Money Down the Rat Hole
Bill Gates gives $50 million to the New York City school system. (Thanks to The Corner for the link.)

One thing that the Gates Foundation has right on schooling is that smaller schools are better than behemoth schools. And smaller schools tend to be .... private schools. How about half of that money going to scholarship programs for kids to take to private schools?
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Economic Growth, Top-Down
Illinois Governor Rod Blagojevich [How I wish Jim Ryan had won! A much easier-to-spell name] announced an economic development plan.

The St. Louis Post-Dispatch reports that 'While the governor said "Economic growth in Illinois will be driven by the private sector and businesses,' not government, Blagojevich said. 'We can't keep relying on the traditional approach to economic development," it looks like government still has a large role to play in the plan.

The proposal--with no price tag yet attached--calls for industrial policy ("developing clean coal technology, vineyards and Southern Illinois University Carbondale") and depending on federal handouts ("protecting Scott Air Force Base from federal cutbacks") and trying to prop up a public works white elephant ("development of MidAmerica Airport.")

Now, if the governor wants some other ideas--without a budget for his proposal, it's hard to say that it is finished--he could hop over to the website of the Illinois Policy Institute, which, among other things, has called for using the already-enacted federal bailout money for business tax relief.
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Texas Legislators May Smother Popular Fiscal Watchdog
Since 1991, e-Texas, a program run out of the comptroller's office, has recommended more than $16 billion in savings. As an entity separate from the legislature, it has been free to take on political pork such as the Texas Food and Fibers Commission, and offer innovative proposals for changing the way state government works.

Critics in the legislature, though, say that there is an inherent conflict of interest: the comptroller is responsible for estimating revenue. So, the argument goes, the comptroller may underestimate revenues, thus overstating deficits--and creating more opportunities for the office to become the fiscal saviour.

There's a grain of truth in here. But the solution is not to eliminate the independent status of e-Texas. Spin off the revenue-estimating job to another office (create one, if necessary), and leave e-Texas alone. As a spokesman for the American Legislative Exchange Council (ALEC) says, "e-Texas is a creative, systematic and institutional approach to saving money in state operations."
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Changing the Business of County Government in Milwaukee
Milwaukee County Executive Scott Walker [yeah, I hate all those caps in a row, but what am I to do?] continues to shake things up. Among his proposals for the next budget, which stands at $1.13 billion.

- Making county supervisor's jobs part time, and reducing their salary from $50,000 to $15,000.

- Eliminating free bottled water for employees, who will, as Walker says, "drink the same tap water as everyone else." (Milwaukee is notorious for dumping untreated sewage into Lake Michigan during heavy storms. Maybe the county ought to shift some money around to take care of that problem.)

- Contract out some services to the mentally ill and the disabled.

- Make some cuts to arts groups.

- Sell some county-owned land.

On the other hand, Walker does some blame-shifting, proposing that the state highway patrol take over the duties on expressways in the county.

The county has 6,000 employees; a "pension upgrade" by Walker's predecessor requires an infusion of cash. Spending on pensions and allocations for employee sick leave claim 20 percent of tax dollars.
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No Spandex, Please: We're State Employees
When you read about "inappropriate clothing," it's usually about the dress habits of teenagers in their high schools. But this time, the dressers-down who got dressed down are employees of Minnesota's Department of Employment and Economic Development.

Now on the outs: T-shirts, exercise clothes and "shirts with inappropriate words or visuals, or clothes that are sloppy, not clean, or in disrepair." Also on the list: "warm-up suits, jeans (blue or otherwise), capri pants that are tight or shorter than calf-length, revealing or see-through attire, miniskirts or sundresses, leggings or Spandex."

State employees wearing Spandex?

The union objected, calling the guidlines "way too stringent." Management relented on some issues, but on the whole, the department chief held his ground, arguing that with the dress code--updated from what was to "business casual"--"You look better, you feel better, you perform better."
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"All You Can Eat" Health Care Makes Medicare Sick
The New York Times profiles some Medicare patients and doctors in south Florida. The title of the article: "Patients in Florida Lining Up for All That Medicare Covers."

It isn't a pretty picture. Given Medicare's low reimbursement rate, doctors say they have to rapidly shuffle patients in an out to make a living--a practice that may not lead to the most satisfying of consumer experiences. Doctors are quick to refer patients to specialists--again, to maximize income. "Many patients have 8, 10 or 12 specialists and visit one or more of them most days of the week."

All these visits to specialists mean that Medicare spends more per person in south Florida than anywhere else--but with little to no medical benefit. Says one health care expert at Dartmouth, "In our research, Medicare enrollees in high intensity regions have 2 to 5 percent higher mortality rates than similar patients in the more conservative regions of the country."

The article gives voice to the concern that there's no one constraining overall utilization. That's right--when supply is not limited by price, consumers--in this case, Medicare beneficiaries--will demand an unlimited supply. So they have to respond to the ways in which primary care physicians try to limit demand, by rapid-fire appointments and quickly sending off non-routine care to specialists.

A better approach, not mentioned in the Times, is to make enrolles financially responsible for their care through, for example, Medical Savings Accounts. Only when people see a direct, personal connection to the cost of their care will Medicare operate rationally. And perhaps they will be able to buy more time with their physician and feel less like a loss-leader.
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County May Sell Golf Course Operations
Arguing that Waukesha (Wisc.) County government must focus on core functions--and that running a golf course is not one of those functions--County Executive Dan Finley is pursuing the sale of the Wanaki Golf Course. " The county, in suburban Milwaukee, owns three courses.

Finley nails the point when he asks: Should Waukesha County have a golf facility when there's plenty of other facilities? Why should county government do it?"

Other members of the county government object, arguing that the course is self-supporting, and that the county ought to sell off two ice arenas, which are not. That's a good idea, too.
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MSAs may Get Boost from Takeover
According to the Indianapolis Star, local company Golden Rule Financial Corp--which has been a pioneer among and advocate for Medical Savings Accounts--is being bought out by UnitedHealth Group of Minnesota. Golden Rule has 1,100 employees and $830 million in revenue. UnitedHealth is a behemoth in comparison, with 32,000 employees and revenue of $25 billion.

Now, I've done work for groups that have received money from Golden Rule, groups that have tried, in the policy arena, to advocate the increased use of MSAs as a tool of reforming health care. So my first response to this article was "uh-oh. Those grants will go down the drain."

And perhaps they will. Golden Rule has been a family-driven business, meaning that it has been free to be more concerned about ideas than the typical corporate giant. But this may all be to the good. The Star cites an industry analysts who suggests that "Golden Rule's reputation as a pioneer in medical savings accounts is likely what attracted UnitedHealth, the nation's largest health insurer."

Perhaps, then, the Big Money knows that MSAs have a greater role to play in the future. That's good news for health care, and for consumers.
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Suburban Flight
The Detroit News reports "more than 33,000 young adults left the [metro] region between 2000 and 2002," or one busload a day. (This brings back the line from the 1970s, when people were moving to Texas: Will the last person leaving Michigan please turn out the lights?)

Of course, this has businesses and government officials worried--lost consumers, lost workers, and lost taxpayers. The population loss is not uniform throughout the metro area, though: semi-rural Livingston county (between the state capital of Lansing, and Detroit) had the largest population gain of the 7-county region, and was the only one to gain among the gen x (ages 24-34). Wayne County, home of Detroit, continues its prolonged death, leading the region in emigration.

To be sure, Detroit, like all of the Midwest, will always have a competitive disadvantage when it comes to the weather. But the economic climate and tax policies may have a role not suggested by the article.

Of the 10 metro areas that gained the most in the gen x crowd, six were in low-tax states (Phoenix, Las Vegas, Dallas, Houston, Austin, Provo), though somehow California got 3 area on the list (LA, Riverside, and -- how can this be -- Sacramento).

Governor Jennifer Granholm wants to make Michigan "cool," and an academic quoted in the article suggests that "walkable cities" may be a key component. Expect gen x flight to be used as an excuse to justify land use controls under the guise of "smart growth."
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Contracting out Under Fire
George Newstrom, secretary of technology for the Commonwealth of Virginia, says that he could save taxpayers $100 million (out of a technology budget of $900 million) by a combination of outsourcing and better management.

But that's a difficult sell, especially since some outsourcing goes to other countries. As Newstom says, "We reject moving work from Virginia to Maryland, not to India, to Maryland. We don't even like that."

Still, information technology will be a target for outsourcing, either within the U.S., our outside. It's not an essential function of government. Currently, states spend close to $50 billion on IT.
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Another Drug Purchasing Pool
The Wisconsin teachers union along with some businesses in the state have announced the formation of Wisconsin, a plan that hopes to get a 5 to 15 discounts on prescription drug costs.

While volume discounts are nothing new, two elements of the plan are worrisome: the involvement of such a large group of government employees could morph into a back-door entry to price controls. And the plan expects to have a preferred list of medications, which would mean that a third party, rather than patients or doctors, would influence or even control what medications are available.
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More Charter Schools in Michigan
An agreement has been reached in Michigan to expand the number of charter schools--currently maxed out at 150 (the existing cap)--by 135. Showing that school boards of existing governments schools are as much of an obstacle to reform as the teachers unions, the director of the Michigan Association of School Boards says that his group is "dead set against this. We'd be pouring more money down a rat hole at a time when we don't have the money we need to shore up the system we've got."

If anything's a rat hole, it's the existing system by which one school board and one teachers union local has a monopoly on the use of tax dollars within a given geographic area (known as a school district.) Charter schools aren't as good as full school choice, but they do allow some alternatives.
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Seattle Voters Just Say No to Latte Tax
Coffee drinkers and non-coffee drinkers alike voted no on a measure to add 10 cents a cup to "any coffee beverage containing a half-ounce or more of espresso." It would not have applied to other forms of coffee, however. The measure, which failed with 68 percent of the vote, was an end around a failed attempt to persuade Washington legislators to impose a state income tax. Money raised by the tax--estimated to be anywhere from $1.8 million to $7 million--would have gone to subsidies for day care and preschool programs. The proponent of the measure blamed its defeat on a fear that the tax would hurt small business owners. I suppose that's progress, though I would also hope that the public would turn a skeptical eye to the idea of taxpayer funded day care.
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We Want Choice, Too
A group of Hispanic parents and activists have announced plans to seek a charter school for Prince George's county, in Maryland. They say the Prince George's school district has failed to pay enough attention to immigrant children. They also say that the schools ought to do more to encourage parental involvement in education. Currently, Maryland has only one charter school, making it a national laggard. For one thing, charter school organizers must first seek local school board members for permission.

Charter schools are at best a halfway solution to full education choice, however.
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Chicago Third Airport Proposal Not Dead Yet
Bensenville and Elk Grove Village, two west suburban municipalities that have fought Chicago's plan to expand O'Hare International Airport, have teamed up with south suburban University Park and Park Forest to advance a third airport. Three of the four municipalities have agreed to chip in $650,000 of taxpayer dollars to promote the idea of building a single-runway airport at Peotone, 40 miles of the Chicago Loop. (Midway Airport lie in southwest Chicago; O'Hare, in northwest Chicago.)

The coalition has hired LCOR Incorporated of Berwyn, Penn., and SNC Lavalin in Montreal to come up with a plan. The State of Illinois suggests that the third airport--favored by the governor, who also wants to exand O'Hare--will cost $500-$600 million to build. The coalition's consultants say that the number will be "millions of dollars less," though the Daily Herald does not give an exact number in its report.

As the newspaper puts it, perhaps dryly, "backers of the Peotone plan still face major obstacles, such as getting the land, the money, and cooperation from airlines and politicians to make it work."

There is no sense to this plan. Airlines are committed to the hub system, and don't want to spend the money. So it's not going to work. Backers suggest that a company that doesn't use hubs, such as Jet Blue, could find a new field attractive. (Southwest, like Jet Blue, uses point-to-point scheduling. It has revitalized Midway.)

Here's what the Daily Herald has to say: "Backers of the proposal said the airport near Peotone, some 40 miles south of Chicago's Loop, is not meant to draw passengers away from O'Hare, but primarily would draw from people who live in the South suburbs and Indiana, which is part of Midway Airport's passenger base."

Elk Grove and Bensonville have fought O'Hare expansion tooth-and-nail (and with tax dollars). They also advocate a plan that will not draw passengers away from O'Hare. It looks to me like a waste of tax dollars, even in support of the stated goal of stopping new runways at O'Hare.
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Congressman to Constituents: Fire Me
Indianapolis is home to Eli Lilly, a research-based pharmaceutical company with over 6,000 employees. It's also the home of Representative Dan Burton, who wants Congress to permit the importation of prescription drugs from Canada and other countries. Such a measure would harm the fiscal health of Lilly, and perhaps the physical health of everyone else.

While one member of Congress (not Burton) says that it is "immoral" for U.S. consumers to pay more for drugs than people in other countries, companies such as Lilly do so because (a) drug prices are cheaper elsewhere thanks to price controls; (b) even at cheap prices overseas, they make some money; (c) if the drug companies refuse to sell the drugs at government-dictated prices, the governments will strip the drug companies of their patent protection, and give them away to generic drug makers. I've been told (but have not yet verified) that this would be permissible under the World Trade Organization rules that most countries observe. (There is, I would guess, a provision that perhaps forced licensing or the removal of patents in case of "dire medical emergencies," or something.)

Representative Burton appeared at a "town hall" meeting, and stood down the noisy anti-importation crowd, many of them Lilly employees, retirees, and consumers.

As the Indianapolis Star recalled the scene: Burton told the crowd he will continue to push for the bill despite the opposition from Lilly that's likely to lose him re-election votes. "I am going to win anyhow," he said. "You are going to have to live with it."

I hope not--for it may mean that many people won't get to live as long, if price controls get so bad that they restrict the development of new, more effective drugs. (Currently, it takes roughly $800 million to bring a new drug to market.)
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Illinois Gov Suggests Illegal Drug Deals
No, Governor Rod Blagojevich isn't pushing illegal drugs--but he is suggesting that state money be used to buy prescription drugs from Canada. Under FDA rules, such a practice is illegal. It's also bad public policy.

Drugs in Canada are cheaper than they are in the US, but only because Canada, with its single-payer system, imposes price controls on drugs and rations services. This really isn't a model that the U.S. should emulate.
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Milwaukee Mayor Holds Line on Taxes
Milwaukee's mayor, John Norquist, presented a budget that does not increase tax rates. ""I think it's the right thing to do, and I think it's good for the city to reduce the amount of its spending because the citizens can only afford so much," the mayor says.

That's good, as far as it goes. But an even better point is that even if the residents could afford to pay more, that doesn't mean that government should do more. Perhaps the alderman of the city will take this opportunity to look for ways to save money and improve services by jettisoning any extraneous functions and putting some of the others up for competitive bidding.
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Tax Dollars for Arts Cut in Half
Doing more with less--or perhaps less with less--has been the mantra of many a private corporation. Now it's a reality facing arts groups in Michigan, after the state cut out half of its annual appropriations.

Too bad it didn't go all the way; government funding often corrupts the arts, sets off political battles, removes the requirement that arts groups be self-sufficient, and robs Peter to pay for the amusement of Paul.
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Detroit Public Library to Charge Outsiders
Some 60 percent of users of the Detroit Public Library do not live in Detroit--and hence, don't pay for its operations. Actually, they do pay a small amount now, since some state tax dollars do go to the library. But as those dollars ($1.8 million) are being eliminated, the library board is considering imposing a fee on non-residents. Neighboring library systems charge non-residents anywhere from $35 to $150 a year.

This is a reasonable idea. It's easy to administer--hand over cash, get a library card--and it imposes some of the costs directly on the people who benefit from it.
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Fire Them All! I'll Take a Job!
Negotiators for the state government in Minnesota want government employees to shoulder a higher burden of health care costs. Union officials (state workers have unions? Yes) are recommending that employees reject the Pawlenty administration's latest offer. Voting on the pact has begun (by mail, presumably), and continues through September 29. Pawlenty has activated the National Guard and directed it to begin training to help in nursing homes and hospitals.

Well, good for the guard--though I suspect that few of its members thought that changing bedpans would be part of their duties. In times of rhetorical flourish, proposals to restrain the growth of increase in social programs are sometimes characterized as abandoning the poor. Looks like government workers, not politicians, may be the ones to do that.

A friend of mine, upon reading the above-linked article from the Twin Cities Business Journal, has this comment: Fire them all! I'll take a job!

Again: to the extent that unions "work" in the private sector, it's because labor and management, facing opposing incentives, must come to terms in a way that is acceptable to the marketplace. But with the public sector, the opposing interest of management doesn't exist--both management and union benefit from increased public spending. Both must work politically, of course, to elect legislators favorable to the task of raising taxes. But this union-and-management partnership creates yet another voting block pressing for the expansion of government programs for the insiders rather than the general good of the public.
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Time to Update Zoning
Chris Fiscelli of the Reason Public Policy Institute argues that zoning laws need changing. Typically, cities enact zoning regulations based on a multi-year plan (sometimes as long as 30 years) that strictly segregates, say, residential from commercial uses. Hence, everyone drives to the strip mall. "With this type of land use regulation, it should not be surprising that much of suburbia looks as it does," he writes.

Fiscelli criticizes zoning, as practiced, as being insufficiently flexible for a changing society. (Indeed, how can one expect what will happen to housing, shopping, and business needs over a 30-year span?). It can also be a tool of snobbery and even racism, not to mention imposing a series of tastes.

While I've thought of some of this before, Fiscelli points out an interesting situation: zoning may produce outcomes that can be criticized from different, even opposing viewpoints. "At a practical level, zoning tends to foster development patterns that conflict with smart growth objectives while using a process objectionable to free market advocates."

Fiscelli offers the alternative of flexible zoning, a "concept that embraces the notion that individual land uses, neighborhoods, and communities are dynamic and constantly evolving as society, technology, and preferences change. Flexible zoning simply sets the rules of the marketplace like not allowing an adult theatre within a certain distance of a school or requiring mitigation measures for certain uses. But it does not specify a specific land use or density or parking requirement for private land." It does not require a master plan, either.

Having seen the arbitrary nature and counterproductive results that zoning can bring, I'm all for changes. At this point, though, zoning changes that make more use of market forces need more intellectual work.

Thanks to the folks at The Buckeye Institute for the link. (Check 'em out; they have the only blog that I know of among the state-focused think tanks.)
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Should Be Remarkable--Probably Isn't
Blogger Chip Taylor links to a story from Rhode Island. Even in a year with a tight budget, the state still found money to give to one tenant's association for bingo supplies.
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How to do Welfare Reform
Also from Greg Blankenship (director of the Illinois Policy Institute), a pointer to an op-ed about how Illinois leads the nation in welfare reform. One key: getting people into the much-derided entry-level jobs, which teach people "soft skills" of showing up on time and working well with others. According to HHS stats, Illinois lead the nation with a caseload decline of 28 percent from March 2002 to March 2003. Illinois officials worked with United Way campaigns to offer child care, transportation, and job training to welfare recipients. Two other elements: a family cap (no more money for extra children) and a strict time limit.
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Mental Health Programs Subject of Michigan Hearings
Here's an example of how policy twists people into doing bizare things: some mentally ill want to be arrested on minor charges, so that they are sent to jail, where, by law, they receive treatment. The Detroit News lambastes the current, community-based institutions that run much of the mental health system for squandering resources and delivering poor quality care. The article sugests that "mental health parity" mandated by government rule is the solution. But that carries problems of its own.
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Troubled Voucher School: One Bad Apple Spoils the Whole Bunch?
Alex's Academics of Excellence (that name alone may give one pause) is in trouble. It has received, since 1999, $49 million in taxpayer payments for participation in Milwaukee's school choice program. But it has been evicted from at least one building, and faces allegations that illegal drug use was conducted on its premises. Further, some teachers say they haven't been paid.

The head of the teachers union in the state, of course, thinks that Alex's shortcomings indict all schools of choice, and the voucher program as a whole.

Mismanagement and illegal activity at a school receiving taxpayer funds is a serious matter, of course. Perhaps the union boss would think we should also shut down the schools in which his members work--schools known for all sorts of ills? Government operation is certainly no guarantee of excellence or safety, and the fact that so few schools of choice are like Alex suggests that we need more of them, not less.
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Missouri to Be a "Shall Issue" state
Writing in National Review's "The Corner," David Kopel reports that Missouri will soon become a "shall issue" state, over the objections of the governor. "Thirty-six states, now including Missouri, issue licenses according to objective criteria, and licenses are not denied merely because a police chief or sheriff does not want people to have guns."

It turns out that 2003 may be a banner year in the "shall issue" movement. The following states have enacted some version of such a law: Colorado, Minnesota, and New Mexico. Kopel says that such legislation has a good chance of being passed in Wisconsin and Ohio. I would guess this will be enacted in Wisconsin--perhaps over a veto--but not in Ohio.
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States Use Accounting Gimmicks
It's easy to cut taxes and increase spending--which is how many states got into fiscal trouble when the economy went south. It's also possible to raise taxes and cut spending. But what seems to be the most difficult is make fundamental reform of government services, and the easiest path of all may be to use accounting tricks to postpone decisions for another day.

According to stateline.org, six states used "revenue acceleration" recently to move around $300 million. Kansas, for example, moved the July 2004 property tax bills into an earlier month--and thus, earlier fiscal year. Minnesota has long had a similar practice in the collection of sales taxes. Says the head of the Coalition of Minnesota Businesses, it is "another one of those gimmicks that prolongs the obvious problem."
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Another State Goes Same-Sex
Pennsylvannia becomes the sixth state to extend certain employee health benefits to "same-sex partnerships." So says stateline.org, which, remarkably, could find no one who opposes the move.
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Why do $150/night hotels charge $2 a phone call?
I've been away for a few days at a conference of policy nerds, which explains the lack of blogging over the last several days.

Staying at a fancy hotel, as is the case with conferences such as this, presents some interesting observations in economics. Why, for example, are local phone calls free at cheap places (Motel 6--often under $50 a night), but expensive (50 cents, or even 10 cents a minute) at hotels that fetch $150 a night? Do hotels such as the Sheraton, W, Ritz Carlton, etc., charge so little that they must nickle-and-dime (or more) to death their guests?

I suspect the reason is that, of course, they do it because they can. People who stay at such lodging places have already demonstrated an insensitivity to costs--if you're interested in saving money, stay not at the Hilton, but at its down-chain cousin, Hampton Inn--so, the theory goes, they won't object to paying a couple of bucks for a phone call. (Well, I for one do object, and avoid piling on extra charges.) And the reason that many people don't object to high room rates and add-on fees is that they are on expense accounts. In other words, someone else is paying.

Another thing I've wondered about: if the hotel is going to charge $10 for a bowl of soup sold through room service (one of those services I refuse, in order to save money), why do they add a 20 percent "service fee"? This one leaves me stumped. Again, the customer has already demonstrated that a high price is not a deterrent. So why not roll any extra costs borne by the hotel into the list price for each item on the menu?

So why do I put up with all this? The value of the contacts I obtain by being in close proximity to people with whom I share personal and professional interests through organizations that are too big to fit into the local Hampton Inn's meeting rooms. Ah, but I still miss those "free" breakfasts and local phone calls.
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