Author Archives: jaybarnes5

How Government Regulation Kills Innovation – Uber Edition

Government works best when it determines the rules of the road, not the composition of the traffic. That’s the pithy libertarian case for less regulation, first formulated by law professor Richard Epstein. Government should make simple rules that apply to everyone  – not micro-manage industries or pick winners and losers.

When most people hear of “over-regulation,” they tend to think of the EPA or another federal agency strangling an industry with red tape. In this critical view of regulation, it’s bureaucrats versus businesses.  But in reality, some of regulation’s most insidious effects arise from entrenched business interests that use the regulatory process to stifle competition.

For example, entrenched businesses may benefit from expensive new regulations precisely because the cost makes it more difficult for upstarts or smaller companies to compete. Dodd-Frank is the best recent example. Passed in the wake of the financial meltdown to allegedly crackdown on Wall Street, the law has instead helped big Wall Street banks consolidate market-share.

According to Marshall Lux and Robert Greene of Harvard’s Kennedy School of Government, since Dodd-Frank, the market-share held by community banks has declined rapidly. Between 2006 and 2010, community banks shrank by six percent. Since Dodd-Frank passed in 2010, community banks have declined by more than 12 percent. The authors explain that Dodd-Frank gutted small banks by “piling up regulatory costs on institutions that neither pose systemic risks nor have the diversified businesses to support such costs.” As one North Carolina banker quoted by the authors explained, “When they created ‘too big to fail,’ they also created ‘too small to succeed.’”

This phenomenon is perhaps even more prevalent at the state and local level. At these lower levels of government, thousands of regulatory licensing boards both police industries and act as a roadblock to new competition or new business models.

Take upstart Uber as an example. Uber is an app-based transportation company that allows consumers around the world to find drivers willing to give them a ride. Uber users download an app. When you’re ready for a ride, you ask the app to find the nearest Uber-approved driver. Your driver shows up and off you go.

Uber is easier and often less expensive than hailing a cab. No surprise then – consumers love it and traditional cab companies don’t. So, like any other industry facing an existential threat to its existing business model, cab companies and drivers are fighting back. In Illinois, they convinced the legislature to enact more expensive standards for cab companies. In Portland, city officials sued to prevent Uber from operating until it acquired expensive permits for every driver. In Nevada, Uber was forced to shut-down. 

The anti-competitive fever may be highest in St. Louis, where a Metropolitan Taxicab Commission controlled by existing operators has the power to disapprove of new competitors for any reason it deems fit – including unwanted competition. Three members of this Cab Cabal own companies that are supposed to be regulated by the commission. Worse, in a rule that would be more appropriate for Chinese-style capitalism, new operators in St. Louis must first apply to the Cabal for a “certificate of convenience and necessity.” In turn, the Cabal has the “power to issue or refuse any Certificate as the public welfare, convenience or necessity may require.” The Cabal can even turn down an application because it doesn’t like the color scheme of the applicant’s vehicles.

If Uber had not tried to enter the market in St. Louis, this ridiculous cabal might have continued without significant challenge. But now that it has – and been denied, people are taking notice. Thousands of would-be small business owners have requested information from Uber on how to become a driver in Missouri, only to be thwarted by the taxi cab cabal. Even more consumers have sent Uber inquiries asking when the app will be available for use in the 19th largest metropolitan market in the country.

The St. Louis taxi cabal won’t budge, so state legislators are taking action. Along with State Senator Kurt Schaefer (R-Columbia), I filed legislation to bypass the cabal by creating a state-wide licensing process for companies like Uber. House Bill 792 would require “transportation network companies” to conduct background checks on drivers and carry adequate insurance.

Missouri consumers and entrepreneurs shouldn’t have to kiss the rings of the Metropolitan Taxicab Commission to freely engage in a simple market transaction.  Existing cab companies should not have the legal authority to kill new competition for any reason – let alone color scheme or a requirement that the new competitor show a “need” for a new company. Instead, any licensing regime should prescribe simple rules of the road, but not seek to determine or limit the composition of the traffic. 

Ethics Bills Moving

On Monday, the House Committee on Oversight and Accountability will hear seven ethics bills, including four of my own. In addition, I expect that the Senate will move quickly on a broad ethics bill sponsored by Sen. Ron Richard. These are just the latest in a series of action that have begun to improve the ethics climate in the capitol. When we adopted our Rules, we put an end to “issues” committee which were often used so legislators could eat for free without being individually reported. On Wednesday, Speaker John Diehl appropriately banned off-site committee meetings during session. It’s my hope that these are just the first in several changes on the way.

General Assembly Rejects Politician Pay Increases

On Thursday, the Senate approved my resolution formally rejecting the proposed politician pay increase proposed by the Citizen’s Commission on Compensation for Elected Officials. To do so, they had to overcome opposition from two Democratic senators who threatened a filibuster. Much credit goes to Sen. Rob Schaaf (R-St. Joseph), who handled the resolution, and to Sens. Mike Kehoe, Jeannie Riddle, and Kurt Schaefer from mid-Missouri.

In the Senate, filibusters kill more bills than actual votes. When the resolution came back up for debate Thursday, Sen. Schaaf noted there was opposition and announced he had a motion to shut off debate on his desk that any senator could sign. I wasn’t there, but it’s been reported to me that Sen. Kehoe immediately marched over to Sen. Schaaf’s desk to sign the motion.

It wasn’t much later that the Senate formally voted to reject the politician pay raises. I’m pleased that the Senate did the right thing. Keeping legislator pay modest helps ensure a citizen government, and there is no case to be made for increasing legislator salaries when they’re already sixteenth highest in the nation while our state employees are the worst-paid.

No New Stadium Debt Without Public Debate

Rome had its gladiators and the Coliseum. American states and local governments have taxpayer-funded NFL stadiums. Since 1992, you’ve been paying for the Rams stadium in St. Louis. Under legislation passed in 1991, Missouri taxpayers have paid $12 million per year to pay for construction of the Rams existing stadium. That obligation will continue until 2022.

When the state and local governments initially negotiated a 30 year lease with the Rams, it gave the team the right to end the lease if the dome was not in the top 25 percent of NFL stadiums. Because of an NFL building spree, the Edward Jones Dome is no longer a top tier facility. In 2012, Rams owner Stan Kroenke started negotiations with St. Louis officials to improve the dome, and dropped not-so-subtle hints that he was looking westward.

Late last year, it was disclosed that Kroenke bought a sizable chunk of land in southern California and was working on plans to build a stadium there. Around the same time, Gov. Nixon asked a two-man task force to develop a plan to keep the Rams in St. Louis. That plan was released on January 9 and required up to $350 million in new public moneys to fund a new stadium. So far, Gov. Nixon’s been mum on how that public financing might work.

On Tuesday, the House Appropriations Committee for General Administration met to take budget testimony from officials in Gov. Nixon’s administration regarding public debt. I started the hearing with a $350 million question: does Gov. Nixon believe he has the legal authority to burden Missouri taxpayers with up to $350 million in new debt to finance a new stadium for the St. Louis Rams without any action of the General Assembly or a public vote?

Gov. Nixon’s position is that he has legal authority, based on a 24 year old statute to unilaterally saddle you with more than a quarter billion dollars in new debt for a brand-new stadium that our children’s children would likely still be paying off 37 years from now.

Potential bond buyer beware: if the Nixon administration attempts to bind Missouri taxpayers with new debt without any legislative action, litigation challenging the bonds is quite likely. Any such bonds should be branded with an asterisk – *subject to litigation.

Forget the legalities for a minute though, and just consider the policy. If Gov. Nixon believes it’s a wise investment of taxpayer money, he ought to present a plan to the General Assembly. A quarter billion dollars over 30 years is real money. It deserves a public hearing, and action should not be taken unless Gov. Nixon can gain the support of the people’s elected Representatives and Senators in the General Assembly.

I’m highly skeptical of any stadium-funding proposal. On a philosophical level, stadium financing is not an appropriate role for government. This is not Rome. The NFL is a private business run by billionaires. Where we have it, welfare ought to be limited to those who are poor and deserving, not doled out to the wealthy or indolent.

As for return-on-investment, every economic study I’ve ever seen shows that these “investments” rarely, if ever, pay off for local governments. Ironically, if you consider income tax revenue from St. Louis Rams employees and visiting NFL players, a deal for the Rams may actually make more economic sense than the Boeing giveaway. But regardless of my opinion or the precise ROI calculations, at the very least, taxpayers deserve a greater say in what happens next.

The $350 Million Question

Speech Week at the Capitol

State of the State

The Missouri Constitution mandates that the legislature do three things every year: pass a budget and listen to both the governor and the Chief Justice of the Missouri Supreme Court gives speeches. That’s all the constitution requires. This week, we knocked out two of the three.

On Wednesday night, Gov. Nixon gave his seventh State of the State address. His reception was polite, but cold. And his speech was long on rhetoric, but short on details. 

He said the legislature should strongly consider toll roads and raising the gas tax to solve a transportation funding shortfall. But he stopped short of explicitly endorsing either. (I’m a yes on tolls and a no on raising the gas tax.)

He called education the “great equalizer” (it is) and asked the legislature to deliver a “clean” transfer bill to his desk. In this case, “clean” is a euphemism for something that passes his ideological litmus test. This was probably the most awkward moment of the speech. When he expressed confidence that the legislature would pass a “clean” bill to his desk, Gov. Nixon was met with silence.

Last year, a bi-partisan, cross-regional coalition of lawmakers endured months of long nights and tense negotiations to put an education reform bill on Gov. Nixon’s desk. We debated big issues and haggled over minutiae. We laughed and swore. Finally, we passed a bill with a veto proof majority in the Senate and a large majority in the House. Meanwhile, Gov. Nixon never offered a plan. His only engagement was with his veto pen. To his credit, however, Gov. Nixon has already engaged legislative leaders on the transfer issue this year. But after his long self-imposed absence, he cannot reasonably expect appreciation.

Gov. Nixon later called for ethics reform, agreeing with my earlier comments that Missouri has the weakest ethics laws in the country. But again, he failed to offer any details.

Finally, in the strangest part of the speech, Gov. Nixon stopped just short of declaring war on Kansas, which has proposed a 360-mile aqueduct to steal our water from the Missouri River. I doubt there’s any member of the General Assembly who wants Kansas to steal our vital resources. But what’s the action item for the General Assembly? We can’t tell Kansas what to do any more than Kansas can tell us what to do. The battleground likely will be with the Army Corps of Engineers, Congress, or, if necessary, the Supreme Court. But other than beating our chests and passing non-binding resolutions, there’s not much the Missouri legislature can do.

Disappointed with Proposed State Budget

After modest pay increases in three of the last four years, Gov. Nixon did not propose a pay increase for state employees in this year’s budget. This is disappointing. There are other budget items that should be lower priority. One example – an apparent plan to spend $70 million on water infrastructure that would be more appropriate to be borne by ratepayers in the affected areas rather than general taxpayers. On the bright side, health insurance premiums for state employees will not increase. While other Missourians have suffered from rising health insurance costs due to Obamacare, the state budget has consistently held state employees harmless – and Gov. Nixon’s budget proposal continues the practice.

With pay raises absent from the initial proposal, it will be very difficult to get them in the budget at the end – and, of course, they’d be subject to line-item veto. Nevertheless, I will try and am confident that other representatives and senators from mid-Missouri will as well.

State of the Judiciary

On Thursday, Chief Justice Mary Russell delivered the annual State of the Judiciary address. She began her speech with a short note about the crucial role that the right to trial by jury plays (and has always played) in our constitutional republic. It is a right which traces all the way back to the Magna Carta. It was a right cited as a reason for severing ties with England in the Declaration of Independence (“For depriving us in many cases of the benefits of Trial by Jury.”) And it’s a right present in both our federal and state constitutions.

The State of the Judiciary, however, is much different from the State of the State. It’s not appropriate for a judge to opine on the political issues of the day. By necessity then, the speech is limited to extolling general principles of law and explaining how Missouri courts are improving processes and procedures.

Judge Russell’s reception was warm and welcoming. Her “undercover judge” work over the past year has endeared her to legislators and Missourians who appreciate her willingness to personally examine the real-world work of Missouri courts. Her attitude and accessibility is a great example for other judges and for all public officials. 

No to Politician Pay Raise Resolution Advances 

On Tuesday, the House approved the resolution I sponsored to reject the proposed politician pay raises recommended by the Citizen’s Commission on Elected Official Pay. The final vote was 135 to 13. It now moves to the Senate for consideration, and will be heard by the Senate Committee on Rules Tuesday morning.

Committee Assignments, Politician Pay Increases, and Legislation 101

Committee Assignments

On Tuesday, Speaker John Diehl announced appointments for committee chairmanships. I’m pleased to report that I was re-appointed as chairman of the House Committee on Government Oversight and Accountability. As chairman of this committee for the last four years, starting with the Mamtek debacle, we have investigated waste, fraud, and abuse in state government. We’ve also debated and passed substantive bills arising from those investigations.  The committee’s investigations have typically been reactive. In this session, I intend for the committee to take more pro-active role. In coming weeks, I will write more about what this will mean.

I have also been appointed to the House Committees on Ethics, Consumer Affairs, and Appropriations for General Administration.

Politician Pay Raise Refusal Advances

On Wednesday, the House Rules Committee heard and approved HCR 4, a resolution I sponsored that rejects the politician pay raises recommended by the Citizens’ Commission on Compensation for Elected Officials. In December, the Commission recommended a $4,000 or 11 percent raise for state legislators, and eight to ten percent raises for statewide elected officials.

Over the past four years, state employees have received steady (but small) pay increases. We still rank near the very bottom of state employee pay for the entire country. By stark contrast, Missouri legislators already enjoy the 16th highest salaries in the country.

Serving in elected office is an incredible honor. We don’t need to increase the salaries. I anticipate that the House will take up and pass HCR 4 next week as our first substantive act of the new legislative session.

Bill Success Rate – Legislation 101

Last Sunday, the News-Tribune ran an informative piece on the role that filing actual legislation plays in a legislator’s job. It was interesting to see the sidebar chart showing my legislative filing and “success” rate. According to the chart, I’ve sponsored 71 bills, of which three have passed.

The article rightly explained that whether a particular bill passes   does not, alone, indicate whether a legislator was successful in filing the bill.  With 163 House members and 34 senators, no single member of the General Assembly (except the House budget chair) is able to pass more than a handful of bills in any session. So, why file more than a few bills? Simple – there’s more than one way to change the law.

You can, of course, pass the bill itself. More likely, however, you attach the bill as an amendment to another bill that’s moving. Or, you handle a Senate version of a similar – or identical – bill that passes. If you have an idea for legislation but do not file an actual bill, your chances of success in adding it as an amendment are greatly diminished. The committee process vets an idea.

Most bills I have sponsored were not filed with the intention of pushing that particular bill number to become law. I’m not driven by the “glory” of getting my name on a bill that I can hang on the wall. My objective is improving our state. I file these bills to secure a hearing, and a positive vote on the bill from the committee.

Armed with that committee vote, I later attach the bill as an amendment to a different bill.  The floor speech follows a template, “This amendment would improve our state by (describe what it does). And, Mr. Speaker, I must note, it is identical to a bill I filed that was passed by a wide, bi-partisan margin in committee.” The second sentence eases the path to adoption. And you never get to say it unless you go through the process of filing the bill, requesting a hearing, testifying on it, and then urging the committee chairman to pass it.

I reviewed the bills I’ve sponsored and tallied the number that were incorporated as amendments to other bills. Together with the three bills that became law on their own, I counted 21 bills that became law through amendments. For example, House Bill 1208 from 2012 would have prohibited rapists from using child custody cases as leverage against their victims. That particular bill did not pass by itself but was included as an amendment in House Bill 1256, which did become law.

Amendments are also occasionally offered that weren’t proposed as bills. My favorite example comes from 2012 when I offered an amendment to Senate Bill 749 that requires insurers to inform consumers if coverage for surgical abortions were added to their insurance plans and allow pro-life Missourians to exclude such coverage from their own plans. The Catholic Conference dubbed it “the Barnes amendment” and it became law to give pro-life Missourians the right to choose whether they would pay for someone else’s abortion in their insurance plan or not.

Finally, every once in a while you can change Missouri law without even passing a bill. That’s what happened with House Bill 1986, a bill I sponsored in 2012 to require the Department of Elementary and Secondary Education to purchase software to detect and deter cheating on standardized tests.  Without having to pass an actual bill, DESE decided to purchase the software on its own for the next school year.

As Mark Twain famously noted, “There are lies, damn lies, and statistics.” The number of bills filed versus passed is a misleading indicator of a legislator’s effectiveness. It gauges a general legislative activity, but doesn’t measure success. It also fails to account for a legislator’s efforts to stop bad bills or bad amendments – an equally important task.

One of the local legislators (Rep. Caleb Jones from Columbia) in last week’s story filed more bills than me (81) and only passed four. Yet, he was recently voted as the top legislator who “gets things done” by readers of an inside-the-Capitol newsletter called MoScout.com. In the same poll, I was voted as the top legislator who “does their homework.”  These polls are meaningless in the big picture, but still nice to receive recognition for hard work from people who observe the legislature on a daily basis.  

Poll – Red Light Cameras

Time to Get to Work

With the pomp-and-circumstance over, I’m eager to start working. Committees have been announced, but assignments have not been made yet. I will hopefully bring you that news next week.

While waiting for that announcement, I’ve been busy filing bills. So far, I’ve filed 12 bills and one resolution. The resolution rejects the proposed salary increases for elected officials. Those bills fall into three categories: ethics, health care, and criminal justice. I’ve written previously about the ethics proposals and the salary rejection resolution, so this week I’ll focus on the other two.

Health Care

I have proposed three “small ball” Medicaid reform bills. These bills don’t move Medicaid into the optimal market-based space;  but they make incremental improvements that will yield better outcomes and savings for taxpayers.

House Bill 319 expands the list of providers eligible to provide Medicaid services through telehealth, or the use of new electronic communications technologies. The most common, and probably oldest, example of telehealth, is radiology. A radiologist can review x-rays, MRI, and other records without being in the same room, or even the same country, as the patient. A technician takes the scan and forwards the necessary medical information to the doctor.

As technology has improved, telehealth services are available in other areas as well. For example, a dermatologist in Columbia could help diagnose an unusual rash or skin lesion using a high-resolution digital photograph taken by a family practice physician in Eldon. House Bill 319 would facilitate the expansion of telehealth services where medically appropriate.

House Bill 320 is similar to a bill I filed last year and would require the Department of Social Services to develop incentives programs to encourage health care providers to open health clinics in or near high poverty schools. In 2009, then Texas Gov. Rick Perry signed legislation creating a similar program in Texas and research has shown that these clinics both improve health outcomes for children in poverty and save taxpayer money by reducing unnecessary emergency room visits.

Because this bill’s opponents have engaged in deception, it’s important to point out that (1) consent of a child’s parent or guardian would be required before a student received any services, (2) no school-based clinic could perform or refer for abortion or contraceptives, (3) the student’s medical records would not become a part of their education records, (4) schools would not be turned into medical providers and no health care provider could collocate without permission of the school, and (5) there’s no new Medicaid eligibility in the bill.

The bill is simple. We have children currently on Medicaid who are emergency room frequent flyers and/or who don’t always receive timely medical care. We know where these kids are during the school day. HB 320 creates incentives to make health care more convenient for these children which, in turn, helps keep them out of the emergency room and saves taxpayer money.

House Bill 386 creates incentives for primary care physicians to serve Medicaid patients outside of normal business hours. Like House Bill 320, it would push Medicaid recipients to receiving health care services in a more appropriate and less expensive setting than the emergency room.

Criminal Justice

House Bill 332 would tighten the “Mack’s Creek Law” to limit local government to collecting ten percent (down from 30 percent their annual general operating revenues from fines and court costs for traffic violations. This bill is identical to a bill sponsored by Sen. Eric Schmitt (R – St. Louis County). I expect that a similar or identical may also be filed by Rep. Paul Curtman (R – Union).  A municipality that subsists only by extracting heavy fines for traffic violations from its own citizens, or those unfortunate enough to pass through, should be forced to close its troll gates. St. Louis County is littered with such municipalities. (By comparison, Jefferson City collects less than 4 percent of its revenue from fines.)

Local governments will, of course, oppose this bill. Vigorously. Those facing those loss of power naturally oppose the change.  One criticism I’ve already heard is that we’re limiting the power of government. To that I plead guilty as charged. (An aside: I thought about filing a bill like this last year but decided against it because I thought it would be too difficult to take on all of the local government lobbyists. Events over the summer obviously made success more likely.)

House Bill 334 would require prosecutors and law enforcement agencies to have a written policy directing investigations of officer-involved shootings to outside agencies and prosecutors. They could appoint a prosecutor in a neighboring jurisdiction or a person designated by the Missouri Office of Prosecution Services, an entity within state government which helps elected prosecutors throughout the state. This is already a common practice. A recent local example (though not involving a shooting) was the death of Brandon Ellingson at the Lake, where the local prosecutor appropriately recused himself and appointed a special prosecutor.

As I wrote previously, prosecutors should not bring charges because of political pressure, public spectacle or general calls for justice disconnected from the actual facts. I respect and, indeed, agree with the grand jury’s decision, and I depart from those who impugn St. Louis County Prosecutor Bob McCulloch. This bill is about general confidence in the criminal justice system. It would not increase the power of the Attorney General or Governor because I have less confidence in the ability of persons in those positions (past, present, and future) to make judgments free from political pressure and bias than other local elected prosecutors or an attorney designated by MoOPS. And it would not re-open the Michael Brown file. It states that it would only apply to situations occurring after August 28, 2015. It would, however, increase confidence in our criminal justice system.

Prosecutors are biased in favor of law enforcement. That’s their role in our adversarial system. Remember the last campaign ad you noticed for a prosecutor who promisednot to side with law enforcement? Of course not. We don’t want prosecutors to be “impartial” regarding law enforcement officers within their own jurisdiction. We want them to work closely with law enforcement officers to put bad people in jail. While the prosecutor’s position requires  sufficient independence and fairness to exercise prosecutorial discretion, they still play for the same team.  In the rare example where the situation is flipped – where a law enforcement officer may have broken the law, House Bill 334 would take the common and best practice and make it law.

Should Gov. Nixon Go to Cuba?