Yesterday the St. Louis Post-Dispatch ran a great editorial. The problem it addressed was straightforward: the $500 million plus state budget shortfall. The editorial writers made no bones about the obvious source of the problem:

Digging out of this hole is Missouri’s true challenge. But neither our Legislature nor our governor can get over their “no new taxes” pledges to do anything meaningful about it.

The solution they suggested was just as straightforward:

Mr. Nixon should declare a holiday. A tax credit holiday.

This single action would more than fill the budget hole estimated by legislative leaders to be in the range of $500 million.

Everybody in the Capitol knows that Missouri’s biggest ongoing budget problem, outside of the Great Recession, is the state’s propensity to hand out tax credits like legislative candy along a parade route. Some credits go to good causes, like senior citizens on a fixed income. Most go to developers or corporations as incentives, theoretically, to create jobs.

Unfortunately for the theory that tax credits create jobs, the evidence that they do so overall is just not there. This fact is fairly well known, accounting for the fact that there are folks on all sides of the partisan divide willing to take pot shots at the practice.

Happily, there are some folks who are willing to at least try to take action to rationalize the use of tax credits. Sadly, they aren’t in Missouri. Michigan Democratic lawmakers, referencing the relationship between an educated work force and job creation, put forward a plan to finance free community college tuition for state residents, which would paid for by canceling $3.5 million worth of tax credits:

Study after study after study has emphasized the importance of a highly educated workforce in the economic vitality of any state in the 21st century” said Senate Democratic leader Gretchen Whitmer, D-East Lansing

So what has our governor decided to do? In spite of the importance of education to our economically beleaguered state, Governor Nixon proposes to partially balance the budget by cutting $89 million from an already mediocre state higher education system.

This year, when you hear talk about the state’s dire budget situation and the pain and suffering it has caused – 860 state jobs will be lost, for just one instance – remember there was a solution staring us in the face, and miracle of miracles, it might even  have garnered some bipartisan support. Also keep in mind that a few days ago, GOP gubernatorial candidate Dave Spence actually proposed a moratorium on tax credits as an important part of his economic plan. He seems to have learned something in those home economics courses.

To give the Governor his due, he’s up against a system that practically dictates that the worst case solution will be the only practicable option. In spite of some GOP criticism of tax credits, others in the legislature have made their unwillingness to reform the state’s program known. Last year, in fact, the Governor was warned by Steve Tilley, who has since become House Speaker, and three other powerful committee chairman – before he even put a budget proposal forward – that they would not permit him to use tax credit reform to balance the budget.

It’s hard not to conclude that once again powerful vested interested are calling the shots when it comes to the distribution of state tax dollars.  Nevertheless, one can’t help wondering just what might be achieved if the Governor had been willing to go out on a limb and show just a little more political courage. Surely there’s a time when we have to fight – even if we’re already backed to the wall? Perhaps that’s when we most need to show some fight.

The Missouri General Assembly is now in a special session, called by Governor Jay Nixon, for the purpose of enacting incentives for Ford to create and retain jobs at its Claycomo plant and paying for those incentives by creating a second tier retirement system for new state employees.

You know, robbing Peter to pay Paul.

Peter, in the form of HB 1 (on pensions)

…. (2) Requires any person who first becomes a state employee on or after January 1, 2011, to be a member of the Missouri State Employees’ Retirement System (MOSERS) Year 2000 Plan….

….A member of this plan must contribute 4% of his or her pay to the system….

[emphasis added]

Paul, in form of HB 2 (on incentives for job creation/retention incentives directed at Ford, though not by name), from the Bill Summary:

….(2)  Defines “qualified supplier” as a company that:

…. d) Provides health insurance to employees and pays at least 50% of the insurance premiums….

[emphasis added]

Uh, is offering a tax incentive to a company which requires they offer health insurance considered “socialized health care”? Just asking. And to think the bill was sponsored by a republican in the Missouri General Assembly. But, I digress.

Then there’s this gem of a quote by the sponsor of the Senate version of the pension bill, Senator Jason Crowell (r), in today’s Kansas City Star:

….Crowell, the architect of the reform legislation, said changes are critical for the state to keep up with broader trends in retirement.

“If you look at where this pension system is, based on where the private sector is, I think any taxpayer would call this necessary reform,” Crowell said….

Is Senator Crowell (r) endorsing a private sector pay scale for all public employees in the State of Missouri?

Then again, the comparison doesn’t quite work – from a technical note in the Bureau of Labor Statistics Employer Costs For Employee Compensation – March 2010 [pdf] news release:

…Compensation cost levels in State and local government should not be directly compared with levels in private industry. Differences between these sectors stem from factors such as variation in work activities and occupational structures. Manufacturing and sales, for example, make up a large part of private industry work activities but are rare in State and local government. Professional and administrative support occupations (including teachers) account for two-thirds of the State and local government workforce, compared with one-half of private industry….

And in higher education [pdf] (the provisions of this bill would apply to public higher education employees in Missouri):

…Salary is one of many factors considered by prospective faculty members in weighing offers of employment; many of today’s academics are prepared to move among institutions (and private sector industries) for a more favorable compensation package. When top faculty members leave to pursue other opportunities, local and regional economic development can suffer through the associated loss of external funding, technology transfer and other entrepreneurial activity, and the loss of talented researchers and graduate students brought and attracted by cutting-edge scholars….

What effect do you think a reduction in pension benefits will have on recruiting and retaining new faculty at Missouri’s public higher education institutions? Just asking.

So much for promoting the long term economic development potential of the state, eh? That defeats the whole stated purpose of the special session, don’t you think? Peter and Paul, meet the Missouri General Assembly.

Retaining and and creating new jobs at the Ford Claycomo plant and for their suppliers is a good thing. It’s the General Assembly’s proposed method of paying for it that has me worried about the unintended consequences elsewhere.

In the Senate SB 1 [pdf] also addresses the public employee pension issue. The different language in the House and Senate bills will have to be reconciled. The Summary of SB1:

SB 1 – This act modifies provisions relating to retirement.

This act creates a new retirement plan for any person who becomes a state employee on or after January 1, 2011. To be eligible for normal retirement under this plan, employees will be required to reach age sixty-seven and have at least ten years of service or reach age fifty-five with the sum of the member’s age and service equaling at least ninety, uniformed members of the highway patrol with a mandatory retirement age of sixty will be required to reach age sixty or reach age fifty-five with ten years credited service, members of the general assembly will be required to reach age sixty-two and complete at least three full biennial assemblies or reach age fifty-five with the sum of the member’s age and service equaling at least ninety, and statewide elected officials will be required to reach age sixty-two and complete at least four years of service or reach age fifty-five with the sum of the official’s age and service equaling at least ninety. Employees, except for uniformed members of the highway patrol, are eligible for early retirement at age sixty-two with ten years of service. Employees must work for the state for ten years to vest in the retirement system. Members of this retirement plan will be required to contribute four percent of their pay to the retirement system. Members will not be able to purchase credit in the retirement plan for their past non-federal full-time public employment, their military service, or transfer credit from other public retirement plans. The employee contribution rate, the benefits under the year 2000 plan, and any other provision of the year 2000 plan may be altered, amended, increased, decreased, or repealed, but such change will only apply to service or interest credits after the effective date of the change. Employees under this plan shall not be eligible for the Backdrop option, which provides a lump sum payment at retirement for those working at least two years beyond normal retirement eligibility. (Section 104.1091)

This act also creates the Missouri State Retirement Investment Board. This board may manage the investment of the assets of the Missouri State Employees Retirement System (MOSERS) and the Missouri Department of Transportation and Highway Patrol Employees Retirement System (MPERS). The board may also administer the deferred compensation plan for state employees and the existing college and university defined contribution plan. Other Missouri public pension systems may upon approval of the system or plan and approval of the board enter an agreement with the board to provide investment oversight and management. The board is prohibited from managing the investments of the Public School Retirement System (PSRS), the Public Education Employee Retirement System(PEERS), the Missouri Local Government Employees Retirement System (LAGERS), the Public School Retirement System of St. Louis, the Public School Retirement System of Kansas City and the retirement plans established by the Bi-State Development Agency and the Reg
ional Investment District.

Before the investment board is authorized to manage the investment of assets, the boards of MOSERS and MPERS must each vote to irrevocably transfer oversight and management of the investment of assets managed by these retirement systems to the investment board. If either the MOSERS or MPERS board do not transfer its assets, then the powers and duties of the investment board lapse and the board is prohibited from overseeing or managing any funds.

The Missouri State Retirement Investment Board is organized as a body corporate and instrumentality of the state with its records subject to the sunshine law and its meetings open to the public. The company’s initial capital is provided on an equitable basis by MOSERS and MPERS. MOSERS and MPERS may transfer any of their executives or employees to the company, except for their executive directors.

The board has seven members, the executive director of MOSERS, the executive director of MPERS, the commissioner of administration, and four members appointed by the governor, initially from a list of names submitted by the executive directors of MOSERS and MPERS, and subsequently from a list of names submitted by board members. The governor has the right to reject any or all of the people on the list submitted by the executive directors or the list submitted by the board members. If the governor rejects any of the people recommended on the lists, the executive directors or the board members, as the case may be, are required to submit a list of two people for each vacant position. This process shall continue until no position on the board remains vacant.

No member of the board or member of the MOSERS or MPERS board may be employed by the board or have a business relationship with any service provider of the board for two years after the end of their membership on the board. No current or former member of the general assembly or statewide elected official may become an employee of the board or work for or have a business relationship with any service provider of the board for five years after their service in the general assembly or as a statewide elected official has ended.

The assets of these retirement systems may be held by the board in a collective trust fund for investment as a single pool. The board is not liable for any payment they make as directed by the executive director, chief executive officer, or other person designated by the retirement system. The administrative and investment expenses of the board shall be apportioned among the retirement systems.

The assets of MOSERS and MPERS will be transferred to the board over a transition period after the MOSERS and MPERS boards elect to transfer the management of investments to the investment board. MOSERS and MPERS are responsible for managing their assets until they are transferred to the board. (Sections 104.1500 to 104.1506).

The act also creates a new retirement plan for any person who first becomes a judge on or after January 1, 2011. Judges will be required to reach age sixty-seven and have at least twelve years of service or reach age sixty-two and have twenty years of service before they are eligible for normal retirement. If a judge retires at age sixty-seven with less than twelve years of service, or at sixty-two with less than twenty years service, their retirement compensation will be reduced proportionately. Judges in this retirement plan will be required to contribute four percent of their compensation to the retirement system. Judges will not be able to purchase credit in the retirement plan for their past non-federal full-time public employment or their military service. Judges under this plan who continue to work after their normal retirement date will not have cost-of-living increases added to their retirement compensation for the period of time between their eligibility for retirement and their actual retirement date. When a retired judge under this plan dies, their beneficiary will not receive an amount equal to fifty percent of the judge’s retirement compensation. Instead, judges will make a choice at retirement among the benefit payment options, that includes options for the amount received by the beneficiary. The employee contribution rate, the benefits under the judicial retirement plan, and any other provision of the judicial retirement plan may be altered, amended, increased, decreased, or repealed, but such change will only apply to service or interest credits after the effective date of the change. (Sections 476.521 and 476.529)

This act prohibits a retired judge who becomes employed after January 1, 2011, as an employee eligible to participate in the MOSERS retirement plan, from receiving their judicial retirement benefits while they are employed. Any judge who serves as a judge while he or she is receiving their judicial retirement is prohibited from receiving their judicial retirement while serving as a judge. A judge who serves as a senior judge or senior commissioner while receiving judicial retirement will continue to receive judicial retirement and additional credit and salary for their service. (Section 476.527)

This act is similar to the perfected version of SB 714 (2010).

And, to add to the fun, another republican in the House introduced a joint resolution, HJR 1:

Proposes a constitutional amendment limiting any increase in the merchants’ and manufacturers’ replacement tax, allowing local governing bodies to reduce the rate, and eliminating the tax in 2015.

Yes, yes, let’s keep cutting revenue. That’ll really help to stabilize the cash flow problems for government entities in Missouri, right?

(See Update at end)

A state so poor that it kicked 100,000 Missourians off Medicaid three years ago has recently developed delusions of grandeur. The legislature is considering offering a Canadian firm, Bombardier Aerospace, as much as $880,000,000 in tax credits over the next 22 years in order to lure the airplane manufacturer to build a plant in Kansas City.

Did you see how many zeros came after those two eights? That figure is edging up on a billion bucks.

But the bill flew through the House with only two hours of debate. The Senate was a different story.  After three days of debate, the bill has stalled on the runway. Cooler heads may yet prevail, and some of them are even republican heads.

Jason Crowell, R-Cape Girardeau, who has led Republican opposition to the bill, argues that:

“Paying up to nearly $900 million in tax credits for 2,000 jobs makes no sense.”

And that’s not the only reason to be skittish: Crowell wants to see the details of the deal before Senators commit themselves to following them.

With the biggest tax credit offer in the history of our state at stake, Senate Majority Leader Charlie Shields, R-St. Joseph, is the only one who’s seen the details? At the very least, he should tell the other senators how many Brooklyn Bridges they are buying here.

But even if the senators had all the details, they should be more than leery. Pitting our state against other possible investors this way is too reminiscent of how Wal-Mart pits one community against its next door neighbor, asking who’ll give it the biggest tax breaks for the chance to have a new Wal-Mart in the community. The only one who wins in those price wars is Wal-Mart. The ones who lose are the local schools, fire departments, and police departments.

To be fair, this deal might not be just the same kind of scam writ larger. Supposedly, those tax credits will be paid back in the form of royalties on planes sold, but a lot could go wrong between now and retrieving our $880 million.

Victor Callahan knows it.  

“At the end of the day, we have to ensure that our taxpayers are protected and that we’re fully accountable,” said Sen. Victor Callahan, an Independence Democrat. “The current bill does not do that.”

Because of sentiments like Callahan’s and Crowell’s:

The Senate voted down an amendment to an appropriations bill Wednesday that would have set aside $120 million in early round financing for the project, with 22 senators voting no.

Let it die. Let somebody else have this pig in a poke.

Update: HB2393 passed in the House 125-16. Democrat Ron Richard of Joplin sponsored it.

Jerry Ford at Missourians for Tax Justice sent out to the members of the group this account of doings in the House last week:

Where’s your money going?

For starters, the Senate debated a bill that would give $500 to $800 Million ($40 Million a year for 22 years) in tax credits to a French/Canadian airplane manufacturer who wants to locate in St. Joe!!

Any discretionary moneys over those years would probably be gobbled up .. forget education, mental health, public safety, medical care, etc. They needed our hero, Jeanette Oxford’s amendment in the House on HJR 70.

While the Senate was giving all our money away, the House was limiting Legislatures from making spending determinations on vital needs in the future by taking away certain future revenues from the table. And then came Jeanette with a great amendment. In essence it said, “Let’s just agree that Missouri should always remain at the bottom of the country for services to its citizens!” While she was shouted down by the Republicans in the Chamber, her stock rose dramatically in the Halls!

She may not know it, but she’s being noticed by lobbyists, pundits, reporters, etc. around the building as someone not to be taken lightly. Her cries from the wilderness are beginning to be heard.

……….

Representative Oxford offered House Amendment No. 1.

AMEND House Committee Substitute for House Joint Resolution No. 70, Page 1, Section 23(a), Line 1, by inserting after “23(a). 1.” the following:

“It is the goal of the state of Missouri to fund education, public safety, and vital services to our citizens at a level below that of most other states, so that Missouri will never be among the top tier of states for public investment in education, public safety, and vital services to our citizens.”; and

Further amend said title, enacting clause and intersectional references accordingly.

Representative Oxford moved that House Amendment No. 1 be adopted.

Which motion was defeated.

Although the motion was officially defeated, it will be acted on in practice–but perhaps Jeanette is less than happy to get her way after all.

Anyway, it’s unusual to see Mott-Oxford speaking for the Republicans better than they could do it themselves.  

Republicans are nervous about Missouri’s financial outlook for 2010, so I asked Clint Zweifel (D-Florissant) what’s going to hit the fan that year.  There are two pieces of Republican legislation, he tells me, that will bite us in 2010.

First, the state was already burdened with $400 million a year in tax credits.  This year alone, the legislature added another $100 million in credits–without any cost benefit analysis.

And, by the way, there’s another $350 million in liability lurking out there if all tax credits were actually redeemed.  They won’t all be redeemed, but how much will be is a variable that’s difficult to predict.

The second splurge that we’ll discover we can’t afford is the social security tax cuts.  Those will cost the state another $155 mill a year.  And the sad part is that only ten percent of seniors will benefit from that cut, most of them in the $75,000-100,000 annual income bracket.

That tax cut was never meant to benefit the poorest seniors because there are no taxes on social security income below the $35,000-40,000 income range.  The average income for people 62 and older in this state is a paltry $25,000.  Those people won’t see a dime of this money.  And there’ll be less money available now for the social services those people need.

Republicans would have made the financial outlook for the state even bleaker if it hadn’t been for Senator Jeff Smith (D-St. Louis).  Having counted the votes, he saw that the legislation was going to pass, so he got it amended to cap the tax cuts for incomes above $100,000.

What were the Republicans thinking when they passed that bill?  Somebody needs to cut up their legislative credit card.  Seriously.

Talk about approach/avoidance.  Our Republican legislature is actually trying to give state money to help get North St. Louis redeveloped.  Since when?  And do we dare look this gift horse in the mouth?  Governor Blunt has called a special two-week session of the legislature to pass his economic development package, and it’s already been trimmed drastically from last spring.

The fuss is over how the money he’s still offering is being allocated.  Fifty-one million dollars in tax credits are available, but they go only to developers who buy at least fifty acres in low-income areas.  Make that “developer”, singular, since only Paul McKee qualifies.  He has angered North St. Louis residents because he has bought 500 properties and left them to deteriorate, thus lowering property values for everyone.

Certainly McKee would do the community a service if he developed all that land, and there’s plenty of risk involved, even with tax credits.  But why should only the big guy get a place at the tax credit table?  Lots of people with fewer resources but with a personal interest in bettering North St. Louis would like to sit down too.

PubDef reports that Michael Allen, the watchdog who first reported that McKee was behind dummy corporations buying properties there, would like to see the threshhold lowered.

“At 20 to 25 acres, other developers and even established neighborhood organizations could apply and receive these tax credits.”

Jim Trout, writing on the West County Dems discussion group puts it eloquently:

“There are a long list of rehabbers, developers, builders, and community organizations who have the passion and experience to turn their neighborhoods around, and they are just missing the equity component to accomplish it on a massive scale – and this tax credit satisfies that requirement. We do not need a great white father to re-invent urban redevelopment. We simply need to level the playing field.”

PubDef promises to post a video on Monday about McKee’s “northside activities.”  That should be worth a look.