Saturday, March 6, 2010

Hard Times and Hard Choices

Now, it isn't necessarily the intent of MAC to talk about Missouri a lot... it just happens to be a place we like a lot. AND it is a state which could reasonably be considered as a good cross-section of America, which, until the last presidential election (when McCain won the state by a slim 4,000 votes), had been one of the most accurate bell-weathers for the county's political outcomes.

Missouri is also, not surprisingly, dealing with many of the same budget-crunching problems as most other states in the union. And being as I live here, I tend to notice more of the goings-on that occur as a result of the budget problems, and some of the proposed "solutions." MAC is all about trying to look at problems affecting ALL OF US, and talking about responsible ways of dealing with them, rather than clinging to ideology. Missouri's budgetary troubles and the solutions being bandied about are a perfect example of how competing ideologies are at loggerheads... and how at the end of the day it is the people who suffer.

Currently, the state has undergone a series of budget cuts, with more sure to be on the way. Money is tight, services are being slashed, state employees are being laid-off while seeing their benefits cut right and left. All the while, the state's Republican dominated senate is looking at experimenting with a complete tax overhaul, which would replace the state's income tax system with a heightened sales-tax, including taxes on services which are not currently taxed (such as child-care, and legal work).

It isn't just the state-budget which is feeling the squeeze -- Kansas City and St. Louis have been the center of continual crises, including a plan to close 26 schools due to education funding shortfalls, all while a multi-millionaire Rex Sinquefield (a retired investment banker) crusades against the Kansas City and St. Louis "earnings tax," claiming it drives people out of Missouri's most populated cities and across the borders to find work outside of the state.

It doesn't seem to matter to Sinquefield that the earnings tax is a significant source of both cities' budgetary incomes, and that a number of services are funded through the tax (40% of which is paid for by non-residents -- such as rich professional baseball and football players!) A handful of Missourians have made it a point to take on Sinquefield, as if he alone is the source of the state's troubles.

Sinquefield's charge against the tax is purely ideological. The state government refuses to look at ways of generating revenue in order to close the budget gap, relying purely opon cuts to services and state-employees' pay and benefits, despite having a multitude of options available at raising revenue. This is also purely ideological. It is estimated that by simply catching up with the times, Missouri could raise an additional $200 million by collecting sales taxes on internet purchases.

The one thing that is certain in all of this is that Missouri residents pay. Whether the state government takes away funding for essential services OR residents continue to pay an earning tax and a state income tax -- PEOPLE pay. If we eliminate the earnings tax in KC and St. Louis -- that revenue will be replaced by some other tax (most likely an increased property tax, BRILLIANT!!), which defeats the entire purpose of eliminating it to begin with, and probably hurts more than it helps.

Who pays for it when the state cuts state employee benefits, and state employees leave for greener pastures? Who pays for it when our schools consolidate into larger class-sizes because cities and school districts can't afford to hire more teachers? Answer: WE DO.

Hard times force us to make hard choices... but too often the ones who are making the hard choices aren't the ones feeling the effects. Rex Sinquefield doesn't feel a thing when a city is forced to make huge budget cuts... Governor Nixon and the state legislature don't feel a thing when the state employees are asked to take a hit to their pension plan or their 401k contributions... or do without a holiday. But we do.

The hard choice affects the people the most... because the people are the ones who pay for it one way or another. I don't know about you, but it seems to me that there is a middle road. Let's make cuts when it makes sense, but lets not close the book on looking for ways to raise revenue when it makes sense to do so. Let's not end an earnings tax without thinking about the consequences of doing so.

Simply taking the ideological stance of being against a tax for the sake of being against a tax doesn't solve anybody's problems. It doesn't address the issue of the NEED for funding police departments and fire departments and other essential public services. Simply making cuts without looking at raising revenue as an alternative smacks of short-sightedness and ideological rigidness.

This kind of decision-making does nothing to help solve a problem, and really isn't even decision-making. It simply says to Missouri's residents that we are going to pay for it by way of decreased services... whether that makes sense or not. The hard choice SHOULD be a choice, not some proscribed "solution" put forth by an ideology. Whatever happened to taking a look at EVERY possible solution, and weighing those options equally? THAT is a choice. It is a hard choice, but at least its a choice. So far, we've seen nothing but the short-sighted slashing of budgets, which equates to nothing more than a knee-jerk reaction to budget short-falls.

Hard times call for hard choices. Missouri deserves a real choice in the matter.

Tuesday, January 19, 2010

Low Energy Costs = Low Motivation?

Missouri, you've just had it too good for too long. So why not try and stretch it a little bit longer?

Just prior to the New Year, a bipartisan panel of Missouri lawmakers released a report highlighting Missouri's energy future. The mission of the panel was to "Determine the best strategy to ensure a plentiful, affordable and clean supply of electricity that will meet the needs of the people and businesses of Missouri for the next twenty-five years and ensure that Missourians continue to benefit from low rates (emphasis mine)." Considering the Missouri has had it so good for their energy prices, it is only natural that they would want to continue this trend. However, the tension between clean energy and cheap energy is only going to increase.

According to the U.S. Energy Information Administration, Missouri residents have a kilowatt-hour cost for their power almost 25% cheaper than the national average, largely driven by a reliance on coal. Fully 80% of Missouri's power generation is fueled by coal. While this form of power generation is indeed the cheapest, it does have a few other attendant costs that have been so expertly socialized by the power industry, and reliance on this form of power for cheaper rates may prove problematic. If Washington pursues the form of cap-and-trade legislation currently bandied about in Congress, Missouri may face an increase in rates as the cost to pollute goes up.

This startling and unsurprising fact clearly influenced the authors of the report, who proceeded to lambast current federal plans as "devastating to Missouri's economic well-being," and glossed over forms of alternate energy with a circumspection and lack of depth that can only belie disinterest or outright ignorance. As a result, the four Democrats on the panel refused to sign the report. This should not be surprising- the struggle for cleaner energy, particularly at the state level, has proceeded largely along party lines throughout the country. However, this tussle hints at a wider problem that needs discussion as well.

The big question is, why should Missouri continue to enjoy energy rates that are lower than the national average? To me, this seems a prime example of what Tom Friedman refers to as part of the national epidemic of "privatizing the gains and socializing the losses." While Missouri residents get the benefit of cheap electricity, borne by the heavy use of cheap coal, neighbors downwind get the cost of increased emissions. While you can't blame Missouri for trying, in the coming era of climate awareness and pending legislation, it is foolhardy and indeed shortsighted for the state house to seek to maintain these low rates. In the report, the 80% reliance on coal as bandied about as a reason to get used to coal reliance. But lets look at the inverse of that. Is this reliance on coal a reflection of a lack of incentive of Missouri utilities to seek alternative power sources? Is the legislative regime demanding low rates stifling creativity and innovation in the Missouri power industry?

These are questions well worth exploring, but do not expect lawmakers to have any part in acknowledging inevitably higher rates. Consistently, the Missouri Public Service Commission has acted to keep rates low, often below the amounts needed by utilities. As fuel costs keep rising, expect the hard-up utilities to seek increasing to raise the rates in tandem.

The omissions and oversights of the report raise further eyebrows. I was surprised at the lack of attention paid to wind power in Missouri, given that this resource has been extensively studied at the state and federal level. While this form of power generation needs further investment and research, there is potential in this industry, and it curious that lawmakers ignored this potential source of jobs and prestige for the state.

Another factor worth considering, and one largely ignored by the panel, is the potential for alternative fuel sources and increased efficiency. Considering the low costs and high reward for increased efficiency measures, it is laughable that this was not pursued further by lawmakers as a policy goal. Perhaps this is because without the proper price incentives, consumers have no reason to reduce consumption. For a case study, refer to Juneau, Alaska. When faced with avalanches that knocked out transmission lines, threatening a five-fold increase in price, Juneau drastically cut its power consumption. When faced with truly crippling bills, Juneau made the adjustments. In a state such as Missouri, home to several large research universities, it is insulting to insinuate that the state is completely inadaptable.

In all, it seems that Jefferson City has laid out its priorities quite clearly: maintain the status quo, continue to rely on cheap coal, keep rates low, everybody happy. But the time for such policies has come and gone, and change is in the wind. One can only hope that the state house will not maintain such short-sighted policies in the face of change, and seek the opportunity presented by these changes.