tax Credits (HPTC)
  • State administration of federal Low Income Housing Tax Credits (LIHTC)
  • High Performance Incentive Program (HPIP) tax credits
  • Investments in Major Projects and Comprehensive Training (IMPACT) grants
  • Promoting Employment Across Kansas (PEAK) program
  • Economic Revitalization and Reinvestment Act bonding for major aviation and wind energy projects
  • Kansas Industrial Training (KIT) and Kansas Industrial Retraining (KIR) grants
  • Network Kansas tax credit funding
  • State support for Innovation Commercialization Centers in Commerce Department budget

That’s quite a list of incentive programs. Some of these are so valuable that Kansas business leaders told the governor that they value these incentives more than they would value elimination of the state corporate income tax.

Agenda: GWEDC/GO WICHITA: Support existing statutory records exemptions

This may refer to the city wanting to prevent these agencies from having to fulfill records requests under the Kansas Open Records Act. (If so, I wonder why the Wichita Downtown Development Corporation was left off.) City leaders say Wichita has an open and transparent government. But Kansas has a weak records law, and Wichita doesn’t want to follow the law, as weak as it is. This is an insult to citizens who are not able to access how their taxes are spent. For more on this issue, see Open Records in Kansas.

Agenda: The Wichita City Council opposes any legislative attempts to restrict the taxing and spending authority of local governments.

As Wichita city leaders prepare to ask for a higher sales tax rate in Wichita, we can hope that the legislature will save us from ourselves. At best, we can hope that the legislature requires that all tax rate increases be put to popular vote.

Agenda: The Wichita City Council opposes any restrictions on the use of state and/or local public monies to provide information to our citizens and to advocate on their behalf.

This is the taxpayer-funded lobbying issue. As you can see in this document, many of the things that Wichita city leaders believe people want, or believe that will be good for their constituents, are actually harmful. Additionally, many of the methods the city uses to engage citizens to determine their needs are faulty. See In Wichita, there’s no option for dissent for an example. Also, see Wichita survey questions based on false premises.

Agenda: The Wichita City Council supports the current framework for local elections, continuing the current February/April schedule of local primary and general elections, as well as the local option allowing non-partisan elections.

The present system of non-partisan elections held in the spring results in low voter turnout that lets special interest groups exercise greater influence than would be likely in fall elections. See my legislative testimony in Kansas spring elections should be moved.

Agenda: The Wichita City Council supports the development of appropriate state and local incentives to nurture and preserve arts activity throughout the City of Wichita and the State of Kansas.

Translation: The city knows better than you how to provide for your entertainment and cultural edification, and will continue to tax you for your own benefit.

Agenda: Public support and awareness of the possibility of passenger rail service connecting Oklahoma City and Wichita/Newton has grown over the past two years.

I’m not sure where the claim of public support and awareness growing comes from, but people are definitely not informed about the economics of passenger rail. In 2010, when the state rolled out several plans for this passenger rail service link, I reported as follows:

Expansion of rail service in Kansas is controversial, at least to some people, in that any form of rail service requires taxpayer involvement to pay for the service. First, taxpayer funding is required to pay for the start-up costs for the service. There are four alternatives being presented for rail service expansion in Kansas, and the start-up costs range from $156 million up to $479 million.

After this, taxpayer subsidies will be required every year to pay for the ongoing operational costs of providing passenger rail service. The four alternatives would require an annual operating subsidy ranging from $2.1 million up to $6.1 million. Taking the operating subsidy and dividing by the estimated number of passengers for each alternative, the per-passenger subsidy ranges from $35 up to $97 for every passenger who uses the service.

It would be one thing if tickets sales and other revenue sources such as sale of food and beverage paid for most of the cost of providing passenger rail service, and taxpayers were being asked to provide a little boost to get the service started and keep it running until it can sustain itself. But that’s not the case. Taxpayers are being asked to fully fund the start-up costs. Then, they’re expected to pay the majority of ongoing expenses, apparently forever.

Also, in Amtrak, taxpayer burden, should not be expanded in Kansas I reported on the Heartland Flyer route specifically. This is from 2010, but I doubt much has changed since then.

For the Heartland Flyer route, which runs from Fort Worth to Oklahoma, and is proposed by taxpayer-funded rail supporters to extend into Kansas through Wichita and Kansas City, we find these statistics about the finances of this operation:

Amtrak reports a profit/loss per passenger mile on this route of $-.02, meaning that each passenger, per mile traveled, resulted in a loss of two cents. Taxpayers pay for that.

But this number, as bad as it is, is totally misleading. Subsidyscope calculated a different number. This number, unlike the numbers Amrak publishes, includes depreciation, ancillary businesses and overhead costs — the types of costs that private sector businesses bear and report. When these costs are included, the Heartland Flyer route results in a loss of 13 cents per passenger mile, or a loss of $26.76 per passenger for the trip from Fort Worth to Oklahoma City.

Asking the taxpayers of Wichita to pay subsidies each time someone boards an Amtrak train: This doesn’t sound like economic development, much less a program that people living in a free society should be forced to fund.

Wichita Eagle labels hold a clue

How Wichita Eagle news stories label outside organizations is a window into the ideology of the paper’s newsroom. From January 2015. Since then it has become even more apparent how the Eagle relies on left-wing advocacy groups for “news.” See Kansas Center for Economic Growth: Kansas Center for Economic Growth, often cited as an authority by Kansas news media and politicians, is not the independent and unbiased source it claims to be. Also: Under Goossen, Left’s favorite expert, Kansas was admonished by Securities and Exchange Commission: The State of Kansas was ordered to take remedial action to correct material omissions in the state’s financial statements prepared under the leadership of Duane Goossen. For a really embarrassing indictment of the Wichita Eagle editorial board, see Kansas construction employment.

A Wichita Eagle op-ed references a report released by two think tanks, Institute on Taxation and Economic Policy and Kansas Center for Economic Growth. (Kansas tax system among the most regressive, January 18, 2015.)

Here’s what readers can learn about the mindset of the Wichita Eagle. These organizations were named. Named and referenced without labels, adjectives, or qualifications that give readers clues about the ideology of the organizations.

That wouldn’t be remarkable except for noticing the contrast in how the Eagle labels conservative and libertarian organizations, most notably Kansas Policy Institute. A quick use of Google finds these mentions of KPI in recent Eagle pieces:

  • “Dave Trabert, president of the Kansas Policy Institute and an outspoken advocate for conservative education reforms”
  • “The Kansas Policy Institute, a free-market think tank linked to Koch Industries”
  • “The Kansas Policy Institute, a conservative think tank”
  • “Dave Trabert, president of the Kansas Policy Institute, a conservative think tank in Wichita”
  • “The Kansas Policy Institute, a conservative think tank based in Wichita”
  • “The Kansas Policy Institute, a conservative Wichita nonprofit organization”
  • “parallel recommendations from the Kansas Policy Institute, a conservative small-government think tank”

Always, a reference to Kansas Policy Institute includes a description of the organization’s politics. This is not inaccurate, as KPI is conservative and free-market.

Contrast with these recent excerpts from Eagle stories:

  • “Duane Goossen is a senior fellow at the Kansas Center for Economic Growth”
  • “said Annie McKay, director of the Kansas Center for Economic Growth”
  • “The Kansas Center for Economic Growth recently surveyed districts and analyzed data from the Kansas State Department of Education”
  • “A study by the Institute on Taxation and Economic Policy that Laffer disputes”
  • “said Matt Gardner, executive director of the liberal-leaning Institute on Taxation and Economic Policy”
  • “according to an analysis by the Institute on Taxation and Economic Policy, which is based in Washington, D.C.”
  • “Wednesday’s report by the Institute on Taxation and Economic Policy says”

You can see that one time the Eagle slipped and labeled ITEP as “liberal-leaning.” That’s actually a gentle characterization of ITEP, which in reality lies quite far on the left end of the political spectrum, as does Kansas Center for Economic Growth. But the use of a label shows that someone, at one time, was aware of ITEP’s politics.

So why does the Eagle routinely label Kansas Policy Institute, but never or rarely label Institute on Taxation and Economic Policy and Kansas Center for Economic Growth?

We know the editorial page of the Eagle is liberal, favoring progressive policies of more taxes and larger government over economic freedom almost without exception. We see too that the newsroom shares the same view, as shown by the sampling of references above. Labeling a source as conservative, free-market, and linked to Koch Industries is not meant by the Eagle to be a compliment.

A note: The two outfits the op-ed relied upon produce much content that is demonstrably wrong. The Tax Foundation has found many serious problems with the report that is the subject of the Eagle op-ed. See Comments on Who Pays? A Distributional Analysis of the Tax Systems in All 50 States (Second Edition). For KCEG, see Kansas school teacher cuts, student ratios.

Kansas Democratic Party income tax reckoning

A story told to generate sympathy for working mothers at the expense of Kansas Governor Sam Brownback is based on arithmetic that is not plausible. From January 2015. Hensley is still the senate Democratic leader.

In the response to the State of the State Address, Senator Anthony Hensley told a tale of woe.

Anthony Hensley
He said, according to the printed remarks “Take for example the single mother who works full time and lives within her means, but still struggles to provide for her family.”

That’s someone we can empathize with. And, someone who is a key Democratic Party constituent. Here’s the burden she faced under Brownback’s tax plan, according to Hensley:

“She paid $4,000 more in income taxes due to the Governor’s plan,”

When I heard him say that on television, I thought surely he had misread or misspoke. $4,000 in state income taxes is a lot of taxes. You have to have a pretty good income to have to pay $4,000 in Kansas state income taxes, much less to pay $4,000 more, as Hensely said. But $4,000 is in the prepared remarks as made available by the Kansas Democratic Party. You’d have to think that someone proofread and checked the senator’s arithmetic, wouldn’t you?

Here’s the arithmetic. According to the Kansas income tax tables for 2013, in order to owe $4,000 in tax, a person filing as single or head of household would have to have “Kansas taxable income” of $87,451. That number is after subtracting $2,250 for each exemption. Let’s say there are three exemptions, allowing for the mother and two children. That means that the person’s “Federal adjusted gross income” would be $94,201. When computing this figure, there are some “above the line” deductions from total income on the federal form 1040, but the most common deductions are after this.

So we can be quite sure that Hensley’s “single mother who works full time and lives within her means, but still struggles,” and who owes $4,000 in Kansas income tax, earns at least $94,201. In all likelihood she earned much more than that, because Hensley said she paid “$4,000 more” this year. If this fictional person saw her Kansas income tax bill rise to $6,000 from $2,000 — that’s an increase of $4,000 that Hensely used — her income would need to be $128,265. That’s before we increase it even more to account for deductions.

Of note, a justice on the Kansas Supreme Court earns $135,905. The U.S. Census Bureau has a statistic named “Median household income, 2009-2013.” For Kansas, the value is $51,332.

I’m not an income tax expert. I could be off by a little. But I’m pretty sure Anthony Hensley and the Kansas Democrats are way wrong on this.

Economic development in Wichita: Looking beyond the immediate

Decisions on economic development initiatives in Wichita are made based on “stage one” thinking, failing to look beyond what is immediate and obvious. From December 2014.

Critics of the economic development policies in use by the City of Wichita are often portrayed as not being able to see and appreciate the good things these policies are producing, even though they are unfolding right before our very eyes. The difference is that some look beyond the immediate — what is seen — and ask “And then what will happen?” — looking for the unseen.

Thomas Sowell explains the problem in a passage from the first chapter of Applied economics: thinking beyond stage one:

When we are talking about applied economic policies, we are no longer talking about pure economic principles, but about the interactions of politics and economics. The principles of economics remain the same, but the likelihood of those principles being applied unchanged is considerably reduced, because politics has its own principles and imperatives. It is not just that politicians’ top priority is getting elected and re-elected, or that their time horizon seldom extends beyond the next election. The general public as well behaves differently when making political decisions rather than economic decisions. Virtually no one puts as much time and close attention into deciding whether to vote for one candidate rather than another as is usually put into deciding whether to buy one house rather than another — or perhaps even one car rather than another.

The voter’s political decisions involve having a minute influence on policies which affect many other people, while economic decision-making is about having a major effect on one’s own personal well-being. It should not be surprising that the quantity and quality of thinking going into these very different kinds of decisions differ correspondingly. One of the ways in which these decisions differ is in not thinking through political decisions beyond the immediate consequences. When most voters do not think beyond stage one, many elected officials have no incentive to weigh what the consequences will be in later stages — and considerable incentives to avoid getting beyond what their constituents think and understand, for fear that rival politicians can drive a wedge between them and their constituents by catering to public misconceptions.

The economic decisions made by governing bodies like the Wichita City Council have a large impact on the lives of Wichitans. But as Sowell explains, these decisions are made by politicians for political reasons.

Sowell goes on to explain the danger of stopping the thinking process at stage one:

When I was an undergraduate studying economics under Professor Arthur Smithies of Harvard, he asked me in class one day what policy I favored on a particular issue of the times. Since I had strong feelings on that issue, I proceeded to answer him with enthusiasm, explaining what beneficial consequences I expected from the policy I advocated.

“And then what will happen?” he asked.

The question caught me off guard. However, as I thought about it, it became clear that the situation I described would lead to other economic consequences, which I then began to consider and to spell out.

“And what will happen after that?” Professor Smithies asked.

As I analyzed how the further economic reactions to the policy would unfold, I began to realize that these reactions would lead to consequences much less desirable than those at the first stage, and I began to waver somewhat.

“And then what will happen?” Smithies persisted.

By now I was beginning to see that the economic reverberations of the policy I advocated were likely to be pretty disastrous — and, in fact, much worse than the initial situation that it was designed to improve.

Simple as this little exercise may sound, it goes further than most economic discussions about policies on a wide range of issues. Most thinking stops at stage one.

We see stage one thinking all the time when looking at government. In Wichita, for example, a favorite question of city council members seeking to justify their support for government intervention such as a tax increment financing (TIF) district or some other form of subsidy is “How much more tax does the building pay now?” Or perhaps “How many jobs will (or did) the project create?”

These questions, and the answers to them, are examples of stage one thinking. The answers are easily obtained and cited as evidence of the success of the government program.

But driving by a store or hotel in a TIF district and noticing a building or people working at jobs does not tell the entire story. Using the existence of a building, or the payment of taxes, or jobs created, is stage one thinking, and nothing more than that.

Fortunately, there are people who have thought beyond stage one, and some concerning local economic development and TIF districts. And what they’ve found should spur politicians and bureaucrats to find ways to move beyond stage one in their thinking.

An example are economists Richard F. Dye and David F. Merriman, who have studied tax increment financing extensively. Their article Tax Increment Financing: A Tool for Local Economic Development states in its conclusion:

TIF districts grow much faster than other areas in their host municipalities. TIF boosters or naive analysts might point to this as evidence of the success of tax increment financing, but they would be wrong. Observing high growth in an area targeted for development is unremarkable.

So TIF districts are good for the favored development that receives the subsidy — not a surprising finding. What about the rest of the city? Continuing from the same study:

If the use of tax increment financing stimulates economic development, there should be a positive relationship between TIF adoption and overall growth in municipalities. This did not occur. If, on the other hand, TIF merely moves capital around within a municipality, there should be no relationship between TIF adoption and growth. What we find, however, is a negative relationship. Municipalities that use TIF do worse.

We find evidence that the non-TIF areas of municipalities that use TIF grow no more rapidly, and perhaps more slowly, than similar municipalities that do not use TIF.

In a different paper (The Effects of Tax Increment Financing on Economic Development), the same economists wrote “We find clear and consistent evidence that municipalities that adopt TIF grow more slowly after adoption than those that do not. … These findings suggest that TIF trades off higher growth in the TIF district for lower growth elsewhere. This hypothesis is bolstered by other empirical findings.”

Here we have an example of thinking beyond stage one. The results are opposite of what one-stage thinking produces.

Some city council members are concerned about creating jobs, and are swayed by the promises of developers that their establishments will employ a certain number of workers. Again, this thinking stops at stage one. But others have looked farther, as has Paul F. Byrne of Washburn University. The title of his recent report is Does Tax Increment Financing Deliver on Its Promise of Jobs? The Impact of Tax Increment Financing on Municipal Employment Growth, and in its abstract we find this conclusion regarding the impact of TIF on jobs:

Increasingly, municipal leaders justify their use of tax increment financing (TIF) by touting its role in improving municipal employment. However, empirical studies on TIF have primarily examined TIF’s impact on property values, ignoring the claim that serves as the primary justification for its use. This article addresses the claim by examining the impact of TIF adoption on municipal employment growth in Illinois, looking for both general impact and impact specific to the type of development supported. Results find no general impact of TIF use on employment. However, findings suggest that TIF districts supporting industrial development may have a positive effect on municipal employment, whereas TIF districts supporting retail development have a negative effect on municipal employment. These results are consistent with industrial TIF districts capturing employment that would have otherwise occurred outside of the adopting municipality and retail TIF districts shifting employment within the municipality to more labor-efficient retailers within the TIF district.

While this research might be used to support a TIF district for industrial development, TIF in Wichita is primarily used for retail development. And, when thinking beyond stage one, the effect on employment — considering the entire city — is negative.

It’s hard to think beyond stage one. It requires considering not only the seen, but also the unseen, as Frederic Bastiat taught us in his famous parable of the broken window. But over and over we see how politicians at all levels of government stop thinking at stage one. This is one of the many reasons why we need to return as much decision-making as possible to the private sector, and drastically limit the powers of politicians and governments.

Wichita school bond contributors: self-interest gone wild

Big contributions to a political campaign earned a lucrative no-bid contract, plus profits for other firms. But, it was for the children. From December 2008.

The campaign finance report filed by Citizens Alliance for Responsible Education (CARE), reporting on the campaign in favor of the bond issue to benefit USD 259, the Wichita public school district, contains information that should be of interest to Wichitans. (To download and read the report, visit this article: Wichita School Bond Finance Report Omits a Big Contribution.)

For example, Kenton Cox of Schaefer Johnson Cox Frey Architecture contributed $13,800 in cash to CARE, and that firm made an in-kind contribution of $15,380, reported by the Wichita Eagle to be donated signs.

Why would an architecture firm have such an intense interest in Wichita public schools? Why would Kenton Cox be concerned, given that he doesn’t even live in USD 259? Here’s a possible answer: the minutes of the December 8 meeting of the board report that Schaefer Johnson Cox Frey Architecture was awarded a contract for plan management services for the bond issue. The value of this contract, as reported by the Wichita Eagle, is one percent of the value of the bond issue, or $3.7 million. This firm will undoubtedly earn millions more for those projects on which it serves as architect.

Was this lucrative contract put up for bid? Was any other firm considered? Was there ever any doubt that Schaefer Johnson Cox Frey Architecture’s contributions to the bond issue campaign would be returned multiplied many-fold?

(The board meeting minutes report that a summary of the agreement for plan management services is available in the appendix to the agenda. Just three weeks later, however, that material is no longer available on USD 259’s website. That’s a problem of a different kind with USD 259.)

Then, what about all the other architect firms that contributed many thousands to the CARE campaign? Civic involvement or self-interest — hoping to be sent a few crumbs in the form of design contracts that Schaefer Johnson Cox Frey Architecture decides not to keep for itself?

For the construction and engineering companies that contributed many thousands, the same questions apply.

One analysis finds that 72% of the contributions, both in-kind and cash, was given by contractors, architects, engineering firms and others who directly stand to benefit from the new construction.

Campaign finance reports for the groups that opposed the bond issue will show that real estate developers and owners contributed heavily to these campaigns. It’s likely that the Wichita Eagle — Rhonda Holman, probably — will editorialize about greedy developers, only wanting to increase their profits on the backs of schoolchildren.

These developers, however, are looking out for two things: First, it’s really their tenants that pay the increased property taxes that the school bond will impose. Then, in turn, anyone who eats in these restaurants, or shops at these stores, or rents these apartments, will pay more. The misinformation that USD 259 and CARE spread — that the bond issue costs just a dollar a week for a typical homeowner — didn’t acknowledge these costs.

Second, the property tax environment in Wichita and Kansas is such that development is discouraged. Some projects, as reported in the Wichita Eagle, have been canceled. What’s not seen by the news media and Wichitans are the projects that aren’t proposed or considered because of our high — and about to be made higher — property taxes. We’ll never see or hear about these.

When considering who are the greedy and self-interested parties, look at the CARE campaign finance report and the education bureaucracy in charge of the Wichita public schools. Their names are there.

Ticket scalping is a market function, not a criminal activity

From December 2009.

At the Intrust Bank Arena in downtown Wichita, some concerts are very popular, which leads to people frustrated at two things: the inability to buy tickets when they go on sale, and then the high prices that ticket scalpers ask for tickets on the aftermarket.

I understand the frustration of the stymied ticket buyers. Who wants to pay $300 for a ticket that was sold by the arena’s box office for $50? It would be great if everyone who wanted to attend could do so for $50 — or for $5, for that matter. And that gets to the heart of the problem and why it isn’t likely to be solved: human behavior and economics.

Walter Block has a chapter in his book Defending the Undefendable that defends the ticket scalper. (The book in pdf form is here.)

As it turns out, scalping is a beneficial economic activity. But even if you don’t believe this, scalping could be avoided if venues like the arena would sell tickets in a different manner.

According to Block, scalping requires “a fixed, invariable supply of tickets.” After all , if the supply of tickets was unlimited, everyone could buy all they wanted at list price (the price printed on the ticket, and what the venue sells them for).

Also, scalping requires “the ticket price chosen by management be lower than the ‘market clearing price.'” Markets clear when people want to buy the same number of tickets that are for sale. This balance is achieved by allowing the price of the tickets to freely adjust. When the list price of the ticket is less than what some people are willing to pay, that’s when scalpers have an opportunity to earn profits.

This points to one way that scalping could be eliminated, if concert promoters wanted to: They could sell tickets like shares of stock or bushels of wheat are sold. These items don’t have a list price. Instead, their price is whatever people are willing to pay.

Why would concert promoters price tickets at less than some people are willing to pay? If a scalper can get say, $300 for a ticket that the box office sells for $50, why doesn’t the box office price the ticket at $300? Or maybe $200? Here’s what Block writes:

For one thing, lower prices invite a large audience. Long lines of people waiting to enter a theater or ballpark constitutes free publicity. In other words, management forgoes higher prices in order to save money it might have had to spend on advertising. In addition, managers are loath to raise ticket prices — even though they would have little difficulty selling them for a big event or special movie — for fear of a backlash. Many people feel that there is a “fair” price for a movie ticket, and managers are responsive to this feeling.

There are several other motivations, less compelling, for keeping prices fixed at below equilibrium levels. Taken together they ensure that this pricing policy — the third condition necessary for scalping — will continue.

In other words, better for scalpers to bear the brunt of public ire for setting market-clearing prices. Can you imagine the public backlash at the Intrust Bank Arena and Sedgwick County if ticket prices for very popular concerts were set at market-clearing prices?

The chapter goes on to explain the two ways that scarce goods — concert tickets in this care — are rationed: price rationing, and non-price rationing. Price rationing, as you might imagine, relies on the price mechanism to determine a market-clearing price so that supply equals demand.

Non-price rationing, on the other hand, relies on something else. Block mentions “first-come, first served” (camping out the night before at the box office window) and favoritism (those connected to or favored in some way by arena management get special privileges) as two methods of non-price rationing. The Intrust Bank Arena has used another method — a lottery — for some concerts.

So which is “fair?” Does price rationing favor those with the ability to pay high prices? Certainly scalping makes it easier for rich people to obtain scarce tickets. But Block says that scalping provides entrepreneurial opportunities. Someone with a small amount of capital (just enough to buy one or more tickets) but a lot of spare time (someone without a job) can camp out in line and earn profits by selling the tickets. Or, they could simply wait in line and be paid a wage.

By the way, scalpers are not guaranteed profits. If there is not much demand for tickets for an event, scalpers will have to sell the tickets at a loss — or they may not be able to sell them at any price.

Back to Wichita: According to a Wichita Eagle article, a group named Taxpayers for Tickets has been formed to take action against scalping. Reading the website, it seems that the group’s focus is on more laws and enforcement of them to effect the goal of getting tickets in the hands of the taxpayers who paid for the construction of the Intrust Bank Arena.

I don’t favor this approach. First, as we’ve seen, scalping is a socially beneficial activity that provides market-clearing prices for tickets.

Second, there is plenty of actual crime in our community that causes death, injury, and loss of property. We don’t need to squander law enforcement resources on victimless crimes like people willingly and voluntarily engaging in market transactions.

In a letter published in the Wichita Eagle, Todd Allen, head of Taxpayers for Tickets, wrote “I figured that since the taxpayers paid for the arena, that makes us the owners.” I hate to disappoint Mr. Allen, but that’s far from the case. Try requesting a contract, as in Sedgwick County keeps lease agreement secret. Not even Sedgwick County Commissioners are able to see the lease of the arena’s flagship tenant.

Another article on ticket scalping is Ticket Scalpers Are Hidden Heroes.