PERSPECTIVE February 2014
OKLAHOMA COUNCIL OF PUBLIC AFFAIRS
In Case You Missed It In the newest issue of Inside ALEC, former OCPA trustee Tom Coburn and current OCPA vice president Jonathan Small say Oklahoma should not go along with the Obamacare Medicaid expansion.
Researchers from the Heritage Foundation and the Reason Foundation say the return on investment in Oklahoma’s preschool program is abysmal. tinyurl.com/l794yhh
tinyurl.com/k8ff7cv
The president of an Oklahoma City school for homeless children supports a proposed Education Savings Account program for Oklahoma.
Oklahoma government spending has reached a new all-time high, while tax relief for Oklahoma families has yet to materialize. ocpathink.org/articles/2602
tinyurl.com/mkv4emr
OCPA president Michael Carnuccio points to the inconvenient truth that Medicaid expansion actually increases emergency-room usage.
OCPA’s Milton Friedman Distinguished Fellow says “the establishment of universal school choice should be our highest policy priority.” tinyurl.com/komvuwd
An OU geophysicist says “global warming is nowhere to be found.” http://wtim.es/1eH30XE
Kansas Gov. Sam Brownback is leading the nation in cutting back bureaucratic overhead. tinyurl.com/knass3s
Over at the Accuracy in Media blog, Brandon Dutcher highlights a subtle form of media bias in Oklahoma.
ocpathink.org/articles/2588
During National School Choice Week, Brandon Dutcher talked to FOX 25 about one popular school choice: homeschooling.
tinyurl.com/kw8opgf
ocpathink.org/articles/2613
PERSPECTIVE OCPA Staff
OCPA Trustees
Brandon Dutcher .................................................. Editor
Blake Arnold • Oklahoma City
Tom H. McCasland III • Duncan
Daryl Woodard • Tulsa
Robert D. Avery • Pawhuska
David McLaughlin • Enid
Daniel J. Zaloudek • Tulsa
Lee J. Baxter • Lawton
Lew Meibergen • Enid
Steve W. Beebe • Duncan
Ronald L. Mercer • Bethany
OCPA Researchers
G.T. Blankenship • Oklahoma City
Lloyd Noble II • Tulsa
John A. Brock • Tulsa
Mike O’Neal • Edmond
Clint Colbert .................................................... Office Manager
David R. Brown, M.D. • Oklahoma City
Bill Price • Oklahoma City
Brandon Dutcher ............................. Senior Vice President
Paul A. Cox • Oklahoma City
Patrick T. Rooney • Oklahoma City
Kelly Ferguson .................... Communications Associate
William Flanagan • Claremore
Melissa Sandefer • Norman
Dacia Harris .............................. Communications Director
Josephine Freede • Oklahoma City
Thomas Schroedter • Tulsa
Ann Felton Gilliland • Oklahoma City
Richard L. Sias • Oklahoma City
John T. Hanes • Oklahoma City
Greg Slavonic • Oklahoma City
Brittoni Bobek ...................................................................... Intern Brian Bush ..................................... Executive Vice President Michael Carnuccio .................................................... President
Rachel Hays .................................... Development Assistant Rebecca Hobbes ................................................................ Intern
Steven J. Anderson, MBA Research Fellow
Tina Dzurisin
Research Associate
Vance Fried, J.D. Research Fellow
Jayson Lusk
Samuel Roberts Noble Distinguished Fellow
Matt Mayer, J.D. Research Fellow
Ralph Harvey • Oklahoma City
John F. Snodgrass • Ardmore
J. Scott Moody, M.A.
Jennie Kleese ............... Development Events Manager
John A. Henry III • Oklahoma City
Charles M. Sublett • Tulsa
Karma Robinson ...... Vice President for Development
Henry F. Kane • Bartlesville
Robert Sullivan • Tulsa
Andrew C. Spiropoulos, J.D.
Jonathan Small .............................Vice President for Policy
Robert Kane • Tulsa
Lew Ward • Enid
Gene Love • Lawton
William E. Warnock, Jr. • Tulsa
Research Fellow
Milton Friedman Distinguished Fellow
Wendy P. Warcholik, Ph.D. Research Fellow
Perspective is published monthly by the Oklahoma Council of Public Affairs, Inc. , an independent public policy organization. OCPA formulates and promotes public policy research and analysis consistent with the principles of free enterprise and limited government. The views expressed in Perspective are those of the author, and should not be construed as representing any official position of OCPA or its trustees, researchers, or employees.
In Praise of Enterprise Zones By Wendy P. Warcholik
Economic distress does not always manifest equally throughout America. Some communities are hit hard economically while others may only feel a small economic hiccup. If the same communities are hit repeatedly then they may slide into a state of permanent decline—Detroit is the current poster child for this kind of economic tragedy. Of course, this is not a new problem. Policymakers have been attempting to tackle hotspots of economic distress for decades. Perhaps the most popularized attempt was the idea of “enterprise zones” first touted by Jack Kemp while serving as Secretary of Housing and Urban Development under President George H.W. Bush. Fast forward to today and the idea of enterprise zones is alive and well. In fact, President Obama has even embraced the idea of enterprise zones with his recently launched Promise Zones (PZ) initiative. PZs are designed to help areas of the country that were hit hard by the recent Great Recession and will initially include areas such as San Antonio, Philadelphia, Los Angeles, Southeastern Kentucky, and right here in the Choctaw Nation of Oklahoma. The PZs are intended to help build infrastructure, increase access to education, reduce crime, and, most importantly, provide incentives for businesses to hire and invest by expanding the existing Empowerment Zone tax credit. Additionally, Senator Rand Paul (RKY) recently unveiled his Economic Freedom Zones (EFZs) which would reduce taxes, enhance educational opportunities, and reduce regulatory burdens. Sen. Paul’s tax reductions include enacting a 5 percent flat rate for the individual and corporate income tax, a 4 percentage point reduction in the payroll tax, boosting expensing on new investments, eliminating the
capital gains tax, and a $5,000 per child educational tax credit to help children attend the school that most meets their needs. Unlike PZs, EFZs will be available to any jurisdiction that meets certain criteria and would receive these benefits for 10 years. However, it’s not just Uncle Sam that has found the enterprise zone model to be useful. There are currently more than 3,000 enterprise-type zones in the United States. Most of these zones are implemented by the states, but they can also be coupled with local tax relief through a popular vehicle known as Tax Increment Financing, which often provides rebates on property taxes or earmarks money to be used for infrastructure improvements. These initiatives are noteworthy, especially since a new problem has arrived on the scene which threatens to drag down economic prosperity: demographic winter. Demographic winter is the situation which arises when, due to declining birthrates, there are not enough young people to sustain the current population level. As a consequence, the area afflicted with demographic winter experiences a slowmoving economic depression as both the labor supply and customer base shrinks. Recently, Kansas implemented a new twist on the enterprise zone model— the Rural Opportunity Zone (ROZ)—in an effort to fight the growing problem of demographic winter in its rural counties. There are currently 73 counties that qualify for a ROZ. ROZs offer individuals a 5-year abatement on their individual income tax and/or student loan repayments up to $15,000 if they move into one of the qualifying counties from out of state. Overall, enterprise zones, in their many forms, are a step in the right direction. Yet, there are still flaws that reduce their effectiveness. Among the
largest flaws is the degree of difficulty complying with the selective parameters of the program. For example, while a tax credit does reduce one’s tax liability, it does not reduce the complexity and compliance costs associated with tax filing—it could actually make them worse. At the extreme, these problems can cause businesses and individuals to forgo the benefits of these zones. One proposal in Maine seeks to address the problems associated with such complexity. The Free ME initiative would eliminate Maine’s income tax (individual and corporate) and sales tax completely on a county-by-county basis starting in the most economically distressed county. Free ME would create a clean, level playing field for all participants and would not disappear until tangible economic benefits are seen—specifically, seeing the county move back to the state average on key economic variables such as unemployment and poverty. The Free ME initiative is being promoted by OCPA’s sister think tank, The Maine Heritage Policy Center, and is receiving muchdeserved state and national attention. This is worth keeping an eye on. In conclusion, it is not every day that two people from opposite ends of the ideological spectrum like President Obama and Senator Paul agree that changing incentives do in fact make a difference in the lives of families across America. This targeted approach embedded in the idea of enterprise zones can help pave the way to broader reforms as the EMZs show progress in tackling some of the most difficult economic challenges of our time, such as stubborn pockets of poverty and demographic winter. The recipe may need tweaking, but at least policymakers are in the right kitchen.
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Markets vs. State-Run School Systems: A Look at the Evidence By Andrew J. Coulson
When I began studying education policy back in the early 1990s, parentdriven education markets were generally thought of as a new, radical, and speculative adventure—uncharted waters where, heaven help us, “thar be monstars.” That was a mistaken view then, and it’s positively absurd now. As I wrote in Market Education: The Unknown History, the education market of classical Athens, in the 5th century BC, was the first time and place on earth in which education reached beyond a tiny ruling elite. There was no government participation in education. Teachers competed in the town square to attract paying customers, families called the shots, and the city ended up building a thriving economy and the highest literacy rate in the ancient world. During their heyday, the Athenians invented democracy, most forms of Western literature, and some pretty enduring art and philosophy. Simultaneously, 100 miles away, Sparta established a highly organized system of public boarding schools. Its legacy? One decent action movie and a name for high school football teams. Over the next 2,500 years, markets continued to outshine state-run school systems in their ability to serve the needs of families, and they also reduced the social tensions created by state schooling. Near-universal literacy and elementary enrollment among the free population were achieved in the United States by the mid-19th century—before the rise of state school systems—chiefly through private and home schools financed by a combination of parent fees and philanthropy. Even the semi-public “district” schools
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of the early 19th century charged most parents fees, reserving free and subsidized places for the poor. Granted, historical evidence is subject to interpretation and charges of selectivity, and so it might not be universally persuasive. But, since 1990, scores of within-country scientific studies have compared education systems ranging from state-run monopolies such as our public schools, to statefunded and regulated private schools, to truly market-like systems in which regulation is minimal and parents choose their schools, as well as paying at least some of the cost directly themselves. I reviewed that body of research a few years ago for the Journal of School Choice and found that it shows private schools tend to outperform state-run schools. More specifically, it shows that the freest and most market-like education systems have the most consistent advantage over state schooling. There is no credible case against this body of research. I could not find a single study that found a public school system to be more efficient than a market system in terms of student achievement per dollar spent. There weren’t even any insignificant findings for this comparison. Every single study that looked at the efficiency question found statistically significant results favoring education markets over state school-
It’s rare to see such clear results in the social sciences. ing. It’s rare to see such clear results in the social sciences, but perhaps that’s because there are few areas of life that are still under the thrall of state-run monopolies. Education markets, when coupled with a mechanism to ensure universal access (such as education tax credits), are a better way to serve our individual needs and to advance our shared ideals. Compulsion and state provision are not only unnecessary, they are counterproductive to our most cherished educational ideals.
Andrew J. Coulson directs the Cato Institute’s Center for Educational Freedom and is author of Market Education: The Unknown History (Transaction Publishers, 1999).
Rich
Survey Finds Oklahomans Favor School-Choice Policies The last week of January was National School Choice Week, and Gov. Mary Fallin issued a proclamation declaring the week to be School Choice Week in Oklahoma, too. After all, she said, “Oklahoma has a multitude of high-quality traditional public schools, charter schools, virtual schools, CareerTech schools, private and religious schools, home schools, and more.” In an effort to measure public opinion on various school-choice policies, the Friedman Foundation for Educational Choice recently commissioned a statewide survey of Oklahoma voters. The survey, which has a margin of error of ± 4.0 percentage points, was conducted by Braun Research, Inc., a company which has been used by such research firms as Gallup and the Pew Research Center. The survey, which the Friedman Foundation and OCPA released during School Choice Week, contains a wealth of useful data. We encourage you to read it at edchoice.org/OklahomaPoll. The following charts highlight some key findings from the survey. For example, the responses to questions 3 and 7 indicate that many Oklahomans are concerned with the current state of our public school system. The chart related to question 9 might as well be titled “Why the Monopoly Establishment Will Fight School Choice to the Death.” Even though more than 9 in 10 Oklahoma students are in fact enrolled in a regular public school, the survey found that most parents would like to choose something else. As OCPA president Michael Carnuccio recently observed in The Journal Record: “The education reporter Mike Antonucci once asked, ‘If the government, under the force of law, takes money from my paycheck every month to supply me and every other citizen with a Yugo, and I choose not to spend additional personal income on a Chevy, am I choosing the Yugo?’ Apparently, the answer is no. Clearly, parents want more choices.” As to which particular choices they favor, the charts related to questions 11 through 16 indicate that they favor charter schools, vouchers, tax-credit scholarships, and Education Savings Accounts.
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FRIEDMAN FOUNDATION FOR EDUCATIONAL CHOICE, Oklahoma K-12 School Choice Survey, Q7
*Homeschool data not available FRIEDMAN FOUNDATION FOR EDUCATIONAL CHOICE, Oklahoma K-12 School Choice Survey, Q9
FRIEDMAN FOUNDATION FOR EDUCATIONAL CHOICE, Oklahoma K-12 School Choice Survey, Q11 and Q12
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PERSPECTIVE • February 2014
FRIEDMAN FOUNDATION FOR EDUCATIONAL CHOICE, Oklahoma K-12 School Choice Survey, Q13
FRIEDMAN FOUNDATION FOR EDUCATIONAL CHOICE, Oklahoma K-12 School Choice Survey, Q15
FRIEDMAN FOUNDATION FOR EDUCATIONAL CHOICE, Oklahoma K-12 School Choice Survey, Q16
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One Boy’s Real Life, and His Parents’ Choice By Patrick B. McGuigan
When Dylan Pennington was in public school, his days were marked by large classes, groups of kids in which he felt lost and alone. His parents (mom Jennifer is an educator herself ) became convinced his teachers had inadequate training to work effectively with special-needs children like their son. Further, they didn’t care much for days when he was verbally bullied. He didn’t want to go to school after getting called “cracker,” “fat,” “weird,” or “crybaby.” From the age of three until nine, Dylan’s days in school were, in theory, guided by an Individualized Education Plan (IEP). It was gloriously specific (on paper) and completely dysfunctional (in practice). He was one of 25 to 30 kids in his class, and not the only youngster on an IEP. As a special-needs kid, there was supposed to be $10,000 a year in tax money for Dylan’s education, but it was not available to pay bonuses for therapists, an aide to help his regular teacher, or someone to help him organize and/ or to give his teacher a clue on how to work with kids who have autism. The fact that none of that happened is, in his mother’s opinion, a misuse of resources. When you cover American education, stories like these are the rule, not the exception. Thanks to the Lindsey Nicole Henry Scholarship program—established by the Legislature in 2010 for the worthy public purpose of better education for children just like this—Dylan now attends Trinity School in Oklahoma City. It is a private school, tucked away in a
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wooded area near Interstate 235. In an interview last month, Dylan’s mom, Jennifer, told me, “He’s learning life skills, as part of a group of 12 kids. He is happy and progressing academically, although much of what he learns is not in textbooks.” Dylan’s disabilities are not limited to autism, but include dyslexia and dysgraphia. Jennifer says, “The school is structured but not rigid. He’s gone from frustrated adults who, he believed, wanted him to go away, and kids who didn’t really want to see him or play with him, to adults who text me regularly with updates on how his day is going, and kids who enjoy his company. There is back and forth with his teacher every day; and his teacher understands the special challenges he faces.” That’s not all: “Dylan is held accountable for his behavior, so his behavior has gotten better. In the public school, he liked being in the office more than doing class work. Now, he enjoys class work and activities with the other children. His life is so much better, now. He is safe, loved, and able to play when it is time to play. Even on what is a ‘bad’ day, now our world doesn’t come to an end.” She continues, her voice catching: “I could go on for hours. We were done with public schools after those six years, regardless. He will never go back to that setting. It’s a blessing to have some of the financial burden of our choice taken away, to have some help to get him a good education in an appropriate and effective setting.” The Penningtons’ view of their son’s situation came to my attention when I
was given a copy of a long letter they wrote, responding to the newest lawsuit aiming to destroy Oklahoma’s historic program for special-needs children. Here is some of what she wrote: “We love our son beyond words, and we will never place him back into public school. We say this not as a threat but to make a point. The money that his public school was receiving for Dylan, it only received because he was enrolled there. When we withdrew him, his public school no longer received funds for him. Our child’s Lindsey Nicole Henry Scholarship is not taking away from another disabled student’s opportunities in the public school system, and we are tired of that being used as a justification for the lawsuit against this scholarship program. “The public schools need to be held accountable for the misuse of disabled children’s funding. If they are losing money, it’s not because of this scholarship program. It is because parents leave the districts due to schools’ poor performance and inability to sufficiently serve their children’s needs and increase their quality of life. “Parents are seeking out new ways to educate their children, whether it is to put them in a specialized private school or to provide home schooling or nontraditional online public schooling. Parents are finally being heard, and it seems that there are some who don’t like that we now have a choice.” She truly says it better than I can, so let her go on: “The lawsuit against the Lindsey Nicole Henry Scholarship Program is more about maintaining power and
Real life has enough challenges without artificial, in some cases nonsensical, barriers placed by government.
control and has very little to do with the disabled children whose lives are forever changed for the better by this scholarship program. We are taxpayers too, and we feel honored that some of our tax dollars are being used to pay for other children in Oklahoma who have qualified for this scholarship to get a good education. These children are our future, and we must make sure we enable them to thrive and learn as we did.” That’s pretty much the whole story, although of course there are other details. Without getting bogged down, Jennifer’s message to fellow Oklahomans and taxpayers is this: “Please consider carefully the reasons behind this lawsuit. Double-check those reasons and the talking points being used to support the lawsuit. Look beyond the accolades and awards of the plaintiffs, and see the children who benefit from this scholarship—and those who will suffer if it is taken away. For some parents, the status quo of the industry of
public education is no longer an option. “Why should they and their children suffer because change is needed in public education but some are not willing to pull up their bootstraps and make it happen? The tax money these public schools were receiving is gone because parents are leaving those schools for better options. Taking away this scholarship isn’t going to change that fact, but it could detrimentally affect the most vulnerable children in Oklahoma.” Dylan deserves … a chance. “Man Overboard,” a soft rock band,
has an album called “The Human Highlight Reel.” It features a nice, mysterious little tune called “Dylan’s Song.” The lyrics include these: “I took a beating on the way of looking for you. … I’m trying to earn my real life back.” Real life has enough challenges without artificial, in some cases nonsensical, barriers placed by government. For Dylan and kids like him, real life should include opportunities for growth, time for development, and for relationships with other kids who are accepting, and empowerment to loving parents. Dylan seems willing to do his part. Are we willing to do ours?
Patrick McGuigan (M.A. in history, Oklahoma State University) is editor of CapitolBeatOK.com. He is the editor of seven books on legal policy, and the author or co-author of three books, including Ninth Justice: The Fight for Bork. Last year the Washington Post political blog, “The Fix,” designated McGuigan one of the three best political reporters in Oklahoma.
www.ocpathink.org
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Oklahoma Tax Collections, Government Spending Reach All-Time Highs By Jonathan Small, CPA
With the release last month by Office of Management and Enterprise Services (OMES) of the new Comprehensive Annual Financial Report (CAFR) for the state of Oklahoma, we now know that total state tax collections and total government spending are at record levels. The fact that state tax collections reached an all-time high in fiscal year (FY) 2013 is particularly noteworthy, considering that during the same time period, millions of Oklahomans experienced increased payroll taxes and federal income taxes, increased health insurance premiums due to Obamacare, new taxes and fees created by Obamacare, and depressed consumer demand. These record-high tax collections are also noteworthy, given that energy prices were low and the state had to pay back an interest-free loan incurred from the private sector at a time when state spending was not reduced to reflect actual revenue during the recession. Total taxes collected by the state in FY-2013 reached $7.86 billion, an alltime high. This is $2.1 billion more than the $5.73 billion collected in FY-2003. One particular revenue source, sales taxes, deserves special mention. In fiscal 2003, net state sales tax collections were $1,404,275,613. In fiscal 2013, the
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most recent fiscal year, net state sales tax collections were $2,275,444,163, an increase of $871 million—or 62 percent in just 10 years. Comparatively, inflation over this same period was 27 percent, state population growth was 9 percent, and state personal income growth 39 percent. Oklahoma’s top personal income tax rate was 7 percent in 2004. Since 2004, the top rate has been lowered periodically over the last 10 years to its current top rate of 5.25 percent, a total reduction in the rate of 25 percent. Changes to Oklahoma’s personal income tax requirements during this period have also included increases in the standard deduction and the addition of a child tax credit, which all served to lower the portion of personal income taxes owed by hundreds of thousands of Oklahomans. During this period, Oklahoma also eliminated its death tax. According to OMES, net state sales
tax collections are poised to set another record for the current fiscal year ending June 30, 2014. Despite the significant obstacles facing Oklahoma families’ wallets as mentioned above, net state sales tax collections to date for the state general fund exceed the prior year by $16.3 million. And of course, what the politicians collect they also spend. As you can see, total state spending is also at an alltime high. As my OCPA colleague Andrew Spiropoulos has correctly noted, too many Republican lawmakers “seem to have been uninformed that conservative legislators are expected to cut taxes and spending.”
Jonathan Small, C.P.A., is the vice president for policy at OCPA. He previously served as a budget analyst for the Oklahoma Office of State Finance, a fiscal policy analyst and research analyst for the Oklahoma House of Representatives, and as director of government affairs for the Oklahoma Insurance Department.
Cover Total State tax Collections (billions of $)
6 7.8
.79 $7
FY-2013
.32
.93
.54 $7
FY-2012
$6
$6
.57 $7
.39 $7
$7
FY-2009
$6
$6
FY-2008
$5
$6.00
.73
.38
.65
$8.00
.01
$10.00
$4.00 $2.00 $FY-2003
FY-2004
FY-2005
FY-2006
FY-2007
FY-2010
FY-2011
Sources: office of management and enterprise services; Oklahoma Tax Commission
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The Negative Impact of Multi-Generational Welfare By J. Scott Moody and Wendy P. Warcholik
Government welfare programs were originally designed to be temporary to help people get back on their financial feet. Today, that is no longer true. For instance, SoonerCare, Oklahoma’s Medicaid system, imposes no time limits on the recipients as long as they meet various income-eligibility requirements. As we have discussed in these pages previously (“Oklahoma Growing Increasingly Dependent on Medicaid,” April 2013), Oklahoma already has an unhealthy dependency on SoonerCare. As a consequence, it is very easy for families to become trapped in multi-generational welfare, which robs them of personal responsibility and self-reliance. There is a multitude of anecdotal evidence that multi-generational welfare in fact exists. Now, new academic research by economists Gordon Dahl, Andreas Kostol, and Magne Mogstad verifies this reality. In a new study (“Family Welfare Cultures,” National Bureau of Economic Research, Working Paper No. 19237, July 2013), the authors examine family welfare cultures by looking at Norway’s disability insurance system. Norway’s homogeneous demographic makeup helps to keep the focus on welfare policies. The authors found “strong evidence that welfare use in one generation causes welfare use in the next generation.” What really makes this study remarkable is that the authors firmly trust they have found more than a simple correlation. Instead, they believe they have found a causal link between parents dependent on welfare and their children following in their footsteps. The causal link they found can be summed up succinctly: children learn from their parents. The authors “find suggestive evidence … in favor of children learning from a parent’s experience” with government welfare. In other words, children are conditioned by their parents’ welfare experience that significantly increases the chances that they too will end up dependent on welfare. More troubling, the study also found that “consistent with this increase in adult children’s welfare dependency, we find that parental DI (disability insurance) receipt decreases the probability that a child will work or pursue higher education.” Therefore, income-based welfare, like Medicaid, becomes a self-fulfilling, multi-generational prophecy—low-income parents on welfare hamper the ability of their children to achieve a better life for themselves. Of course, the question remains, how big of a problem is this for Oklahoma? To better answer that question, let’s ex-
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amine a relatively new data series that shows the number of births on Medicaid as a percent of all births for each state. As shown in Table 1, this percentage ranges from a whopping 71 percent in Louisiana to a low of 27 percent in Virginia, with a median value of 45 percent. (The data come from the National Governors Association as reported by the Henry J. Kaiser Family Foundation. The table is an amalgam of several years because not all states report the number of births on Medicaid every year. To fill the gap, we used the highest percentage reported between 2003 and 2009, the latest year of available data. Note: we used the median Montana value because the maximum value appears to have been misreported.) Unfortunately, Oklahoma is in the very high range, with 62 percent of all births on SoonerCare, the fourth highest in the country. In absolute numbers, that represents, on average, approximately 30,000 babies that are born right into Oklahoma’s welfare system each and every year. These data strongly suggest that Oklahoma has a very significant multigenerational problem in the Medicaid system. In conclusion, this analysis should give Oklahoma’s policymakers yet another reason to stop expanding the Medicaid rolls. (For starters, how about a moratorium on advertising for SoonerCare?) Oklahoma’s very high number of births on Medicaid strongly suggests that multi-generational welfare is a very real problem with dire outcomes for the parents and especially the children. Breaking this cycle will not be easy, and compounding it by increasing Medicaid rolls would be a step in the wrong direction.
OCPA research fellow J. Scott Moody (M.A., George Mason University) has worked as a public policy economist for more than 13 years. Formerly a senior economist at the Tax Foundation and a senior economist at the Heritage Foundation, he has twice testified before the Ways and Means Committee of the U.S. House of Representatives. His work has appeared in Forbes, CNN Money, State Tax Notes, The Oklahoman, and several other publications. OCPA research fellow Wendy P. Warcholik (Ph.D., George Mason University) formerly served as an economist at the U.S. Department of Commerce’s Bureau of Economic Analysis, and was the chief forecasting economist for the Commonwealth of Virginia’s Department of Medical Assistance Services. She is a co-creator (with J. Scott Moody) of the Tax Foundation’s popular “State Business Tax Climate Index.”
Table 1 Percent of Births on Medicaid State Louisiana Arkansas Mississippi Oklahoma Georgia South Carolina North Carolina West Virginia Alaska Texas New Mexico Arizona Tennessee Delaware Washington Maine Florida Oregon Illinois Missouri Indiana Kansas California Nebraska Iowa Wisconsin Vermont Kentucky Rhode Island Idaho Nevada Montana Alabama New York Minnesota Wyoming Michigan Ohio Hawaii Maryland Pennsylvania South Dakota Connecticut Colorado Massachusetts Utah North Dakota New Jersey New Hampshire Virginia
Percent 71% 64% 64% 62% 60% 60% 59% 59% 58% 57% 56% 55% 53% 52% 50% 50% 50% 49% 48% 48% 47% 47% 47% 46% 45% 45% 45% 45% 45% 44% 44% 44% 44% 43% 43% 43% 43% 42% 41% 39% 39% 39% 39% 38% 37% 35% 33% 32% 28% 27%
Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50
Sources: Henry J. Kaiser Family Foundation; U.S. Census Bureau; Oklahoma Council of Public Affairs
Will Increased Government Spending on Higher Ed Boost Economic Growth? By Brandon Dutcher
You know the drill. Higher-education officials commission a study which discovers that “investment” in higher education has a tremendous multiplier effect, stimulating all sorts of economic activity. The twentysomething reporter who covers higher education for the local newspaper does the conventional stenography, and everyone goes home happy. Higher-education officials in Oklahoma released just such an economic-impact report last year, and with the 2014 legislative session under way some of the report’s findings are again being discussed. Fortunately, some reporters have the wisdom to consider not only that which is seen, but that which is unseen. “Tenured professors and tax-financed researchers in higher education generally believe that public education spending is a ‘multiplier’—that is, that a dollar spent leads to much more than a dollar in economic activity,” Patrick McGuigan reported for Oklahoma Watchdog. “Not everyone agrees with that assumption.” In fact, a top analyst of taxpayer spending on colleges and universities argues, “Government spending does not come out of thin air. Every dollar spent by state government comes out of the private sector at some point. A dollar of public spending is estimated to cost anywhere from $1.25 to $1.50 to raise.” In short, Joshua Hall of the Center for College Affordability and Productivity (CCAP) challenges the accuracy of recent assertions that every dollar spent on public colleges in Oklahoma triggers nearly five dollars in economic activity. Hall chided a State Chamber of Commerce study finding the public system of higher education is both a bargain and a wise use of taxpayer resources. The chamber analysis did not include a look at the number of sites in the system, administrative efficiencies, and other traditional concerns of critics. Concerning that asserted “multiplier” effect of taxes spent on higher education, CCAP’s Hall told CapitolBeatOK, “Ignoring these costs … is a surefire way to inflate the benefits.” He says that after taking the costs of taxation into account, the net effect of taxes spent on Higher Ed is zero, “at best.” Battelle Technology Partnership conducted the analysis for The State Chamber study, reaching several positive conclusions, including an estimated “return on investment” of $4.72 for every $1 of tax funding. Battelle’s Martin Grueber said the projected $4.72 return on each dollar spent is “pretty strong” in comparison to other states. Asked if the study looked at the positive economic effect if some of that money were left in the private sector, Grueber told CapitolBeatOK: “We don’t look at that for the projects we do. We were trying to find the economic impact of those dollars spent in public institutions of higher education and play that out. We did not look at the fiscal stream, as such.” One notable critic of Battelle-style analyses, Dr. Richard Vedder of Ohio University, told CapitolBeatOK, “Econometric analysis I have done suggests that the relationship between state appropriations for higher education and economic growth is actually negative—resources are taken from competitive private enterprise driven by market discipline and given to an inefficient sector sheltered from such discipline.”
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@OCPAThink 1. Ilya Somin (pictured at left), a professor of law at the George Mason University School of Law, visits with OCPA senior vice president Brandon Dutcher and OCPA Milton Friedman Distinguished Fellow Andrew Spiropoulos about the current legal challenges to the president’s health law. Professor Somin is a coauthor of the new book A Conspiracy Against Obamacare: The Volokh Conspiracy and the Health Care Case. 2. OCPA executive vice president Brian Bush chats with University of Missouri economist Peter G. Klein at an OCPA event on January 21. To see the discussion, which touched on entrepreneurship, strategies for revitalizing rural America, and more, go to www.ocpathink.org/videos. 3. OCPA vice president for policy Jonathan Small is pictured here (at right) discussing Obamacare on KARN, 102.9 FM in Little Rock. 4. Pictured here are students at Lauren’s Institute for Education (L.I.F.E.), a private school for developmentally disabled children in Gilbert, Arizona, which benefits greatly from Arizona’s trendsetting Education Savings Account (ESA) program. OCPA trustee Bill Price, along with OCPA staff members Brandon Dutcher and Jonathan Small, were part of a contingent of Oklahomans that traveled to Arizona in December to visit with lawmakers, researchers, educators, and parents about Arizona’s ESA program. 5. Mr. Small (pictured on stage, at left), recently spoke at a series of “Uncover Obamacare” town hall meetings in Arkansas, stressing the need to resist the Obamacare Medicaid expansion in any form (including the so-called private option).
14 PERSPECTIVE • February 2014
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QUOTE UNQUOTE “[T]here has never been enough revenue for public education, and there never will be.”
“There is a certain crowd in Washington who, for the last few decades, have said, let’s respond to this economic challenge with the same old tune. ‘The market will take care of everything,’ they tell us. If we just cut more regulations and cut more taxes— Tahlequah Public Schools especially for the wealthy—our economy will grow stronger. superintendent Lisa Presley Sure, they say, there will be winners and losers. But if the winners “If there’s one certain do really well, then jobs and prosperity will eventually trickle conclusion from the last 30 down to everybody else. And, they argue, even if prosperity years of education reform, it is doesn’t trickle down, well, that’s the price of liberty. Now, it’s a that more money doesn’t yield simple theory. … But here’s the problem: It doesn’t work. It has better student results.” never worked. … I mean, understand, it’s not as if we haven’t The Wall Street Journal, Jan. 17, 2014 tried this theory.” President Barack Obama “It’s as if the number had simply been made up out of thin air.” “The Kansas portion of the Kansas City Metro area gained State Rep. Jason Murphey, discussing the 9,500 jobs from May 2012 to May 2013 while the Missouri side oft-cited figure of $160 million allegedly needed to repair the state Capitol building. Murphey says registered no change in total nonfarm employment over the this $160 million figure is “based on absolutely no year.” sound logic,” and that the real price tag is “much less.”
OCPA research fellow Steve Anderson, the former budget director for tax-cutting Kansas Gov. Sam Brownback