February 2003
Feb. 27, 2003
(Distributed to Kansas newspapers Feb. 24, 2003)A STAR-ry future, or not?
We may learn this week or next just what rules the state is going to set for use of the most powerful economic development tool that is available for Kansas to encourage business growth.
The tool is STAR bonds–the acronym means Sales Tax and Revenue–and one need look no further than Wyandotte County to learn just how powerful a development tool that they are.
The concept is simple. For a number of years, new businesses use sales taxes that they collect from customers and forward to the state. The state uses those sales tax receipts to pay off bonds to build streets, sewers, buildings, parking lots, just about everything you’d need to go into business in spanking new facilities that are guaranteed crowd-drawers.
When Wyandotte County was given permission to use the bonds–which were used to construct a NASCAR auto racing track, a Nebraska Furniture Mart store and a destination-level sporting goods store–the standard that Wyandotte County had to meet was to create an economic development “of statewide importance.”
That means, we now understand, that Wyandotte County had to see a development that would draw tourists and customers from all corners of the state. They did it. The county is prospering, jobs are being created, people are getting in their cars in pre-dawn dark and driving hundreds of miles to get to Wyandotte County. Why, they’re even getting some restaurants that you’d think all afternoon about eating at in the evening.
That’s a powerful economic development tool, but, by the way, the sales tax revenues that are paying off bonds for those facilities aren’t making their way into the state treasury. The state is essentially paying the tab for Wyandotte County’s boom. It’s considered a good deal; incomes are up, people are paying more taxes and there’s a synergy between the STAR bond properties and the rest of business in Wyandotte County.
The question this session of the Legislature has become who else gets to use those powerful STAR bonds to boost their economies.
Somewhere between a Wyandotte County-sized project and a lonely convenience store by the side of a highway, there’s probably the answer. Wichita, which is wanting badly to soup up its hard-to-exploit river front landscape, wants STAR bond authority on projects costing at least $50 million. That would allow for improvements and infrastructure that would support its own destination-level sporting goods store and related stores that would bring shoppers and their cash, checks and credit cards to Wichita. Wichita likes that.
And there are some developments afoot in Johnson County that could get a boost from STAR bonds, too.
So, why not just let STAR bonds be used to encourage development wherever entrepreneurs believe they’d work? Well, there is that factor of taking sales tax revenues from the state and using them to pay off bonds. That’s a little troubling in times when state revenues are not showing much growth.
And, at some point, a STAR bond project is probably going to fail to generate enough sales tax revenue to pay off the bonds, and that is a real danger.
Oh, and what about rural areas where nobody would stick a $100 million project or even a $50 million project, but where the local economy needs a boost? Will STAR bonds lead to Kansas to being home to just two, maybe three, big cities and the rest of the state withering?
You’d hate to see that happen.
So, does the Legislature let a couple big cities become the economic keys to the state’s prosperity? Oh, and of course, hand their developers the keys to the state treasury?
Maybe, or maybe not.
Because at some point the state and the developers who use STAR bonds have to make sure that folks from the smaller counties can make enough of a living to drive to the cities to spend their money on sales-taxable items to pay for the bonds. The bonds are so attractive, so powerful, that they might become rural-prosperity killers. And you’d hate to see that happen.
This may be the legislative session where some important decisions are made on what the map of Kansas is going to look like in the next five or 10 years. We’re curious how it is going to come out...
Feb. 20, 2003
(Distributed to Kansas newspapers Feb. 17, 2003)Don't hang around the mailbox
Statehouse hangers-on have spent weeks hearing legislators and the governor say that once the economy turns around, they will restart the revenue-sharing program that shoots around $100 million a year to cities and counties.
The programs were designed to allow cities and counties to share in the proceeds of the state sales tax that is collected from, well, people in Kansas who live in cities and counties.
Before he left office, then-Gov. Bill Graves stopped last-half payments to cities and counties and saved the state about $48 million in check-writing.
He also suggested that his successor, now-Gov. Kathleen Sebelius, do the same and in her Fiscal Year 2004 (starts July 1) budget not write any of those checks, which for a full year would total about $100 million.
Cities and counties are, of course, outraged.
But for all the talk of restarting the program when the economy starts roaring again, mayors and county commissioners are cautioned not to hang around the mailbox waiting for those checks to arrive.
The practical reason is that, even for state government, $100 million is real money, not pocket change that you'd drop into the guitar case of a street musician. There are real, showy, interesting things that can be done for Kansans with $100 million. And one of them isn't just writing checks to cities and counties which will get all the credit for doing nice things with state money.
How do you restart a program that has been dead at least a year and a half or two years? In Kansas politics and government, you don't.
Now, it's not because the Legislature and the governor wouldn't like to help bail out local units of government; just that there are politically more important and high-visibility things to do with the money.
The cutoff of the money flow to local units of government is going to be interesting because it will start on a local level what has happened at the state level in the way of budget politics.
Cut money to a state-level agency, and its cabinet secretary typically chooses the most high-profile, nice, friendly, widely used program to threaten to end. You never see, say, the Department of Revenue lament that it is going to reduce the amount of driving of state cars that it will allow its employees. No. It closes driver license examination stations. Nobody in the general public cares about state cars being used, they care when they have shorter hours to get a new driver's license, or have to drive to a nearby city to get a license.
That's how you take a budget cut and make it seem so oppressive that Kansans gripe loudly and threaten to vote against anyone who has anything to do with the cut.
On a city and county level, let's see... If a city gets less money from the state, it could threaten to close the swimming pool, or maybe quit turning on the lights for evening softball games at the local park. Those actions would rile citizens, and if the anger is loud enough, maybe give cities and counties cover for raising the mill levy a little to keep those nonessential but expected services going.
What's happening here? It is a real reordering of the responsibility of different levels of government. State stuff is paid for by the state, local stuff is paid for by local units of government. No sliding of state money into local programs. Look for that trend to be reinforced over the next year as cities and counties react to shrinking state assistance.
Once cities and counties learn how to operate their enterprises with locally collected monies, is there an upside for state government?
Maybe there is. If the economy does turn around, then it's time for the state to take care of state-level responsibilities and once they're cleaned up, not take any more taxes than necessary from Kansans, freeing up money for local units of government to adjust their tax rates to take care of local-level responsibilities.
This separation of responsibilities has been muddied over the years so that it has become hard to tell which level of government is responsible for what services.
Yes, it would have been nice if this weaning process, the separation of city and county and state responsibilities, could have taken place over a number of years. But it didn't. And reacting to it is going to be unpleasant.
But, then, if it was easy, anyone could be a mayor or a county commissioner or a legislator or a governor. But do we want that?
Feb. 13, 2003
(Distributed to Kansas newspapers Feb. 10, 2003)Will they converge?
Intriguingly, there are two distinct global battles going on in the Kansas Legislature this year; one is ridiculously simple, the other is complicated and probably more interesting to watch.
The simple battle is K-12 public education just wanting to be "held harmless" from budget cuts, from much scrutiny, from much of anything that sounds like change in the industry. OK, that's legitimate. The industry has spent a lot of time over the years convincing the public and legislators that what they do is so complicated, so important, so vital, that if legislators scrutinize it much, they'll be defeated when they run for reelection.
The complicated battle is virtually everything else, where the Legislature is trying to either do something so inconsequential and inexpensive (how about a bill to allow you to put those neat neon lights under your car as long as the lights are not red), or so important and expensive (how about keeping the most dangerous folks in prison) that they take a lot of time and attention and judgment.
The lights-under-the-car bill will take time because most legislators will have to learn why anyone would want them, and having determined that, learn that they really don't cause problems for anyone except some cops who have some basic time-allocation skills issues.
The prison-crowding problem will take time because housing prisoners costs money, virtually nobody doesn't want criminals locked up and we're running out of prison space because we have some minor-league convicts taking up space that we probably need for major-league criminals. Oh, and there seem to be more criminals. No declining enrollment problems in prison.
We could just build some new prisons, but that would either cost money out-of-pocket for the state which the state doesn't have, or would require the state to issue bonds to build prisons and we'd have to repay the bonds, causing some problems down the fiscal road for the state.
Now, both the lights-under-cars and prison debates are places for K-12 to stay well away from because the schools are being held harmless. They're not players, and unless there are significant numbers of educators who want neon lights under their cars, there is no reason they should wade into that debate.
And unless K-12 educators are either thinking about going into the crime business as a sideline, or believe that they might someday be victims of crime and want their transgressors punished, they probably better stay out of the crime and prison space debate, too.
Yes, there's a little isolation going on here when the only goal of K-12 is to be held harmless from the rest of the issues in the Legislature and the rest of the issues that the people of Kansas have an interest in.
Hmmm...
These distinct global battles in the Legislature are looking a little less distinct from some vantage points. Now, that's not to say that being held harmless is a bad thing if the governor can manage to accomplish that, and if the Legislature can manage to accomplish that while taking care of other business.
But it is going to take some interesting choices.
If you are driving by the scene of an injury accident, do you stop to offer help? What if you're on the way to...your wedding? To mail your property tax check? On the way to your job at a hospital?
This held-harmless business may become more complicated than it appears.
There is a good case to be made for not meddling with an industry that is being held harmless, but the Legislature isn't a good place to make that case. After all, people who aren't natural-born meddlers rarely run for public office and the chance to, well, meddle with state laws. If 165 Kansans didn't want to meddle with something at the state level, they'd just not have filed for office and could devote their time to hanging around their homes and carrying out the empties.
Yes, the global struggles are going to be interesting. But more interesting may be whether the two major issues facing the Kansas Legislature--protecting K-12 education and everything else--ever converge. They might not.
But we're interested in what happens if, or when, they do.
Feb. 6, 2003
(Distributed to Kansas newspapers Feb. 3, 2003)Honeymoon's over
Finally--it took almost three weeks--the grinning contest at the Statehouse has ended.
It ended with the first spending bill of the 2003 legislative session, the one that carried out much of what former Gov. Bill Graves proposed as a way to get through the current fiscal year at about break-even to give new Gov. Kathleen Sebelius at least a fighting chance at putting together a budget for the next fiscal year.
The plan was to write off some debt, primarily to the Kansas Department of Transportation, and write into law that the state isn't going to give cities and counties about $48 million this year. It also vacuumed $30 million-plus from some agencies' accounts and put the money into the State General Fund where it can be used to bolster other areas of the budget.
Oh, it also took care of some spending that needed to be done, to finance some higher costs for K-12 education and to provide some more services for more of the poor through the Department of Social and Rehabilitation Services.
But...looking back...it was almost too good to be true for a Democratic governor who is heading a state that by voter registration and makeup of the Legislature is solidly Republican.
Rather than give the governor a pass on some debts and let her sweep money out of the corners of some state agencies, the Legislature turned that write-off into a loan. The state gets the money that is vital to Sebelius' budget for the upcoming fiscal year (FY 2004) but it has to be repaid in the following budget year.
It means, essentially, that even if the state's economy heats up this year, throwing off revenues that wind up in the state treasury, that the first $106 million of the new money is spoken for.
Politically, it means that the Legislature, by deciding to demand next session that the governor repay the money, can make sure that even if it rains money on the state treasury the governor won't get wet.
Yes, we're back to hardball politics, after nearly three long weeks during which Republican legislators bit the inside of their cheeks while saying nothing very bad at all about Sebelius' first budget.
The governor? For her part, she was politically light on her feet, saying that she always intended to repay K-DOT its $94 million, though Graves never mentioned repaying the loan.
Insiders recognize her need to say that she was going to repay the money, but who else would not leap at the chance to eliminate debt completely, not just refinance its repayment?
Republicans in the House found just enough justification to turn the theft into a loan in the form of an attorney general's opinion from last summer that said if state agencies charge their customers a fee for, well, anything, that the fee ought to have some relationship to the service being provided. It shouldn't, for example, charge barbers $1,000 for a license, and then spend $50 of that running the barber board and sending the rest to the State General Fund.
The state ought to be able to charge the barber board a little money for rent, lights, heat, maybe some accounting services and general maintenance, but not seize most of the money from barber licenses to give to school districts, highway contractors and social service programs.
That was the key to turning the outright cancellation of loans and sweeping of money from agency accounts into the State General Fund into a promise to repay the money next legislative session.
Attorney generals' opinions, legislators often say, are "just one lawyer's opinion" but for the political purpose of keeping the Legislature's foot on the governor's throat, the opinion was reason enough for action.
So, the House has spoken, and essentially picked a fight with the governor.
Will the Senate go along? It, too, is top-heavy with Republicans who wouldn't mind seeing the governor firmly behind the eight-ball when she draws up her budget for them to consider next session, which is an election-year session in which she'll continue to be low on money to do nice things for Kansans that Democrats can tout as the reason that there ought to be more Democrats in the Kansas Legislature.
Which, we figure, means she'll either be able to do fewer nice things, or the nice things she does will require a tax increase in an election year, which is not a good thing for her to demand that Democrats in the House and Senate vote for. (And the political play there is that legislative Democrats go into the election season as supporters of their governor's higher taxes, or that Democrats don't vote for higher taxes and appear to have repudiated their governor.)
Yes, the grinning contest is over.