Explaining the Student Transfer Bill

How does this impact districts outside of St. Louis and Kansas City?

The bill only has minimal impact outside of the metropolitan St. Louis and Kansas City areas. The vast majority of provisions attempt to bring order and rationality to the chaotic transfer law in existing statutes. Nonetheless, there are a few provisions which have statewide impact:

1.      School Calendar from Days to Hours[1] – The bill converts the current statutory requirement of 174 school days to 1,080 hours of pupil attendance. This equates to approximately six more regular school days. But it also allows districts greater flexibility in how they meet this requirement. The effective date of this provision is delayed for an additional school year.

  1. School Limited to Four Days Per Week in June, July, and August; Mandatory Break for July 4[2] – The bill limits the school week to “no more than four days” in “any regular or summer school term scheduled for June, July, or August.” It also requires schools to have an entire week of break around July 4 if the holiday falls during the week, or at least 4 days if it falls on a weekend. The bill also requires a separate school board meeting if it chooses to start school more than ten calendar days prior to the first Monday in September.[3] The effective date of this provision is delayed for an additional school year.
  2. Transient Students Shall Not Count in First Year of Transfer[4] – The bill requires DESE to record and report each district’s “transient student ratio” – the measure of a district’s students who have been in the district for one entire year versus those who enrolled or left in the middle of the school year. It provides that statewide assessment scores for transient students shall not be included in a school or district’s annual APR score.
  3. Increased Minimum Teacher Salaries[5] – The bill increases the minimum teacher’s salary from $25,000 to $30,000, subject to appropriations, over a four-year period. For teachers with advanced degrees, the bill increases minimum salary from $33,000 to $35,000. To help pay for the cost of salary increases, this section creates the “Teacher Minimum Salary Fund” in the state treasury, which, subject to appropriation, shall be used to distribute appropriated moneys to schools for this purpose.
  4. K-8 District Tuition[6] – The provision clarifies that K-8 districts pay tuition only to accredited public high schools in another district in the same or an adjoining county.
  5. Allows Districts to Share a Superintendent[7] – The bill clarifies that two or more school districts may share a superintendent. This provision is identical to SB 701 which passed out of the Senate and the House Committee on Elementary and Secondary Education via consent.
  6. School District Financial Requirements When Formula Underfunded – The bill includes an amendment offered by Rep. Lyle Rowland in committee that is identical to HB 1111, which extends existing law excusing districts from professional development and fund placement requirements. HB 1111 was voted out of the House Elementary and Secondary Education Committee by a vote of 16-1.
  7. Otherwise A+ Eligible Students Not Discriminated Against for Taking Virtual Classes[8] – The bill includes an amendment offered by Rep. Vickie Englund which clarifies that a student who is otherwise eligible for A+ cannot be made ineligible because they take virtual classes. This provision is identical to HB 1895, which passed out of the House Elementary and Secondary Education Committee by a vote of 17-0.
  8. District Leasing of School Buildings[9] – The bill allows school districts to sell or lease buildings to other entities. It is identical to HB 783 from 2013 which passed out of the General Laws Committee by a vote of 13-0 with no testimony in opposition.
  9. Creates Standards for Reapportioning Local Tax Effort After Boundary Change[10] – Proposed §164.432 sets rules for the re-apportioning of local effort after a district boundary change.
  10. Establishes Parent Portal Fund[11] – The bill establishes the “Parent Portal Fund” to assist districts in creating a parent portal for patens to access educational information and their children’s education data.

How does the bill pro-actively help provisionally-accredited school districts?  

The bill requires the State Board to create assistance teams for borderline and provisionally accredited districts.[12] The members of these assistance teams will vary based on the needs of the district, but will include at least ten members, including teachers, principals, and at least one parent. The assistance team’s “suggestions for improvement shall be mandatory for provisionally accredited districts, but shall not be mandatory for borderline districts.” Provisionally-accredited districts can appeal to the State Board if it has an alternative method for improvement.

How does the bill help unaccredited districts improve?

  1. Increased State Board Flexibility in Unaccredited District[13] – Last year, we passed SB 125 to empower the State Board with greater flexibility for its intervention decisions in unaccredited districts. We permitted the State Board to choose not to conduct a full-scale takeover of an unaccredited district – or to allow the existing Board to stay in place if it took actions required by the State Board. This bill increases the State Board’s flexibility by allowing it to choose to only take-over a subset of schools within an unaccredited district. For example, the State Board could choose to appoint an S.A.B. for only the unaccredited schools within an unaccredited district – leaving the local elected board in charge of the remaining accredited schools. In addition, the bill requires that at least one member of an S.A.B. be appointed by the elected school board. It allows the State Board to appoint other members of the local elected board to an S.A.B., but provides that they shall not comprise more than 49 percent of the S.A.B.’s membership.
  2. Free Tutoring and Supplemental Education[14] – The bill requires unaccredited districts to offer free tutoring and supplemental education services to students performing below grade level using funds from a new “School District Improvement Fund” – which is to be made up of gifts, bequests, and donations, and may include appropriations.
  3. Early Reading Intervention[15] The bill requires the St. Louis and Kansas City school districts to create an early reading intervention program for students in kindergarten or first-grade who test below grade level in reading. These programs would requires the districts to create a personalized learning plan to improve the student’s reading performance. If the student is still not at grade level by the end of first grade, the school is required to assess the student for an IEP. If an IEP is deemed inappropriate, the student’s personalized learning plan shall continue until they are reading at grade level.
  4. Extended School Day[16] – The bill allows any unaccredited or provisionally accredited school district to increase the length of the school day or the annual hours of instruction. The bill also creates the “Extended Learning Time Fund” to help pay for the costs of extended school days in these districts. This provision is subject to appropriations.

How does the bill impact charter schools?

The bill seeks to encourage charter schools as an option for transfer students. It does so in the following ways:

  1. Increases Public Schools as Charter Sponsors[17] – The bill would allow any single or a combination of accredited public school districts to sponsor charter schools in unaccredited districts.
  2. Gives State Board Additional Time to Approve Charter Proposals[18] – The bill moves the date by which the State Board must approve a charter from December 1 to January 31.
  3. Ensures Due Process Rights for Charter Applicants[19] – Current law provides that the State Board “may, within sixty days” of a charter application “disapprove the granting of the charter.” Current law state that the State Board “may deny” a charter within 60 days of receiving a charter application. The bill clarifies that, if the State Board fails to act in that time period, the charter is deemed approved. If the State Board disapproves, the decision must be “in writing and shall identify the specific failures of the application.”
  4. Charter Schools Subject to Same Accreditation System[20] — The bill requires DESE to calculate an APR score for each charter school and to publish it in the same manner that it does APRs for traditional public school districts and schools.
  5. Streamlined Expansion of High-Quality Charter Schools[21] – The bill encourages the expansion of high-quality charter schools by providing them “expedited opportunities to replicate and expand” in St. Louis, Kansas City, and unaccredited districts. Upon entering into a charter with a sponsor, the school is deemed approved by the State Board. This expedited process is limited to charter schools which (1) receive an APR of 75 percent of more for three of the last four years; (2) maintains a high school graduation rate of 80 percent if it operates a high school, (3) are in material compliance with existing performance contracts, and (4) are organizationally and fiscally viable.
  6. Allows Charter Schools to Accept Transfer Students[22] — The bill allows charter schools to charge the same tuition or fees that a traditional public school can charge or impose. In so doing, it permits charter schools in the same or adjoining counties to accept transfer students from unaccredited districts.
  7. The Bill Does NOT Create 10 Year Contracts for Charters -At least one education lobbying group is claiming the bill extends charter contracts from 5 to 10 years. That is NOT TRUE. The bill was amended in committee to keep that provision at 5 years.
  8. The Bill Does NOT Prohibit DESE from Closing a Charter If They are Underperforming -The same lobbying group is claiming that the bill prohibits DESE from closing underperforming charters. This claim is NOT TRUE. The provision in question was not intended to do what this lobbying group claims, and, to avoid any unintended consequences, was taken out of the bill in committee.
  9. Provides a Three-Year Financial Start-Up Period[23] — Current law includes a statute dealing with “charter schools experiencing financial stress.” The bill provides that this statute only applies to charter schools that have been in operation for three or more school years. This provision is needed because charter start-ups regularly take two to three years to develop a stable student base.

How does it impact school accreditation?

The bill moves the State Board from a system of district-level accreditation to a system with both district and individual school accreditation. It codifies the existing classifications of accredited with distinction, accredited, provisionally accredited, and unaccredited.

How does it ensure representation on the State Board for areas in which a potentially unaccredited school is located?

Before the State Board declares any district unaccredited, if there is no member of the Board from the congressional district in which the district is located, the State Board is required to inform the governor of its intent to change the classification at least thirty days before taking such action. This 30 day period will give the governor time to fill such a vacancy before the action is taken.[24]

How does the tuition work?[25]

Under current law, tuition is paid from the sending district to the receiving district at 100 percent of the out-of-district tuition rate set by the receiving district. The current ratio is bankrupting the sending districts and resulting in financial windfalls to the receiving districts.[26] This bill sets tuition at 70 percent of the sending district, regardless of the receiving district to which the transfer student is assigned. In addition, transportation shall be provided for by an additional amount equal to up to 10 percent of the sending district’s tuition.

Does this violate the Hancock’s prohibition on unfunded mandates?

No. The Supreme Court has ruled that the transfer law does not violate Hancock because (1) there’s nothing “new” or “increased” about requiring public education for eligible children, and (2) Hancock does not prohibit local-to-local burden-shifting of an existing activity or service. See Breitenfeld v. School District of Clayton, 399 S.W.3d 816 (Mo. 2013).

How may receiving districts determine classroom sizes?[27]

Under current law, there are no specific rules for receiving districts to set classroom sizes. A plain reading of the law leads to the conclusion that districts do not have any ability to limit transfers to protect reasonable classroom sizes. This bill clarifies that each potential receiving district “to establish by objective means and adopt a policy for class-size and student teacher ratios” which they “shall report” to the State Board for review. If the State Board approves of the class-size, the receiving district “shall not be required to accept any transfer students … that would violate its class-size or student-teacher ratio.” If the State Board finds that the district’s policy is “unduly restrictive to student transfers,” the Board may limit or revise implementation of the policy. In addition, no transfer shall require any receiving district to hire additional classroom teachers or construct additional classrooms.[28] It must also be noted that, contrary to the claims of at least one education lobbying group, the bill does NOT prohibit receiving districts from assuming future growth when calculating the number of available seats in their district.

How do the transfers work?

Under current law, every child whose parents live in an unaccredited district is eligible to transfer to an accredited district in the same or an adjoining county.[29] This bill provides that:

·         Transfer rights are limited to students who have attended an unaccredited school in an unaccredited district for at least one semester.[30]

·         Transfers are not allowed to other unaccredited or provisionally-accredited districts, but students may transfer to a provisionally-accredited school within their unaccredited district, if a slot is available.[31]

·         Students may transfer to (1) accredited schools within their home district, (2) accredited schools in accredited districts located in the same or an adjoining county, (3) charter schools located in the same or an adjoining county, or (4) non-sectarian private schools.

·         Parents have until April 1 to notify the transfer authority of their intent to transfer.[32]

·         The transfer authority makes transfer assignments only if (1) in-district slots are not filled organically through student or parent choice, or (2) available slots in any schools are over-subscribed. If in-district slots are not filled organically, the authority “shall ensure in-district slots are filled first.”[33] After these slots are filled, the authority shall make assignments according to the following rules:[34]

o   First priority is given to students within the same household so that they all attend the same school;

o   Transfer authority may deny transfer to student who has been suspended more than once in most recent school year or who has been suspended for an act of school violence. A student denied transfer for this reason has the right to an in-person meeting with a representative of the transfer authority.

o   If sufficient enrollment slots are available, each student gets choice of three schools to which they may transfer;

o   To the extent possible, the authority shall fill in-district seats first.

o   Transfer authority discretion to make assignments only occurs if (1) in-district slots are not naturally filled, or (2) a receiving school’s slots are over-subscribed.

o   If sufficient slots are not available within the district, transfer authority shall consider the following factors, with student or parent choice being most important:

1.      Student or parent choice

2.      Best interests of the student

3.      Length of residence in the district

4.      Student academic performance

5.      Student free and reduced lunch status, and

6.      Distance and travel-time to receiving school.

What happens when a sending district becomes accredited?

New transfers stop when a sending district becomes accredited. To ensure continuity, the students who have already started at new schools may continue to attend those schools through high school graduation.[35] Students are best served when they can keep the peer groups and relationships with teachers and other school officials where they are doing well, rather than shuttling them back-and-forth between schools.

Is the non-sectarian option constitutional?

Yes. In 2007, the Missouri Supreme Court held that spending public moneys at St. Louis University did not violate Missouri’s establishment clause because the key question under Missouri’s constitution is “whether religion so pervades the atmosphere of the university that it is in essence under religious control or directed by a religious denomination. Mere affiliation with a religion does not indicate that a higher education institution is ‘controlled by a religious creed’ for purposes of Missouri’s establishment clause.” SLU v. Masonic Temple, 220 S.W.3d 721 (Mo. 2007). The House Committee Substitute keeps the Senate’s definition of non-sectarian school – that which is not part of the public school system, charges tuition, and “does not have a religious affiliation.”[36]

Does the non-sectarian option impact formula funds or accredited districts?

No. The non-sectarian option involves funds paid solely from the sending district’s operating levy in an amount not exceed the lesser of the non-sectarian school’s previous year’s tuition or 70 percent of the sending school’s tuition. As a result, this will have no impact on formula funding. Nor will it have any impact on accredited districts.[37]

Does the bill create three different systems of school classification?

No. The Senate bill created three systems by allowing charter schools to be accredited by their sponsors and setting no long-term accreditation standards for non-sectarian schools other than the North Central Association Commission on Accreditation and School Improvement. Amendments to the bill have been made or will be offered which subject charter schools and the transfer students attending private schools under this section to be subject to the same A.P.R. scores as traditional public schools.

[1] Proposed §160.011(9) at 3 contains main change. Other changes are spread throughout the bill.

[2] Proposed §160.041.1 at 3.

[3] Proposed §171.031.3 at 60.

[4] Proposed §162.1303 at 31-32.

[5] Proposed §163.172 at 38-39.

[6] Proposed §167.131 at 39-40.

[7] Proposed §168.205 at 57.

[8] Proposed §162.1250.3 at 30.

[9] Proposed §177.011 at 26-27.

[10] Proposed §164.432 at 40.

[11] Proposed §170.320 at 41-43.

[12] Proposed §161.086.3 at 24-25.

[13] Proposed §162.081.3(2)(a) at 26-27.

[14] Proposed §167.685 at 40.

[15] Proposed §167.730 at 41-43.

[16] Proposed §171.031.8-9 at 59-60.

[17] Proposed §160.400.3(7)-(9) at 5.

[18] Proposed §160.405.2(1) at 11.

[19] Proposed §160.405.3 at 12.

[20] Proposed §160.405.15 at 18.

[21] Proposed §160.408 at 18-19.

[22] Proposed §160.415.11 at 22.

[23] Proposed §160.417.6 at 24-25.

[24] Proposed §161.084 at 24.

[25] Proposed §167.825.5 at 43.

[26] The real-world application of transfer finances are reported in “Money Being Paid by Normandy, River Gardens to Other Districts Not Being Spent,” a February article in the Post-Dispatch by Elisa Crouch, who summarized, “There’s little dispute that transfer students have created new financial burdens for the districts now paid to serve them. Like all students, they require art supplies, desks, textbooks, and even paper towels. But with few exceptions, the new students have been absorbed into existing schools without the need of more teachers and new classrooms.”  Of the 11 districts that received more than 90 percent of the transfer students, only 4 actually added new teachers and staff. Ferguson-Florissant hired 10 new teachers to help with 440 transfer students. Francis Howell, Pattonville, and Clayton added support staff – including reading specialists, teacher’s aides, substitute teachers, and after-school supervisors. Mehlville and Kirkwood increased funding for after-school activity buses.

[27] Proposed §167.826.6 at 45.

[28] Proposed §167.826.3 at 44.

[29] As a result, students who attend accredited schools within unaccredited districts have the right to transfer. In addition, disconnecting transfer rights from actual attendance at an unaccredited school encourages what Sen. Maria Chappelle-Nadal has called “educational larceny” – an act where (1) parents take transfer rights by moving into the geographical boundaries of the district for the sole purpose of taking advantage of the transfer law or (2) parents with children who were already in private schools take advantage of the transfer law to send them to a neighboring accredited public school district.

[30] Proposed §167.826.1 at 43.

[31] Proposed §167.826.2 at 44.

[32] Proposed §167.827.3 at 46.

[33] Proposed §167.827.4 at 46-47.

[34] Proposed §167.827.4 at 46-47.

[35] Proposed §167.826.9 at 46.

[36] Proposed §167.848(5) at 56.

[37] Proposed §167.828.2 at 47.

Gov. Nixon’s Chicken Little Tax Show

Last week, the legislature passed a historic tax relief bill that would gradually reduce the tax rate paid by every Missourian. This week no surprise Gov. Nixon played Chicken Little in reply, trying to scare Missouriansinto thinking the tax cut was something it’s not.

As I detailed here last week, Senate Bill 509 gradually reduces the states top tax rate by a little more than 8 percent, and the tax rate for small business owners by 25 percent. This tax relief is phased-in with small annual reductions contingent on actual growth in state revenues. In addition, the bill adjusts our tax brackets for inflation and increases the personal exemption by $1,000 for married couples with less than $20,000 in annual income.

On Tuesday, Gov. Nixon claimed a sentence in the bill did something other than what the legislature has been debating for the past two years: reduce the top tax rate not to 5.5 percent but instead to zero.

Gov. Nixons Chicken Little-style interpretation is only possible if you read one sentence of the bill in complete isolation from the rest of it.  But after 16 years serving as our state governments top attorney, Gov. Nixon knows that courts dont interpret legislative language in isolation.

Instead, it’s long settled by the Missouri Supreme Court that the cardinal rule of statutory constructionis to determine the intent of the legislature by looking at a statute as a whole.  Courts must give words a reasonable reading rather than an absurd or strained reading.In addition, courts will not interpret some words in a statute in a way that renders other words meaningless.

Gov. Nixons reading of SB 509 is absurd. The first part of SB 509 enacts the tax cut through a series of modest reductions equal to only 1/60th of the total tax rate. These small reductions only occur if state general revenue grows by at least $150 million. For a court to accept Gov. Nixons interpretation, it would have to rule that the legislature intended to take nibbles out of the tax rate in the first four years, and then, in year five, swallow the whole cookie in a single bite. And that  the big bite on the last year happened without a single word of debate.

Gov. Nixons interpretation also renders other parts of SB 509 meaningless. Another part of SB 509 enacts additional tax relief for small business owners through a similar series of modest tax deductions. However, if, as Gov. Nixon alleges, income above $8,000 has a tax rate of zero, these deductions are meaningless because theres no actual additional tax relief for any small business owner who has income in excess of $10,666.

Gov. Nixons defenders point to a special interpretative rule that tax statutes be strictly construed against the taxman. But its not absolute. Theres only one cardinal ruleof statutory construction. As explained by the Missouri Supreme Court, the tax statute rule does not require that statutory language be ignored and not given meaning that reasonably accords with the apparent intention the legislature expressed in the statute.

For SB 509, the question is ultimately what the legislature meant by the phrase tax bracket.Gov. Nixons advocates argue tax bracketmeans a range of taxable incomes to which a particular tax rate applies.This definition presumes that there must be a tax rate above zero for there to be a tax bracket.But this definition is inconsistent with other Missouri statutes, case law, and the dictionary definition of bracket.

Gov. Nixons claim that language eliminating the top tax bracketactually means setting the rate to zero would not actually effectuate the intent because it would not, in fact, eliminate the top tax bracket.Instead of eliminating it, under Gov. Nixons absurd interpretation, SB 509 would change the rate.

For these reasons, Missouri courts would reject Gov. Nixons absurd interpretation of SB 509. Instead, the only reasonable interpretation of the bill is that it abolishes the administrative wall requiring separate treatment of income over $8,000 versus income over $9,000. It does so by equalizing treatment between the two and merging them into one.

If I believed there was any chance Missouri courts would accept Gov. Nixons histrionic claim, I would act as I have on the blatantly unconstitutional gun bill that continues through the General Assembly: Id vote no. But Gov. Nixons is not a reasonable interpretationits political theatre, a crisis manufactured to scare votes into his column for the looming veto override fight set for late next week.  

Gov. Nixon’s Absurd Reading of SB 509

Gov. Nixon announced Tuesday that SB 509 contains a “fatal flaw” which should prevent the legislature from overriding his pending veto of the bill. This flaw relates to language in proposed §143.011.2(4), which provides, “The bracket for income subject to the top rate of tax shall be eliminated once the top rate of tax has been reduced to five and one-half percent.”

Gov. Nixon reads this provision in isolation to argue that it eliminates all income taxes in Missouri for income above $8,000 per year once the gradual steps down to 5.5 percent are completed. In making this argument, Gov. Nixon is well-aware that this is not the intent of the General Assembly, and with 16 years of experience as the state’s top lawyer, he’s also well-aware that Missouri courts do not examine statutory provisions in isolation. Instead:

The cardinal rule of statutory construction is that the intention of the legislature in enacting the statute must be determined and the statute as a whole should be looked to in construing any part of it. Words are to be given their plain and ordinary meaning whenever possible. Where the words of a statute are capable of more than one meaning, the courts give the words a reasonable reading rather than an absurd or strained reading.” JS v. Beaird, 28 S.W.3d 875, 876 (Mo. banc. 2000).

“Each word, clause, sentence, and section of the statute will be given meaning, and (Missouri courts) will not interpret (a) statute in a way that renders some phrases mere surplusage.” Farish v. Mo. Dep’t of Corrections, 416 S.W.3d 793, 796 (Mo. 2013). “Consistent with these principles, a sentence should not be given meaning that thwarts a section; a clause should not undermine a sentence.” Middleton v. Mo. Dep’t of Corrections, 278 S.W.3d 193, 196 (Mo. banc. 2009).

In support of his interpretation, Gov. Nixon enlists a letter from Prof. Cynthia Block from Washington University School of Law in St. Louis. It is telling that neither Gov. Nixon nor Prof. Block mention the duty of Missouri courts to examine statute in context to avoid absurd readings and interpretations that render some provisions meaningless.  

How Nixon’s Interpretation Would Lead to Absurd Results and Render the Pass-through Tax Cut Meaningless

Where the words of a statute are capable of more than one meaning, the courts gives the words a reasonable reading rather than an absurd or strained reading.” JS v. Beaird, 28 S.W.3d 875, 876 (Mo. banc. 2000).

Putting proposed §143.011.2(4) in context illustrates how Gov. Nixon’s interpretation would lead to absurd results. First, the reductions are limited to “one-tenth of a percent” and “no more than one reduction shall occur in a calendar year.” See proposed §143.011.2(1).[1] Second, the reductions “shall only occur if the amount of net general revenue … (increases) by at least one hundred fifty million dollars.” See proposed §143.011.2(2).[2] Third, the other significant tax relief provision in the bill allows individual taxpayers who receive income from a pass-through business entity to deduct up to 25 percent of income received from the pass-through from their federal adjusted gross income. See proposed §143.022. It does so through the same measured stair-step approach as the reduction in individual income tax rates.

Nixon’s interpretation would require a Missouri court to examine the careful stair-step approach of §143.011.2 and conclude that, instead of intending to ensure that general revenue would not be starved from tax reductions, the legislature really intended to take a series of small nibbles at the top marginal tax rate followed by a gigantic bite. In the first four years, the court would find that the legislature intended to reduce the rate by 1/60th in careful steps, then suddenly, in year five, reduce the top rate by 56/60th’s. Taken in context, this is an absurd result.

·         Each word, clause, sentence, and section of the statute will be given meaning, and (Missouri courts) will not interpret (a) statute in a way that renders some phrases mere surplusage. Farish v. Mo. Dep’t of Corrections, (Mo. 2013).

Nixon’s interpretation would also require a court to conclude that the legislature enacted the second tax relief provision even though it would have no significance if income above $8,000 could not be taxed. If SB 509 is interpreted in the strained manner Nixon fears, there is no actual tax relief to any individual who receives pass-through income in excess of $10,666. Thus, Gov. Nixon’s strained interpretation would render proposed §143.022 meaningless for the vast majority of Missouri small business owners.

Prof. Block’s Letter Reveals the Only Reasonable Interpretation Consistent with Legislative Intent which Would Render the Entire Statute Logical and Give Effect to Every Part of SB 509

·         Where the words of a statute are capable of more than one meaning, the courts give the words a reasonable reading rather than an absurd or strained reading.” JS v. Beaird, 28 S.W.3d 875 (Mo. banc. 2000).

Prof. Block writes, “For tax purposes, the term ‘bracket’ has a technical meaning quite distinct from ‘rate.’ The former, represented by the left-hand column in most tax tables, refers to a specified range of taxable incomes to which a particular tax rate applies.” Under this interpretation, a tax bracket is only a category of income subject to some level of taxation. Thus, if the tax rate for a certain range of income levels is zero, according to Prof. Block, there is no “tax bracket.”

This definition, however, is inconsistent with another Missouri statute, case law, and the dictionary definition of “bracket.”  

Despite there being no direct definition of “tax bracket” in Missouri statutes, there is an implied definition. For the collection of sales taxes, §144.285 requires the director of revenue to “establish brackets, showing the amounts of tax to be collected on sales of specified amounts.”

A previous version of the sales tax statute set the first bracket as follows:

144.285. Brackets for collection of tax. – 1. In order to permit sellers required to collect and report the sales tax to collect the amount required to be reported and remitted, …,   the following brackets shall be applicable to all two percent taxable transactions: (1) On sales of less than twenty-five cents no tax shall be added.” Automatic Retailers of America, Inc. v. Morris, 386 S.W.2d 901 (Mo. 1965).

In Automatic Retailers, Missouri’s then Director of Revenue argued that this “zero bracket” for sales less than 25 cents was not actually a bracket with a zero tax rate. The Missouri Supreme Court rejected the argument, upholding the bracket of zero percent.

Contrary to Gov. Nixon, the only reasonable interpretation of the definition of “tax bracket” in SB 509 is that the phrase denotes an income point at which a different tax rate will be applied. Under this interpretation, creating a tax rate of zero for income above $8,000 does not eliminate the top tax bracket. Instead, it applies a different rate to the existing bracket. Under this reasonable interpretation, a court would reject Gov. Nixon’s interpretation of SB 509 as setting the top bracket to zero because that would not actually eliminate the bracket and effectuate the intent of the statute. Instead, it would merely change the rate for the top bracket.

This more reasonable interpretation is also consistent with the dictionary definition of “bracket” as “a section of a continuously numbered or graded series.” See Merriam-Webster’s Online Dictionary. The word “section” is defined as “one of the parts that form something.” See Merriam-Webster’s. It connotes the action of “cutting or separating by cutting” so as to show distinction with other parts. To “eliminate” the top tax bracket under this interpretation would be to tear down the wall of separation between the current top rate which would no longer exist and the new top rate.

Is the rule of statutory construction that tax laws should be construed strictly against the taxing entity iron-clad, or is it subject to other rules of statutory construction?

As the Missouri Supreme Court has explained, “Rules of statutory construction cannot be rigidly applied. Most often, for every rule suggesting one resolution, another rule exists that suggests the contrary. ” South Metropolitan Fire Protection District v. Lee’s Summit, 278 S.W.3d 659, 666 (Mo. 2009).

Although tax laws are to be strictly construed against a taxing entity, this rule is not iron-clad. Like other rules of statutory construction, the tax statute rule must give way to “the cardinal rule” of statutory construction” – that the intent of the legislature be determined by examining “the statute as a whole” and, where words of a statute “are capable of more than one meaning, the courts give the words a reasonable reading rather than an absurd or strained reading.” J.S. v. Beaird, 28 S.W.3d 875, 876 (Mo. banc. 2000).

“Taxing statutes should be construed strictly against the taxing authority unless a contrary legislative intent appears.” Union Electric v. Coale, 146 S.W.2d 631, 635 (Mo. 1941)(Interpreting statute against taxing entity.) Put another way, “[t]ax laws are to be construed strictly against the taxing authority; however that rule does not require that statutory language be ignored and not given meaning that reasonably accords with the apparent intention the legislature expressed in the statute.” L & R Distributing v. Department of Revenue, 648 S.W.2d 91, 95 (Mo. 1983) (Interpreting statute in favor of taxing entity.)

No rule of statutory construction is iron-clad save for “the cardinal rule” – that courts must give effect to the intent of the legislature. Regarding SB 509, it is clear that the intent of the legislature is not to make the tax rate zero for all income above $8,000, but instead to gradually reduce the top rate contingent upon economic growth and then adjust the brackets accordingly to remove the section divider currently placed at $9,000 of income.

[1] 2. (1) Beginning with the 2017 calendar year, the top rate of tax 27 under subsection 1 of this section may be reduced over a period of 28 years. Each reduction in the top rate of tax shall be by one-tenth of a 29 percent and no more than one reduction shall occur in a calendar 30 year. The top rate of tax shall not be reduced below five and one-half percent. Reductions in the rate of tax shall take effect on January first of a calendar year and such reduced rates shall continue in effect until the next reduction occurs.

[2] (2) A reduction in the rate of tax shall only occur if the amount of net general revenue collected in the previous fiscal year exceeds the highest amount of net general revenue collected in any of the three fiscal years prior to such fiscal year by at least one hundred fifty million dollars.

High Noon for Tax Relief

As the finish line for session approaches, the legislative process accelerates and members get more serious as they realize that time is short. But before we hit the gas, theres usually a slight pause.

By this time most of the big-ticket legislation has already crossed chambers, but isnt quite ready to be passed on the other side of the building. This week the Missouri House spent most of its time on “small” bills. These include bills dealing with non-profit food preparation, student assessments, water fluoridation, diabetes prevention, and intoxicating liquor on boats.

And we also passed two big bills. We sent a historic tax cut to Gov. Nixon, and we passed a constitutional amendment to increase early voting.

House Passes Historic Tax Cut for All Missourians

For the past decade, Missouri’s economic development approach was central planning. The focus has been on special subsidies for big businesses with the ability to hire lobbyists with access to the legislature and the ability to grease the skids at the Department of Economic Development. This approach works well for gubernatorial press conferences, but not job growth. The worst example of this was from this December when Gov. Jay Nixon asked – and the legislature delivered (but I voted no) – a $2.4 billion corporate tax subsidy offer to Boeing.

This week, the House resisted central planning style economic development. We pivoted from big businesses to every Missourian by sending Gov. Nixon legislation which would reduce taxes for everyone. Senate Bill 509 gradually reduces the states top tax rate by a little more than 8 percent, and the tax rate for small business owners by 25 percent. This tax relief is phased-in with small annual reductions contingent on actual growth in state revenues. In addition, the bill adjusts our tax brackets for inflation and increases the personal exemption by $1,000 for married couples with less than $20,000 in annual income.

I joined with 102 of my Republican colleagues to vote for the bill. Just one Democrat voted yes. Gov. Nixon has 15 days to sign the bill. Expect a veto – and a quick showdown. Because theres more than 15 days remaining, an override attempt will occur before the end of session. Its going to be close – really close. 

Early Voting Resolution Sent to Senate

On Wednesday, the House also passed legislation to increase opportunities for early voting. For statewide general elections, HJR 90 would open the polls three Saturdays before Election Day. The resolution passed by overwhelming bipartisan majorities.

Some Democrats criticized the bill because it didnt start voting early enough or have long enough hours. They would prefer voting to begin six weeks before Election Day – so they voted no. Their opposition is a prime example of people who allow perfect to be the enemy of good.

I would prefer Early Voting thats limited to just a week or two before traditional Election Day. Think of an election like a court case. Each campaign team gets months to make their case, and they expect to make their closing arguments in the last few weeks. We wouldnt want juries in a court case to decide before the parties could make their closing argument – so why should we short-circuit the democratic process?

Sen. Kehoes Small Business Unemployment Tax Protection Bill Advances

Senate Bill 673, sponsored by our own Sen. Mike Kehoe, made its way through the House Committee on Workforce Development this week. This bill protects small business owners by tying the length of unemployment benefits to the state unemployment rates. Unemployment benefits are intended to serve as a bridge to help people who lose work, through no fault of their own, to maintain an income for a reasonable time until they can find another job.

Under current law, the length of unemployment benefits is not tied to the economy. But if the purpose of unemployment is merely to provide a stopgap, so a person who has been laid-off can obtain new employment, then length of benefits should be tethered to the status of the economy.  

SB 673 provides for longer benefits in a rough economy and shorter benefits in a boom economy. In a bad economy, benefits will be available for nearly five months. In a great economy, they would be available for just over three months. This change will lower the costs of unemployment taxes for small businesses throughout the state because it ties a government benefit to its overall need.

I was honored that Sen. Kehoe asked me to carry this legislation in the House and look forward to getting the bill to Governor Nixon’s desk.

Why I Voted for Right-to-Work

This week the House considered right to worklegislation, which would ban contracts that require Missourians to join a union as a condition of employment.  I voted for RTW for three reasons: freedom of association, anti-trust balance, and economic growth.

Freedom of Association

As your state representative, my focus is protecting individual rights and empowering you to make your own choices so long as those choices dont intrude on the rights of others. I am naturally suspicious of the big” – whether it’s big government, big business, or big labor. And I generally oppose any regime that compels people to act when theyd rather not. 

Opponents often confuse or mischaracterize the concept of individualism. It is not a rejection of community. No man is an island, and community institutions are vital, not just to an individual’s sense of identity, but also to a free society: churches, labor unions, business groups – heck, even bowling leagues create a layer of society for accomplishing tasks that government cannot and should not try to accomplish.

A flourishing civil society distinguishes free from unfree societies. Consider: there were no business associations or labor unions in the Soviet Union or its satellites. In Poland, the labor movement helped  overthrow communism. But the key is freedom of association, not compelled association. RTW empowers the worker to freely associate for the obvious reason that it ensures no Missourian can be forced to join an organization as a condition of employment.


In the late 1800s, Congress passed anti-trust legislation to protect consumers and entrepreneurs by making unreasonable restraints on trade illegal. The theory behind anti-trust is that big organizations shouldnt be able to conspire to eliminate competition in the marketplace.

At the same time, the American labor movement was in its infancy, and workers lacked basic rights, including the right to freely associate.

In 1908, the United States Supreme Court held in Loewe v. Lawlor that federal anti-trust laws applied to the actions of labor unions. In a legal environment with no workplace safety standards, no minimum wage, and no child labor laws, anti-trust legislation made labors early difficulties even worse. In 1914, Congress acted accordingly and specifically exempted labor union activities from anti-trust laws.

By World War II, the pendulum had swung in the opposite direction. Despite the greatest battle for freedom in world history, which required huge increases in manufacturing, according to labor historian Jeremy Brecher, During the 44 months between Pearl Harbor and V-J Day, there were 14,471 strikes involving 6,774,000 strikers: more than during any period of comparable length in United States history.Strikes increased dramatically with war demobilization. They doubled in the first month after V-J Day, and then doubled again the next month.

In 1947, Congress passed the Taft-Hartley Act over the veto of President Truman to outlaw certain labor practices, empower the executive branch to stop strikes through injunctions, and allow states to pass RTW laws, outlawing closed-shop agreements. Despite his veto, Truman invoked Taft-Hartley 12 times to stop strikes.

Fortunately, the USA of 2014 is much better than that of 1914. Many of the contractual rights unions fought to win from employers are now codified in federal and state law, including but certainly not limited to minimum wages, safe workplace requirements, workerscompensation, child labor prohibitions, anti-discrimination protections, and prevailing wage. Moreover, while it was nearly impossible, if not illegal, to organize in 1914, the right to organize today is clear. Federal law prohibits employer interference with unionization drives.

Since Taft-Hartley passed, 24 states have passed RTW. The first wave of laws happened nearly immediately after passage. In recent years, RTW laws have passed in Michigan, Oklahoma, Indiana, and Idaho. By passing RTW, these states have essentially applied anti-trust principles to protect individual workers in the same way that consumers and entrepreneurs are protected.

Economic Growth

Mark Twain famously said there are lies, damn lies, and statistics.I feel the same way about most of the economic researchon RTW. Union-sponsored studies proveits Hades. Business-sponsored studies proveits Paradise. In these situations, I try to find research that is not tainted by the source of the funding.

Each side has its own irrefutable fact that it loves to cite as proof. Businesses cite the fact that RTW states have grown at significantly higher rates than non-RTW states. Unions counter that non-RTW states have lower average wages than RTW states. Both sides argue that their chosen result is caused by RTW status. However convenient, correlation shouldn’t be confused for causation.

Does RTW lead to higher rates of economic growth?  Very likely yes. Though some studies have come to the opposite conclusion, according to a senior economist at the Boston Fed, a veto-proof majority of serious studies find that the existence of a RTW law exerts a positive, statistically significant impact on economic activity.” 

The most interesting study on the topic was done in 1997 by Thomas Holmes of the Minneapolis Fed. Because of difficulty isolating the RTW variable to compare states with different policies, transportation systems, geographies, climates, histories, and cultures, Holmes examined RTW by comparing manufacturing in every county in the United States next to a border of a state with an opposing RTW policy. From 1947 to 1992, Holmes found that, in counties within 25 miles of a RTW border, manufacturing jobs increased one-third faster in RTW states than in non-RTW states.

Does RTW lead to lower wages? Very likely no. Even though states with RTW laws have indisputably lower wages than non-RTW states, it does not automatically follow that those lower wages are caused by the RTW law. One review of prior studies found that RTW laws have no impact on union wages, nonunion wages, or average wages in either the public or the private sector.William J. Moore, The Determinants and Effects of RTW Laws: A Review of Recent Literature,Journal of Labor Economics, Summer 1998.

Instead of RTW, there may be other factors causing the wage differential. For example, much depends on the starting point. Most RTW states had agricultural economies and were generally poorer than non-RTW states before adopting RTW. These RTW states started the relevant test period with significantly lower wages than the non-RTW states. As explained by Robert Reed, an economist at the University of Oklahoma, the economic past still casts a long shadow on the economic present.”  Reed conducted a study which attempted to account for these historical differences and found that, controlling for a states economic conditions at the time of adoption, average wages in RTW states were 8 percent higher as compared to wages in non-RTW states.

RTWs Likely Impact

In reality, both sides likely overstate their case. RTW is not the most important economic development bill being considered in our state capitol. Tax cuts, education reform, and Medicaid are all more important. But the economic research cited above suggests it will certainly help.

Nor is RTW a death knell for organized labor. Unions will still exist and will continue to work on behalf of its members. The jobs of union leaders will of course become more difficult because they will have to persuade members to join and stay. Without compulsory membership, union leaders will have to adjust to the reality faced by leaders of every other organization in a free society: they will have to convince their members that membership is an actual benefit worthy of their continued investment. 

Good unions will survive. Great ones will thrive. In Missouri, we already have RTW for public sector employees. Yet, these public sector unions still attract robust union rolls full of dues-paying members. These unions dont require compulsion to keep their members. Instead, they rely on promotion and persuasion based on effective leadership and representation.

And the end the individual will have the freedom to choose which organizations they join – a fundamental American value worthy of government protection.

Rep. Rory Ellinger: Man in the Arena

In honor of Rep. Rory Ellinger, the General Assembly and Gov. Nixon hurried HB 1320through the legislative process over the past two weeks. This common sense proposal excuses breastfeeding mothers from jury service. The speed with which it was passed was due to the declining health of Rep. Ellinger, who was recently diagnosed with cancer.

Rory and I are of different parties and opposite political philosophies. And we’ve probably spent more time debating each other on the House floor than any other members of the House. But ours has always been, I hope, a relationship of mutual respect and admiration.

Rory devotion to community improvement spans decades, beginning with his work in civil rights in the 1960s. In a building where comity and painstaking attention to detail are all too often lacking, Rory was a shining example of what a legislator should be.

As the most liberal Democrat in a Republican-controlled General Assembly, Rory realized he wasn’t going to win the big battles. But he also knew he could still make a difference. I served on five different committees with Rory. He was always prepared, always inquisitive, always seeking to improve legislation (even if he disagreed with the underlying premise), and always respectful of others – whether they were a legislator or witness with whom he agreed or disagreed.

When he served on the committee investigating Mamtek, some Democrats declined to ask tough questions, but not Rory. It was never about politics for him. It was about doing what was best for his constituents and the state of Missouri.

When we served on the Joint Committee on the Criminal Code, Rory showed up for every hearing on a nearly 1,000 page bill fully prepared and ready to dig into the details. As a tireless advocate, he pushed the committee to make more substantive changes in the law. When he was rebuffed, he persisted, he never let it dampen his spirits or diminish his support of the legislation. Instead, he continued to work to improve what was left in the bill.

Rory also knew he could improve our state by seeking out those nooks-and-crannies of the law where a small change might make a huge difference to someone. Then he worked to make it happen. HB 1320 is a perfect example of such a change. Rory identified a problem: breastfeeding mothers should not be required to serve on juries for days or weeks at a time away from their young children. Then he went about trying to fix it.

Another example, though I can’t recall the precise details: Rory had a bill to make a slight change to the composition of certain local government boards. It was non-controversial. As smart legislators do, Rory started looking for places to “hang” his bill as an amendment. Knowing a Republican would have a better chance getting his amendment on to a bill that made it to the governor’s desk, Rory sought  Republican help – and he targeted me. Then, with great patience and persistence, Rory went to work – asking at every reasonable opportunity if I’d put his amendment on several bills I was handling as a sponsor or as a committee chairman. It took probably half-a-dozen tries, but Rory finally won. I relented and took on his bill.

His work was not always in committee or side conversations. Rory was also a frequent debater on the House floor. Typically, a keen observer can accurately predict the result of any vote in the House before it’s ever taken. On big issues (pro-life, tax cuts, budget battles), most legislators know exactly where they stand – and its easy to predict how they’ll vote.

On smaller issues, though, it’s open season. With 100 things going on at any one time, it’s difficult on small bills to marshal the attention of the entire body. While debate occurs, there are other legislators preparing  their own legislation, meeting with constituents, negotiating with other legislators, or any one of dozens of other duties that go into being a state representative.

The most interesting debates tend to unfold on these small bills where things are less predictable. Rory was ready to debate any issue. And though he never rose to speak for the purpose of scoring political points or to see his name in print, he often managed both because his remarks were sincere.

That’s not to say Rory didn’t garner his share of eye rolls or “what is he doing?” moments on the House floor. Rory never quite distinguished between the proper procedure and honorifics of the courtroom versus those of the legislature. He oft referred to the Speaker as “your Honor.” When he rose to make a point-of-order, he sometimes couched it as “an objection.” And he often confused the proper protocol to even start a debate.

But once he reached the substance of an issue, the procedural confusion vanished. I was amazed in our second year in the House together when Rory nearly killed one of these small bills all by himself. As was typical of Rory, his defense that day was on behalf of a group with little political power and not many elected officials willing to fight for them – the surviving family members of prisoners who commit suicide while in jail.

The bill had passed out of committee without much controversy. No one expected much debate on the floor. Then Rory made his case. Fighting against distractions and the general inertia which gives every bill being debated a natural advantage, Rory made headway. He changed my mind on the bill. He must have changed dozens of minds on the bill. By the time he was finished speaking, people were talking, “Can you believe this? This bill’s in serious trouble.”

Before a bill leaves the House, there are at least two votes. There’s a vote on perfection, and a vote on third read. The third read requires 82 votes to move to the Senate. The perfection vote simply requires a majority of the people present for the day. But the majority party almost never wants a bill to pass on perfection with less than the 82 votes required to pass on third read. The logic is that you want to KNOW the votes are there for the next step, not just assume they’ll be there.

A roll call vote was requested, and as the big board opened for voting, just as many reds lit up as green. When the unexpected happens in a vote in the House, it’s fascinating to watch the reactions. Here we had what everyone thought was a non-controversial bill – and Rep. Rory Ellinger pushed it to the precipice of death with nothing more than logic and sincerity.

Republican bills, however, don’t die easily on the House floor. Rory had made a valiant effort, but the necessary votes were whipped up to move the bill along. By a vote of 74-70, well shy of 82, the bill advanced. Normally, the third read vote happens the legislative day after the perfection vote. But clearly, there was a problem with this bill that would require some whipping. We finally went back to it a week later, and it passed with 86 votes.

Rory may have lost those votes, but he won in the end. The bill never made it to the Senate floor for debate and never became law. Of course, this is the type of thing that’s rarely reported. It was a small bill, and there were countless other things happening in the Capitol on that day. But Rory proved, for at least that bill, old-fashioned debate still mattered.

I will always remember and appreciate Rory and his friendly fighting spirit.

Injecting Market Forces Into Missouri’s Health Care Welfare System

Imagine going to a grocery store where there are no prices on the food and the government has told you that it will pay for whatever you or the clerk think you need. How much restraint would you exercise? How much restraint would you expect the clerk to exercise? Most of us like to think that we’d do the right thing, and I believe most people would. But, as Madison pointed out, “If men were angels, no government would be necessary.” 

Incredibly, in many parts of our state (and nation), Medicaid operates on a fee-for-service basis similar in concept to the absurd thought experiment outlined above. A Medicaid recipient who has no money presents at a health care provider for services. The recipient pays no co-pay – or only a nominal amount. And at no point does price ever matter.  And then they send the bill to you, the taxpayer. It’s all gas, no brakes.

By contrast, in the I-70 corridor, recipients are covered by managed care plans which operate similarly to private health insurance plans. They inject a level of oversight into Medicaid transactions to protect taxpayers from wasteful and, in some cases, fraudulent health care claims. The I-70 corridor managed care plans have proven to be more affordable to Missouri taxpayers without sacrificing quality for recipients.

But Medicaid-managed care needs reform as well. Under the current system, managed care companies do not compete directly on price. Instead, the Department of Social Services names its price and asks the managed care companies to match it. Though DSS engages a top-flight actuarial firm to set its price, the more efficient approach would be to allow free market forces to establish the price, versus the decision of a single firm. If the price is too low, managed care companies will let DSS know and no bids will be received. If, however, the price is too high, no managed care company is going to tell DSS they’ve priced the bid wrong. Instead, they’ll be happy to pocket higher profits off of Missouri taxpayers.

Nor are recipients in the current managed care corridor given financial incentives to use taxpayer resources wisely. Because recipients have only limited financial resources, there are no penalties for misuse of the ER. Likewise, there are no bonuses for healthy or appropriate behaviors.

For the last two years, I’ve worked with many elected officials, health care providers, and ordinary citizens to develop a better plan for Missouri’s Medicaid system. House Bill 1901, sponsored by Rep. Noel Torpey, is one result of that work, and the House Committee on Government Oversight and Accountability has spent three weeks hearing the bill. To inject market forces into Missouri’s Medicaid system, House Bill 1901 would:

  • Eliminate fee-for-service and expand managed care statewide;
  • Require actual price competition in the bidding process for managed care companies;
  • Foster competition by allowing networks of health care providers to form Accountable Care Organizations to compete with more traditional managed care companies;
  • Turn recipients into participants by empowering them to choose their own health plan based on cost and services;
  • Encourage participants to choose low-cost plans by offering financial incentives for them to select the most affordable option. Just as you and I have financial incentives to choose more affordable health insurance plans, so should Medicaid participants.
  • Provide participants with a state-funded cost-sharing card that the participant must use each time they receive a health care service. To encourage healthy behaviors, if the participants use care efficiently and go to preventive care appointments, they should be rewarded. If they misuse the ER, they should be penalized.

House Bill 1901 is similar to previous proposals by stalwart conservatives like former Gov. Matt Blunt, Texas Gov. Rick Perry, and former Indiana Gov. Mitch Daniels – each of whom proposed increasing Medicaid eligibility far beyond what is contemplated in HB 1901. If passed, this market-based Medicaid plan could serve as a conservative model for the rest of the country on how to inject market forces into the system to save taxpayer money and improve the quality of care.

If we could turn the clock back to 2007, I believe HB 1901 would be considered a leading conservative alternative to ObamaCare. It extends health care coverage to the working poor who otherwise can’t  afford private health insurance. This can save money over the long-term.  I believe ideas still matter, regardless of political labels people try to affix to them, and I’m hopeful that HB 1901’s conservative plan for Missouri Medicaid will be passed into law.

How to Change State Policy – The Committee Investigation Way

As chairman of the House Committee on Government Oversight and Accountability, I’ve lead several investigations into wasteful or misguided state government programs. 

The committee was formed in 2011 to investigate the Mamtek debacle in Moberly. After a series of hearings and proposed legislation, which a blogger from Bloomberg News called the “one bright spot in this whole sad tale,” many of the committee’s recommendations were adopted by the Department of Economic Development through administrative rules.

Ever since, the committee has worked to (1) ensure the State Board of Education detects and deters cheating on statewide assessments, (2) protect the privacy of your personal information you share with the Department of Revenue, including conceal-carry permit information, and (3) protect welfare reform by persuading the Department of Social Services to cancel a contract which paid a per person bounty for every Missourian it signed up for permanent disability benefits.

In each instance, the committee made a positive impact on state law without even passing a bill. Instead, we identified a problem and worked with the relevant state agency to change state policies going forward.

Last summer, after a series of startling pieces of investigative journalism by Jeremy Kohler of the St. Louis Post-Dispatch, it appeared the committee would need to hold a series of hearings on Brownfield Tax Credits – incentives designed to help developers renovate properties with major environmental problems. Kohler’s reporting exposed a series of Brownfield projects for which it appeared that the property developer had fixed bidding processes to increase costs to Missouri taxpayers.

News coverage suggested there was a major transparency problem in the program. All of the issues raised could have been solved if Brownfield tax credit developers were required to bid and complete Brownfield projects with procedures as open to public scrutiny and competitive bidding as ordinary government spending.

In late June, I sent document requests to the state agencies charged with implementing the Brownfield tax credit program. After some preliminary discussions, I informed the decision-makers at the agencies that I believed the biggest problem was a lack of transparency and that legislation would be necessary to subject Brownfield tax credits to the same system of open bidding as occurs in typical government spending. Also, after reviewing the statutes creating the Brownfield tax credits, I was convinced that a new statute was unnecessary because the Department of Economic Development already had the authority to require public bidding by administrative rule.

Thanks to DED, I received word that it would begin the process of promulgating administrative rules to ensure more open and accountable Brownfield bids. But complicated administrative rules don’t just happen overnight. They took six months here.But on March 17, those new rules appeared in the Missouri Register.  These new rules require Brownfield developers to submit preliminary cost estimates prepared by independent, licensed architects or engineers, and to publiclybid all purchases of goods and services over $25,000. As a result, taxpayers will receive better protection against any potential misuse of Brownfield tax credit proceeds.

In grade school, we learn how a bill becomes a law. We watch the classic School House Rock video “I’m Just a Bill” and think of lawmaking as a somewhat orderly process. In practice, the orderly process is the exception. The simple bill can be killed about 40 different ways. The most common death is quiet and natural, caused by a legislative calendar that doesn’t leave enough time to pass every bill worth passing.

In fact, most new laws or state government policies come about through one of two alternative methods. It can become “law” either: (1) through a new or changed administrative rule or practice, as was the case with many of the examples cited in this article, or (2) via amendment to the old-fashioned bill, a process I’ll describe in a later column, which is a little more complicated and free-wheeling than you might think based on your grade school civics lessons.

As your state representative, I’ve used the opportunity as chair of the House’s investigatory committee to improve state policies by working with state departments to fix them without the need for legislation. It’s not ever easy. And it doesn’t work for everything. But, when we’ve had the opportunity to improve state policy for the better through cooperation rather than legislation, our committee has taken it.

Health Care Price Transparency and Reducing Misuse of the ER

Free markets improve quality and reduce prices. But, to work optimally, they require certain pre-conditions. To work properly, markets can’t conceal prices. They can’t insulate consumers from the costs of their decisions. And they can’t have buyers who are ignorant of the appropriate places to receive services because they are disconnected from the consequences of their consumption decisions. Unfortunately, such is the condition of our health care markets.  We have opaque pricing, third-party purchasers, and, in Medicaid, a lack of health care literacy by recipients who needlessly crowd our emergency rooms.

Last Monday, the House Committee on Government Oversight and Accountability started hearings on House Bill 1901, the Medicaid bill sponsored by Rep. Torpey which I have co-sponsored. Our first hearing focused on these (and other) problems.

Ensuring Health Care Pricing Transparency

We’ve all been there. You or someone you love has a serious medical treatment. You’re thankful to have received good medical care. But you didn’t ask many questions about costs. In fact, had you asked, you likely wouldn’t have received a clear answer. Then you get the bill – and you’re shocked at some of the prices.

As explained by Steven Brill in Bitter Pill: Why Medical Bills are Killing Us, “When you look at the bills that … patients receive, you see nothing rational – no rhyme or reason – about the costs they faced in a marketplace they enter through no choice of their own. The only constant is the sticker shock for the patients who are asked to pay.” Brill’s article presents a compelling case for serious payment reform.  He adds, “There is little patient pushback against higher costs … because the customer getting the treatment is either not going to pay for it or not going to know the price until after the fact.”

HB 1901 attacks sticker shock by requiring health care providers to give accurate pricing information upfront. This simple provision merely requires providers to inform the consumer of the estimated costs of the health care services they are seeking. It follows a provision we added to state law last year which requires health insurance companies to provide policy-holders with accurate information on out-of-pocket costs associated with receiving medical treatments.

Cutting Down on Misuse of the Emergency Room

Another serious flaw in health care markets is that third-parties pay most of the bills. This is necessary for the largest health care bills  - the very purpose of insurance is to guard against catastrophic economic loss) –  but we still ought to mitigate the third-party payer effect.

This problem is most pronounced for Medicaid-paid emergency room visits. Though HB 1901 imposes reasonable cost-sharing on recipients, you can’t require someone to pay money that they do not have. Someone who incurs no cost to receive care in the ER is more likely to seek care there even when it’s not appropriate.

HB 1901 is designed to reduce misuse of the ER by expanding managed care statewide, providing recipients with pre-paid medical debit cards to give them “skin in the game,” and requiring reasonable cost-sharing by healthy Medicaid recipients. Federal rules, however, prohibit requiring Medicaid recipients with serious ailments from being required to be covered through managed care plans. As a result, we must do more.

Randy Jotte, an emergency room physician at BJC, testified that the top one percent of government-funded ER users in the St. Louis region averaged more than 15 ER visits per year.  These 1,088 ER super-utilizers cost Missouri taxpayers $112,000 each per year, at a total cost of $122 million. To curtail waste and abuse of Medicaid, we  must reduce these numbers.

HB 1901 attacks ER misuse. It requires DSS to incentivize the construction of urgent care clinics that operate outside of normal business hours adjacent to hospital emergency rooms. It also requires DSS to (1) identify ER “super-utilizers” – defined as those who present more than 10 times in a single year at an ER, (2) educate them about appropriate places to seek care, and (3) coordinate their care to prevent the flare-ups which cause them to go to the ER.  This second provision is modeled after work already started at Truman Medical Center in Kansas City and being implemented at BJC. In Kansas City, the program has saved millions of dollars for taxpayers.  HB 1901 would adopt these successful models statewide.

No More M.A.D. with Kansas

Missouri and Kansas have a long history of competition – and worse. In the 1860s, we fought in the Civil War. We used to compete in sports every year, until KU chickened out when Mizzou moved to the SEC. And, for the past decade, we’ve battled to lure jobs across the border by dangling so-called jobs tax credits.

In the past four years, Missouri and Kansas have collectively doled out $217 million in corporate subsidies to seduce Kansas City area businesses to shuffle jobs across state lines, but fail to add any new jobs to the region. In these years, Kansas has spent $141 million to entice the re-location of 3,433 jobs from Missouri, and Missouri has spent $76 million to lure 2,929 jobs from Kansas – for a net difference of 504 jobs at $430,000 per job. However large, these numbers still fail to take any “retention” tax credits into account to theoretically keep a company from moving jobs elsewhere.

Unfortunately, rather than create a long-term low tax climate for all entrepreneurs and families, these corporate subsidies only provide special benefits to the privileged few big enough to be aware of the benefits and savvy enough to work the system. Both states shuffle the cards around, hold celebratory gubernatorial press conferences, and pretend as if real economic growth is occurring.

In the era of a 24-hour news cycle, these perpetual press releases touting corporate subsidies create the appearance of success. These results prove that our economic development border war is not leading either state to prosperity. Instead of improving our economy, the border war paves a path of mutually assured destruction.

Both states give hard-earned taxpayer dollars to businesses to move just a few miles. Their employees probably never move. They don’t start shopping in new places. They don’t generate new economic activity for the region. The only change is the address from which they operate.

This is insane economic policy. And it illustrates the fundamental problem with our so-called jobs tax credits: they don’t actually create new jobs, especially when the subsidies are spent in competition with Kansas.

House Bill 1646, sponsored by Speaker Tim Jones (R-Eureka), directs the Governor and the Department of Economic Development to negotiate a corporate subsidy ceasefire with Kansas for the nine combined border counties in the Kansas City metro area. It tells Kansas that we’re willing to work for the greater benefit of the entire Kansas City region, but we’re not going to unilaterally disarm. If Kansas passes a similar law, we’ll call a truce.

This limited bill enjoys broad support in the legislature. As one who is skeptical of the entire corporate subsidy shell game, I’m hopeful that it’s the first of many steps to re-examine our economic development policy. Going forward, we should pursue an interstate compact with several other states to shift the focus away from specialized giveaways and back to lower taxes for everyone.