January 2007

Jan. 25, 2007
(Distributed to Kansas newspapers Jan. 22, 2007)

Rationing?

Every now and again, pressure builds in the Kansas Legislature to do something that just doesn’t feel right but may just need doing, anyway.

It’s the issue of payday loans, those high-interest, short-term loans that make it possible for thousands of Kansans to get the car fixed so they can go to work, pay the light bill before payday or cover something, well, unexpected.

The concept that the Legislature is looking at is so intrusive that it appears at first glance to be almost un-American.

Probably the problem is that the subject matter is something that most of us wouldn’t consider for a moment. It’s paying interest rates of 15 percent or so each week for borrowed money. That’s a lot of interest, more than most of us pay on our homes and cars. Multiply it out over a year—most payday loans aren’t outstanding that long of course—and you wind up with hundreds of percent of interest. It’s almost a scandal, to hear some describe it.

But…putting strict limits on the percentage of interest that lenders can charge for payday loans or limiting how often borrowers can renew their loans just doesn’t sound right to most of us.

The basic principle of borrowing money is simple. Interest rations credit.  That’s the Grail of the lending business. If you are a good risk to repay the loan, then there’s less risk by lenders in loaning you money. You’ll get a relatively low rate. It’s just that simple.

The greater the risk that a lender won’t be repaid in full, the higher the rate of interest that the lender charges. That’s just the way the world works. Nothing much that can be done about that basic law of a lender determining the risk that he will not be repaid on time, and covering that risk by raising the interest rate.

Congress did a little interest-rate meddling last year, passing a bill that would prohibit lenders from charging servicemen and servicewomen more than 36 percent interest a year on money they borrow. While 36 percent sounds like pretty good interest (and better than most of us do with our own money), at some point lenders will decide that on a purely businesslike basis, they can make more money lending money to non-service-related people, and the pool of money lenders are willing to send out the door with servicemen and women will be reduced. If you can make more money loaning to civilians than service people, except for a brief bout of patriotism or whatever, you’ll stop loaning the money to service folks.

Bankers tend to take an interesting approach here. They hate to see new people in the lending business, but there aren’t many banks that are going to make a loan on Monday that will be repaid by payday. That’s just not their sphere of expertise. They make larger loans for bigger amounts at lower interest rates because customers they lend to demonstrate some higher probability of ability to repay. Payday loans aren’t their business, but they keep an eye on the issues involved because, well, they’re bankers…

Do payday loan borrowers even figure into this equation? Just peripherally. It’s easy to take up their cause and wish that they could borrow money at lower rates. And it’s easy to assume that by ratcheting down interest rates or handling fees that you’ve made their lives better, or cut their risk of serious financial problems. It might happen.

But there’s this funny feeling that somehow, the Legislature is about to mess with some business principle that is so basic, so understandable, that you wonder about unintended results.

Interest rations credit. But legislators can ration the business.

We’ll have to see how this one comes out…

Jan. 18, 2007
(Distributed to Kansas newspapers Jan. 15, 2007)

A simple question?

Here’s a simple question for you.

How sick do you want a child—any child—in Kansas to be before that child gets health care?

Uncomfortable and cranky? Seriously sick and listless? Sick (and contagious) enough that the child represents a danger to your children? So sick that the child may lose some mental or bodily function? Sick enough that death is a real possibility?

That’s a pretty rough question, isn’t it?

The reason that you might want to consider that question and the multiple choice answers is that the Kansas Legislature is again this session going to consider, among other items, the governor’s proposal that the state provide health care (that means some form of health insurance or at least payment to health-care providers) to all children between birth and age 5.

There are many moving parts to providing health care to Kansans. Gov. Kathleen Sebelius probably stretched the concept to the breaking point when she used the term “universal” in her State of the State address last week. That created a whole new level of legislative hysteria over something that isn’t going to happen. Sure, it would be nice if everyone in Kansas had guaranteed access to health care, rich or poor, rural or urban.

But just that term—actually more of a goal that at its most basic level is agreeable—instantly set a cadre of lawmakers quivering mad and talking “Hillarycare” or “socialized medicine” or “Canadian medicine” or even “Massachusetts medicine.”

Well, universal health insurance or care isn’t going to happen, not this year. But, the governor used the word. Politically, it is easier to swat away at a big idea than a small one. (Would you have gone to see the movie King Kong if its title role was held by just a normal-sized gorilla? Of course not. But make him 50 feet tall, and that’s a whole other level of drama.)

Maybe “universal” was a poor choice of words, but the corner of Sebelius’ health-care proposal that deals with children from birth to age 5 is one that can be cunningly overlooked, or at least not talked about, while battling a giant concept like universal health care.

The magician’s term is “misdirection.” It’s getting the audience to focus on, say, the scantily clad assistant while the magician is putting the rabbit into the hat.

But care for children isn’t “Hillarycare” or “Massachusetts medicine.” It’s focusing on a narrow portion of the population of the state that requires adult—and even governmental—protection. And age birth to 5 is the time period when there aren’t always a number of adults in contact with the children. At age 5, they’re in school where teachers and school nurses and such get a look at ‘em, but the critical formative years are pretty much spent at home.

Now, of course, a child with a very serious health problem gets treatment, often at an emergency room where costs are high.

But regular, low-anxiety medical care is what we all hope would make those frantic emergency room visits unnecessary—if someone, government as a last resort, would pay for it. 

There are many little steps to be taken, a lot of legislation and rules and regulations, and it turns out, about $4 million in state taxpayer money to be spent to provide health care to children from age birth to 5. That’s what government does. The paperwork.

But maybe it really does come down to that initial question.

How sick do you want a child—any child—in Kansas to be before that child gets health care?

Not a bad question, is it? We’ll see how the Legislature, on your behalf, answers it.

Jan. 11, 2007
(Distributed to Kansas newspapers Jan. 8, 2007)

Labor not happy

Organized labor has had its feelings bruised by Democratic Gov. Kathleen Sebelius—after working for her initial election in 2002 and again last fall—when the governor decided that every dime of a growing surplus in the state’s unemployment insurance trust fund be used to lower employers’ taxes.

It’s a narrow area of what all goes on in state government, but the key here is that there is now way more money in the trust fund than is calculated to be needed to pay weekly benefits to workers who are laid off by their employers.

The fund surplus first was announced by Sebelius’ Secretary of Labor Jim Garner on Labor Day—before the general election at which Sebelius smoked Republican Sen. Jim Barnett, R-Emporia, for the governorship—her second term.

Labor officials noted that the governor didn’t make much mention of it, and the thought was that after the election, the governor would propose that the overage in the unemployment trust fund be divvied up between employers and workers. Not “halvsies” of course, but that from the extra money employers would get a benefit and laid-off workers would get a benefit of some sort, too.

Well, the governor stayed quiet until after the election to avoid any political campaign repercussions from the issue. That’s understandable. Why raise an issue that might give Republicans something to hammer her with?

But after the election, labor interests were shocked when Sebelius proposed that the extra money in the fund be used to reduce employer unemployment compensation taxes. Not one of those off-again, on-again tax holidays that former Gov. Bill Graves used when the fund grew fat several years ago and which created “sticker shock” for businesses when the tax was reimposed. Instead, she proposed what might well be a sustainable tax cut for employers.

Labor was looking at maybe taking that surplus and cutting tax rates for employers while increasing benefits a dab (they range from $85 to $385 a week now) or maybe eliminating the waiting week for application for benefits, which would get some money into the pockets of laid-off workers more quickly than the average three weeks it takes now for the first unemployment check to reach out-of-work Kansans.

So, what’s the proposal that is going to the Legislature for consideration? It’s just a straight and graduated employer tax cut. Employers—and they all generate individual experience ratings on their unemployment insurance accounts after about three years—get breaks ranging from a free ride (no taxes paid at all) to a 25 percent reduction in those payroll taxes.

The graduated tax break for employers is based on how many of their workers are discharged and wind up receiving unemployment benefits. The fewer laid-off workers, the bigger the break. That makes sense.

Unemployment taxes are a significant expense for businesses, there’s no doubting that. Employers pay taxes on the first $8,000 of a worker’s earnings each year, which means the general (non-construction industry) 4 percent rate costs employers $320 a year a worker for unemployment taxes. That’s significant, of course.

It’s significant also that Garner will hand to legislative committees a bill that has only the tax break in it. That makes it difficult, maybe impossible, for labor interests, which are presumed to be Democratic, to get any traction with a labor benefit in the bill. It gives the business lobby the chance to say the bill is apparently what the governor wants and after all, she’s the governor and why not show deference to her leadership and just pass the bill her administration proposes?

Labor upset? Sure. It appears that there’s not much chance for labor to carve out much of a shared benefit from the trust fund’s overage. Republicans will note labor is opposing a sitting governor, labor’s governor, who for this narrow issue is playing the GOP tune.

We’ll see where this one goes…

Jan. 4, 2007
(Distributed to Kansas newspapers Jan. 1, 2007)

Out West…

It is one of those subtleties of the Kansas Legislature that this year and next the state’s great western reaches need to stockpile every statutory advantage that may be needed there for, well, maybe forever.

It’s three years from the official U.S. Census and it is five years from the session in which the Kansas Legislature will reapportion itself for the next decade. And there is no doubt that barring some cataclysmic external force—and we’re thinking the theme of the TV show Jericho—western Kansas and low-population counties scattered across the state are going to lose legislative horsepower. More of the House’s 125 seats will be held by urban representatives, more of the Senate’s 40 seats will be held by urban senators.

The Kansas Legislature, politically, is no place to depend on the kindness of strangers…and friendly as rural legislators are, they’re not pole dancers who can work for drinks and tips for their regional interests.

The gathering of rural interests in the next two years has the advantage of western Kansas leadership of the Legislature. Senate President Steve Morris, R-Hugoton, and House Speaker-elect Melvin Neufeld, R-Ingalls, are both far-western legislators. The traditional US-81 highway dividing line between east and west Kansas is a two-hour (Neufeld) or three-hour (Morris) drive into the morning sun.

Most obvious western-Kansas oriented legislation recently: Creation of what is essentially a trust fund for counties atop the emptying-out Hugoton natural gas field, cadging a portion of the state’s severance tax for those counties.

But there’s more that western Kansas probably ought to be working for in the next two years. Surprisingly—and these western Kansas lawmakers tend to be fiscally conservative—their interests would be best-served by doing whatever is necessary to have the state pay for most of what their population-sparse regions need. We’re talking whatever it takes to increase the state’s portion of the cost of public education. While Johnson County talks about local option budgets and raising money at home to provide extra money for public education, western Kansas, which is especially sensitive to property taxes, ought to be pushing for total state funding of local schools.

What else might legislators and residents of western Kansas be interested in? Well, there’s water, of course, and maintaining the “first in time, first in right” water appropriation rule, and watching very, very carefully any movement that would allow transporting of water from one natural drainage basin to another. Western Kansans aren’t interested in having thirsty cattle while Johnson County residents are making their cappuccino with water from west of US-81.

There’s the whole area of higher education, too, with just one state regents' university (Fort Hays State) in western Kansas and a passel of community colleges and technical institutions that are going to require nourishment and protection even as public school graduates’ numbers decline.

Public safety and services might require some attending to. There are long, long ambulance rides out west for some people, at large costs, and this might be the time to beef up services and put a funding mechanism in place to spread the cost of those emergency services statewide, with either subsidies or maybe a state-directed system under which the lack of dense population doesn’t unduly delay service to those who need medical assistance in a hurry.

And then there’s wind and the energy it produces. If there’s a product native to western Kansas, where people aren’t so fussy about what they see from the highways, it’s wind—and the windmills that transform it into electricity. Might be looking for some severance tax-style revenue source that stays where the wind blows, not to where the power flows.

Maybe the city folk won’t notice what’s happening on the way to reapportionment…