The major defined contribution retirement plan-related changes in SECURE 2.0 include:

Strengthening auto-enrollment and auto-savings in retirement plans

Effective for plan years beginning after 2024, all 401(k) and 403(b) plans must automatically enroll participants with a 3%-10% contribution rate and provide an auto-save increase of 1% per year until it reaches a maximum of 10-15%. The participant must be given the opportunity to opt out of the default rates under current rules governing so-called “eligible automatic contribution arrangements” (EACA). 

This change is significant as it makes retirement plan participation the default position, which was not an option under current law. This will get more individuals into retirement savings plans—something very much needed in the United States. The Bureau of Labor Statistics reported in 2021 that 68% of private industry workers had access to retirement benefits through their employer, but only 51% chose to participate. In contrast, 92% percent of workers in state and local governments had access to retirement benefits, and 82% participated.  

The impact of this change will not be realized immediately because it only applies to new plans established after Dec. 29, 2022. In addition, government plans, church plans, new businesses, and small businesses with 10 or fewer employees are exempt.  

Refundable saver’s match tax credit

The current tax law provides a “non-refundable” tax credit for eligible individuals who contribute to IRAs or employer retirement accounts. Starting in 2027, The SECURE Act 2.0 changes the tax credit to be “refundable” in the form of a federal 50% matching contribution, up to $2,000 per year. The matching amount phases out depending on the employee’s income (e.g., $41,000-$71,000 for married filing jointly; $20,500-$35,000 for single taxpayers.

Using a federal matching contribution to provide the refundable credit will likely improve lower- and middle-income retirement savings.

Increased catch-up contribution limits for older workers

Individuals aged 50 and older under current law can make “catch-up” contributions up to $7,500 to 401(k), 403(b), and governmental 457(b) plans. The SECURE Act 2.0, effective in 2025, increases the catch-up limit for individuals ages 60-63 to $10,000 (indexed beginning in 2024). For higher-income individuals earning over $145,000 in a tax year, the contribution must be made to a Roth Account on an after-tax basis.

Lowered barriers to the use of lifetime income annuities

Beginning in 2023, the SECURE Act 2.0 further reduces tax code barriers for using annuities in defined contribution plans as recommended in Reason’s DC Personal Retirement Optimization Plan (or PRO) plan design in two ways.

Required Minimum Distribution Rules (RMD) Relaxed for Partial Annuitization: Current law requires an individual to determine RMD separately for annuitized and non-annuitized amounts. The result is a higher RMD amount than if the individual had not annuitized anything. The SECURE Act 2.0 removes this disincentive to annuitize by allowing the individual to aggregate both annuitized and non-annuitized distributions for RMD purposes.

Higher Qualified Longevity Annuity Contract (QLAC) Purchase Limits:  A QLAC product allows an individual to buy an annuity with a start date that begins only if they live longer than a stated age (no later than 85) as a way to help protect against the risk of outliving their retirement assets. Under current law, an individual can purchase a QLAC product but cannot spend more than 25% of the account value up to $135,000 (as currently indexed). The SECURE Act 2.0 eliminates the 25% limitation and increases the dollar limit to $200,000 (indexed). 

Other changes help portability, RMD distribution planning, and flexibility

The SECURE Act 2.0 permits retirement plan service providers to offer account portability services that automatically transfer retirement savings to an individual’s new employer’s plan. This helps preserve retirement savings instead of just cashing out of the prior employer’s plan. 

The act also increases the Required Beginning Date for minimum distributions from 72 to 73, depending on the individual’s “applicable age”:

• For those who turned age 72 before 2023, the applicable age is 72 (or age 70 ½ if they were born before July 1, 1949).
• For those who turn 72 after 2022 and reach the age of 73 before 2033, the applicable age is 73. 
• For employees turning 74 after 2032, the applicable age now is 75.

The onerous excise tax for RMD violations is also reduced in 2023 from 50% to 25%. The penalty tax is further reduced to 10% if the failure to take the RMD is corrected within a two-year window period.

Conclusion

The SECURE Act 2.0 takes important and meaningful steps toward increasing retirement plan savings participation. It reduces tax policy disincentives and tax code rules that perversely inhibit lifetime annuity solutions, which would improve retirement income security. It also provides additional flexibility for tax optimization for retirement distributions. 

The post Ways the SECURE Act 2.0 can help people save for retirement appeared first on Reason Foundation.

Backed by Gov. Pillen, Legislative Bill (LB) 583 would increase state reimbursements for special education expenditures as well as ensure that every school district—including the many rural Nebraska school districts that currently get no state formula aid—receives a minimum of $1,500 per student amount in state aid, also called Foundation Aid.

The bill would also set aside $2 billion in revenues to be collected from state taxpayers in a series of years in an Education Future Fund to sustain further increases in state education funding. All told, this would result in about $270 million in new revenues for K-12 education in the immediate year following the bill’s enactment.

Another bill, LB 589, aims to make the new influx of state funds from LB 583 result in a reduction in property tax burdens. This bill would cap the annual allowable growth in state and local school district revenues, both property tax and non-property tax, at three percent. Note that reimbursement funds for special education and donations are excluded from these revenues, which means that the increase in special education reimbursements wouldn’t count toward a school district’s revenue growth cap. Additionally, an amendment introduced would exclude payments on the principal and interest of bonds from the revenue growth limit. There are also exceptions allowing for higher revenue growth caps for districts that have substantial growth in total student enrollment or enrollment of low-income or English learner students. 

Laying aside these exceptions, however, the many Nebraska school districts that rely primarily on property taxes should see a necessary reduction in property taxes from the new per-student Foundation Aid and the three percent annual budget growth cap.

Take the example of Centura Public Schools, a school district with 442 students in the 2022-2023 school year that is heavily reliant on local property taxes. LB 589 specifies that all local and state revenues, excluding only special education funds and private grants and donations, should be used to calculate a district’s three percent revenue growth limit. According to the district’s most recent annual financial report (AFR) from the 2021-2022 school year, Centura receives $6.61 million from those funding sources. Now, if Centura were to receive $1,500 per student under LB 583, that would represent an estimated $663,855 increase in funding—a 10% increase on the funding sources considered under the cap based according to the district’s latest AFR.

Assuming Centura doesn’t qualify for any of the enrollment growth exceptions granted in LB 589, the new aid from the state would require a reduction in property taxes for the district to meet the three percent revenue growth limit. Based on the district’s AFR figures, Centura would only be able to grow its budget by an estimated $198,237. Therefore, the new state aid should result in an estimated total property tax reduction of about $465,618, spread across all property taxpayers in the district. These calculations are all summarized in Table 1.

This dynamic would apply to many of Nebraska’s other small, property tax-dependent school districts—the influx in state aid would necessitate a reduction in their property taxes to meet the three percent revenue growth limit.

But problematically, LB 589 provides a pathway whereby Centura–and similarly situated school districts– could minimize the property tax relief by allowing districts to override the revenue growth limit with the approval of 60 percent of the district’s voters in a special election. It also allows district school boards to override the revenue growth limit without petitioning voters at all if they receive an affirmative vote from at least 75 percent of school board members.

According to the bill, voter or school board approval would allow districts with “no more than four hundred seventy-one students”—which would include Centura—to have a revenue growth cap of seven percent instead of three percent. This cap would cut Centura’s required property tax reduction down to about only $200,000, a very small reduction in property taxes considering that Centura levied $5.55 million in local property taxes in the 2021-22 school year.

The advantages of LB 589 and LB 583 are that they aim to gradually decrease Nebraska’s heavy property tax burdens by increasing the state’s role in financing K-12 education. Future state investments would be subject to the same budget growth limits and should result in further property tax relief. But for the many Nebraska districts in similar situations as Centura, the current provisions in LB 589 that allow for school boards or voters to override the proposed three percent revenue growth limit risk creating a dynamic where $2 or $3 in new state funds are required to achieve only $1 in property tax relief.

To achieve cheaper and more immediate property tax relief, state legislators could consider removing provisions in LB 589 that allow school districts to increase their revenue growth cap with school board or voter approval.

More fundamentally, Nebraska lawmakers should also examine every aspect of how the state Tax Equity and Educational Opportunities Support Act (TEEOSA) formula works and how it’s funded. There are many problems in Nebraska’s education funding system that should be addressed, such as how the state formula sorts districts into complex, non-transparent comparison groups to determine base funding and how most Nebraska school districts raise more than their formula share from local property taxes alone. State policymakers shouldn’t pass up this opportunity to decrease the formula’s overreliance on property taxes and to make the formula more transparent and student-centered.

The post Analyzing Nebraska’s proposed legislation impacting school finance and property taxes appeared first on Reason Foundation.

In his recent remarks at the Florida Sheriffs Association’s Winter Conference, the governor commented on the trial of the Stoneman Douglas High School shooting perpetrator. He said that the mass murderer’s conviction was long overdue, but he was disappointed that the jury did not recommend capital punishment. Wrongly suggesting that the outcome was the result of a lone juror’s personal opposition to the death penalty, Gov. DeSantis argued:

I think it was really based on one person’s idiosyncratic views. Fine, have a supermajority, but you can’t just say one person. So maybe 8 out of 12 have to agree or something. But we can’t be in a situation where one person can just derail this.

The jury foreman in that decision told CBS News that three jurors voted against recommending the death penalty. One juror in question was reportedly a “hard no” because the juror believed that the gunman was mentally ill.

Setting aside the details of any particular case, Florida’s proposal stands in stark contrast to the growing number of states moving away from executions. Twenty-three other states have totally abolished the death penalty. Governors in three additional states have placed an indefinite moratorium on executions, and at least nine states are actively considering abolishing the death penalty.

Meanwhile, a group of conservative lawmakers and pastors in Oklahoma are calling for a moratorium on executions as the state presses forward with plans to execute Richard Glossip, a man widely believed to be innocent. Reason.com reported:

Glossip’s case has garnered attention from death penalty opponents, because he’s on death row for a murder he did not commit. Glossip was convicted and sentenced to death for allegedly masterminding the murder of Barry Van Treese, the owner of a hotel where Glossip worked, in 1997. Glossip allegedly convinced Justin Sneed, a 19-year-old maintenance man at the hotel at the time, to kill Van Treese, and in exchange the two would split the victim’s money.

Glossip has insisted on his innocence, and there is no corroborating evidence tying him to the crime. Once Sneed confessed to the killing and pointed the finger at Glossip, he was convicted and sentenced to death based upon the testimony of Sneed alone. Sneed avoided the death penalty. Since then, Glossip and his attorneys have been fighting to get the state to reconsider its plans to execute him.

Among the states that still allow the death penalty, all but three require juries to reach a unanimous decision. Alabama requires that 10 out of 12 jurors agree to recommend the death penalty. In Missouri and Indiana, judges can make the final decision if juries are unable to reach a unanimous vote.

Florida previously allowed trial judges to make the final determination regarding capital punishment, with juries only serving an advisory function. However, the U.S. Supreme Court’s 2016 ruling in Hurst v. Florida found that the state’s procedure violated defendants’ Sixth Amendment right to a trial by jury.

Initially, Florida lawmakers responded with legislation that would have required 10 out of 12 jurors to recommend capital punishment, but that law was quickly struck down by the Florida Supreme Court. The Florida legislature subsequently passed a law requiring unanimous jury recommendations for capital punishment. The Florida Supreme Court further complicated the issue in 2020 when it reversed its position on jury unanimity, opening the door for Gov. DeSantis’ proposal.

Regardless of whether unanimity is constitutionally required, it would be unwise to lower the threshold. In fact, Florida should put an end to executions altogether.

A wrongful conviction is perhaps the worst possible outcome in the justice system. It consistently deprives innocent people of their liberty and denies justice to victims. The National Registry of Exonerations shows over 80 exonerations in Florida since 1989—cases in which a person was wrongly convicted of a crime and later cleared of all the charges based on new evidence of innocence. Wrongful convictions are made immeasurably worse when they result in wrongful execution by the state.

Additionally, lengthy and costly series of appeals also typically precedes executions—more than half of all inmates on death row in the U.S. have been there for more than 18 years. Lengthy appeals are part of the reason why capital cases are so costly to taxpayers. It is estimated that capital punishment costs Florida about $51 million annually beyond what it would cost to sentence first-degree murderers to life in prison without parole. Thus, Florida would save about $24 million per inmate sentenced to life without parole rather than capital punishment.

However, the delay for appeals between conviction and execution is critically important. It serves as a bulwark against wrongful executions. According to the Death Penalty Information Center, 30 people in Florida are among the 191 people in the United States who have been exonerated while they were awaiting execution since 1972. That translates to roughly one exoneration for every 8.2 executions nationwide. Florida’s justice system is much worse than the average at convicting innocent people, with one person on death row being exonerated for every 3.3 executions since 1979. Eleven out of the 30 people exonerated in Florida had wrongly been on death row for more than 10 years before they were cleared.

Clifford Williams, a Florida man, was exonerated in 2019 after serving 43 years on death row––the longest time on record among exonerees nationwide. An appeal uncovered several weaknesses in Williams’s trial, including mistaken witness identification, official misconduct, and an inadequate legal defense. Williams was initially denied compensation due to a prior felony, but Gov. DeSantis later approved a $2 million award.

Proponents of the death penalty might argue that it serves as a deterrent, but there is no consistent evidence to support that claim. Empirical research on the subject is marked by intense methodological disagreements and has produced conflicting results. As a 2015 National Research Council report concluded:

[R]esearch to date on the effect of capital punishment on homicide is not informative about whether capital punishment decreases, increases, or has no effect on homicide rates. Therefore, the committee recommends that these studies not be used to inform deliberations requiring judgments about the effect of the death penalty on homicide.

Even in the absence of evidence on deterrence, capital punishment involves significant tradeoffs when it comes to upholding justice. Capital punishment is a sentence reserved for the most heinous and depraved criminals. It is understandable that Gov. DeSantis and many others are frustrated when these individuals receive anything less than swift execution. However, the costs of error in capital cases is high, and Florida’s track record demonstrates that errors are not uncommon. Making it easier to send people to death row risks more cases like Clifford Williams’ experience of wrongly losing 43 years on death row while adding financial consequences on top of concerns about justice.

Jury unanimity doesn’t eliminate wrongful convictions and executions, but lowering the standard, as Gov. DeSantis has expressed he would like to see happen in Florida, would only increase the opportunity for errors that could result in wrongful executions by the state.

Instead of taking this misguided cue from Gov. DeSantis, Florida lawmakers should consider abolishing the death penalty altogether.

The post Florida should abolish capital punishment, not make it easier appeared first on Reason Foundation.

Jared Harrison of Oklahoma was charged with unlawful possession of a firearm after police found marijuana and a handgun in his car while he was driving to work in 2022. Judge Patrick Wyrick of the U.S. District Court for the Western District of Oklahoma dismissed the indictment, agreeing with defense attorneys that the statute banning “unlawful” users of cannabis from possessing firearms violates the Second Amendment of the U.S. Constitution. “The mere use of marijuana carries none of the characteristics that the Nation’s history and tradition of firearms regulation supports,” Wyrick wrote. 

According to a U.S. Supreme Court ruling last year that struck down a gun control law in New York, any restrictions on gun ownership must be in line with a historical application of the Second Amendment. 

The ban against gun ownership by medical marijuana patients is concurrently being challenged in another federal court by several medical cannabis patients. That suit was led by former Florida Agriculture Commissioner Nikki Fried, but she left office in January, and her successor has indicated the agency will no longer be a plaintiff. Will Hall, a private attorney who assumed the case on behalf of the remaining plaintiffs, said he plans to address this new Oklahoma precedent “in our subsequent filings.” 

In Harrison’s case, the prosecution argued that “disarming presumptively risky persons, namely, felons, the mentally ill, and the intoxicated” is in the public interest. Harrison’s lawyers had argued that the portion of federal firearms law focused on drug users or addicts was not consistent with the nation’s historical tradition of firearm regulation, echoing what the U.S. Supreme Court ruled last year in a case known as New York State Rifle & Pistol Association v. Bruen. 

Judge Wyrick rebutted the prosecution in the Harrison case, emphasizing the fact that marijuana use does not carry any of the characteristics that are supported by the nation’s history and tradition of firearm regulation. The use of marijuana, which can be purchased legally (under state law) in more than 2,000 ordinary storefronts in Oklahoma, opined Wyrick, is not inherently violent, forceful, or threatening. It is not a “crime of violence,” nor does it involve “the actual use or threatened use of force.” 

Despite the government’s authority to protect the public from dangerous people with guns, Wyrick insisted that Jared Harrison’s “mere use of marijuana does not indicate that someone is in fact dangerous, let alone analogous to a ‘dangerous lunatic.’”

Laura Deskin, a public defender representing Harrison, said the ruling was a “step in the right direction for a large number of Americans who deserve the right to bear arms and protect their homes just like any other American.” 

There is no clear evidence that medical marijuana patients are any more disposed to engage in violent crime than other groups. On the contrary, the available evidence indicates that medical marijuana is associated with slightly lower crime rates. A federal ban on gun ownership by medical marijuana users would simply penalize those users on the basis of a medical condition for which a physician has recommended cannabis as treatment. 

Judge Wyrick has made clear there is no public interest served by depriving lawful medical marijuana patients of the means to defend themselves. As cases related to medical marijuana users’ right to bear arms continue to pop up across the country, having this ruling as an established precedent is a positive development. 

The post Federal judge: Restrictions on gun ownership violate medical marijuana patients’ Second Amendment rights  appeared first on Reason Foundation.

In Dec. 2022, Florida Gov. Ron DeSantis signed a one-year “toll-relief bill” that applies to every toll road, toll bridge, and express toll lane in the state. Those who drive 35 or more trips per month on Florida’s tolled roadways will be given a 50% discount on the tolls they were charged. The state will compensate toll operators via $500 million in general fund money.

Not to be outdone, New Jersey legislators are considering a similar measure for that state’s toll roads. Oregon’s Department of Transportation (DOT) is working on low-income discounts for drivers who might use soon-to-be-tolled Interstates and bridges in the Portland area.

In Michigan, what shocked me most, was one section of an otherwise very well-done January 2023 study of potential toll-financed Interstate highway modernization in the state. It was researched and written for Michigan DOT by HNTB and CDM Smith, two firms with great expertise in toll financing. The most promising near-term corridors would be rebuilt and modernized, corridor-by-corridor, financed by toll revenue bonds over the next 10 years, at a cost of $18.5 billion. The toll financing plan is estimated to fully cover the capital and operating costs and attain an investment-grade bond rating.

The financial projections in Michigan took 5% of revenue off the top to account for an array of possible discounts, mitigations, and rebates the state could offer to toll lane users. One component, which I think is defensible, is called “local community transportation mitigation.” Because some traffic that now uses Interstates would divert to other roads when the Interstates are tolled, spending a bit of the toll revenue to assist impacted communities in funding things like signal timing improvements, park-and-ride lots, and commuter buses is defensible. In addition, quite a few toll roads offer discounts for frequent commuters, which is also suggested.

But I draw the line at what the Michigan study calls “local community non-transportation mitigation.” It suggests using toll revenue to buy community support by funding “arts and cultural abundance,” “public health and well-being,” “learning,” and “sustainable environment and natural resources,” among other nice-sounding things.

Also proposed is 100% discounts (i.e., no tolls at all) for “environmental justice communities.” Remember, this is for people who own and drive cars, not those who commute via subsidized transit.

Part of the rationale for these mitigations is the projected extent of traffic diversion. The report includes diversion rate estimates for each corridor, ranging from 6% to 18%, based on the most-viable car/SUV toll of 6 cents per mile. An alternative way to reduce diversion—mentioned in the report but not included in the plan—is to provide rebates of state fuel taxes for all miles driven on newly tolled corridors. The state gas tax is about one cent per mile, so if motorists received a rebate of that amount, the net cost per mile to use the tolled Interstate would drop from 6 cents to 5 cents (17% less). And since diversion rates are proportional to the cost of using a toll road, diversion would likely be 17% less than the study estimated.

In a research paper of mine, published last month in Transportation Research Record, I estimated that the net present value of a fuel-tax rebate for newly tolled Interstates in a mid-size state would be less than 7% of gross toll revenue. That is within the ballpark of the 5% that HNTB would set aside for its set of mitigations and discounts in Michigan.

Let’s now consider some of the downsides to this growing trend of discounts and exemptions from tolling. In a report on the new Florida legislation, Moody’s Investors Service points out how unsustainable a one-year discount program will be. State budgets go up and down, and in the immediate term, in 2023, many states still have unspent windfalls from trillions of dollars in COVID-19 pandemic-era federal programs. That is not going to be the case in many future years.

But once motorists are used to paying far less to use toll lanes than before, that will likely seem like an entitlement, and there will be political pressures to continue the discounts—either at the expense of other state obligations (Medicaid, public schools, etc.) or at the expense of the toll roads. Ultimately, that could reduce toll road bond ratings, increasing their debt service costs.

Toll discount programs likely also lead drivers to think highways cost less to build, maintain and expand than they actually do. In this case, that would lead to political pressure for more federal and state funding of what had previously been self-supporting major highways and bridges. That is bad news for the long-term sustainability of highway funding. The true costs of building and maintaining highways and bridges should be paid for by those who use them.

And that brings me to one last point. The United States is facing a once-in-a-century need to replace what will soon be an obsolete method of highway funding—per-gallon fuel taxes—with a funding source that is independent of vehicle propulsion source. The general consensus is that the fairest and best replacement is to charge per mile driven, with higher charges for the heaviest vehicles that produce the most wear and tear on roadways. 

The easiest way to begin this transition to mileage-based user fees is with per-mile tolls on limited-access highways, such as Interstates and freeways. With all-electronic tolling and prepaid accounts, the cost of toll collection can be a very small fraction of the gross revenue collected. The transponder technology—E-ZPass and equivalents—is in widespread use in much of the country and widely accepted with little concerns about privacy.

If states adopt this path toward shifting from charging per gallon of gas to per mile driven, it’s vital that they do it right. The gas tax was designed as a users-pay/users-benefit road-use charge. There are no gas tax discounts for social justice communities, nor are there such discounts for electric bills, water bills, cable bills, or smartphone bills. Some utilities offer reduced lifeline rates to low-income customers. Something similar could be considered for per-mile highway charges. But as I wrote in a recent PW FInancing column on transportation equity:

Politicizing urban highways and undermining tolling, which should be used to finance and maintain highways, is not a good or effective solution to the nation’s infrastructure problems and won’t produce more equity.

We need solidly funded highways going forward, and those who use them should pay for them.

A version of this column first appeared in Public Works Financing.

The post Sustainable highway funding requires charging the drivers who use them appeared first on Reason Foundation.

In this issue:

• Experts spar over induced demand and freeway expansion
• Analysis, not knee-jerk reactions for Ohio train derailment
• Which state DOTs plan to fix major truck bottlenecks?
• TRB report on Black Americans and transportation
• Hyperloop startups losing ground
• How is Denver doing on Vision Zero?
• News Notes
• Quotable Quotes

Experts Spar Over Induced Demand and Urban Freeway Expansion  

I-35 through downtown Austin is massively congested much of the day. That’s hardly surprising since both Austin and Texas have been growing by leaps and bounds for several decades (with no end in sight), while I-35 through central Austin still has not had a significant expansion since 1974. Trying to accommodate today’s traffic flow with the capacity of 50 years ago is like trying to put 10 pounds of potatoes into a 5-pound sack.

Yet opponents of expanding I-35 in Austin raise the concept of “induced demand,” which some refer to as the “iron law of freeway congestion.” The idea is that it’s pointless to add capacity because the improved traffic flow will (only) lead to more vehicles choosing to use the freeway, yielding renewed congestion.

One of those who raised this argument is professor and engineer Kara Kockelman, who teaches transportation engineering at the University of Texas at Austin. In a recent piece by Kelsey Thompson of KXAN, Kockelman said that roadway improvements can lead to people changing their behavior, such as living further out in the suburbs or making trips during peak periods that they used to make at off-peak times. “By opening up I-35,” she told KXAN, “what we do is increase the attractiveness of that corridor for longer distance travel.” Also, after a long construction period, “There’ll be a lot of pent-up demand just waiting to get onto that road when it fully opens,” Kockelman added. That’s all true, but it’s not the end of the story.

At about the same time, another transportation expert, Steven Polzin of Arizona State University, published an article on Planetizen, “Induced Travel Demand Induces Media Attention.” He points out that in fast-growing states, most new highway demand comes from population growth and new jobs, not from “induced” travel. Second, he notes that vehicle miles traveled (VMT) per capita have leveled off in the past decade, so traffic congestion will likely not grow as fast in coming decades, other things equal. Third, Polzin points out that trips accommodated by an expanded highway can provide a number of benefits, such as:

• Residents getting access to better jobs and businesses with better selections and lower prices;
• Businesses having access to a larger labor pool, and larger customer and supplier bases;
• Enabling emergency vehicles getting where they are needed faster;
• Pulling cut-through traffic out of neighborhoods; and,
• Enabling parents to get home in time for family meals and activities.

Some of those benefits might not be long-lasting, especially as places like Austin continue to grow. But neither expert mentioned a way to make the expansion benefits last longer: add market-priced lanes instead of free lanes, so the pricing will enable high-value trips to take place even during peaks when the free lanes are getting jammed. Those can be personal trips (to the airport to catch a plane, getting to day-care in time to avoid late fees), enabling express buses to run consistently faster and more reliably, and letting emergency vehicles get where they’re needed quickly, for example. Kockelman mentions toll roads but not express toll lanes. In Houston and especially Dallas/Ft. Worth, the express toll lanes are popular and much-used. But even there, where they have proven their usefulness and popularity, regional plans for a whole network of express toll lanes have been thwarted by the Texas state legislature, which has banned any new Texas Department of Transportation (TxDOT) support for tolled projects, and any new long-term public-private partnerships (P3s) financed by toll revenues.

TxDOT’s earlier concepts for I-35 in Austin called for adding express toll lanes (also known as priced managed lanes). But as I noted in the August 2022 issue of this newsletter, due to the legislative ban, TxDOT’s current plan is to spend $4.9 billion of taxpayers money to add “non-priced managed lanes” to I-35 in Austin. In plain language, that means old-fashioned, ineffective high-occupancy vehicle (HOV) lanes. Based on past history, if built, those lanes will likely be either too empty (wasting costly pavement) or too full (fam-pools, cheaters). Without pricing, there is no “management” of HOV lanes.

In a recent presentation in Ft. Worth, I pointed out that TxDOT’s current plans to add HOV lanes to I-35 in Austin, I-35 in San Antonio, and I-635E in Dallas total $8.1 billion. On average, revenue-financed highway projects like express toll lanes need only 20% from the state DOT with all the rest financed based on toll revenues. Were those three projects carried out via revenue-financed P3s, TxDOT would save 80% of that $8.1 billion to spend on other projects statewide. That ought to appeal to legislators from smaller cities and rural areas. And it would produce a much more effective and long-term solution for the antiquated I-35 through Austin.

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Analysis, Not Knee-Jerk Regulation, for the Ohio Train Derailment
By Marc Scribner

On Feb. 3, a 149-car freight train operated by Norfolk Southern derailed in East Palestine, Ohio. Legitimate concerns regarding its hazardous material cargo and the potential impact on the local community soon morphed into a highly politicized and incoherent public debate on rail safety. Without knowing the causes of the derailment, it is premature to suggest any policies to prevent similar accidents from taking place in the future.

Of the 38 cars that left the track in East Palestine, 11 were tank cars carrying hazardous materials. These cars then caught fire and ignited an additional 12 cars that had not derailed. The train crew was able to decouple the lead locomotives from the train and flee a mile east while emergency responders began fighting the fires and instituted a one-mile radius evacuation zone surrounding the site.

By Feb. 5, emergency response personnel had extinguished the fires but noticed the temperature was still rising in a tank car carrying more than 115,000 gallons of toxic vinyl chloride, indicating a chemical reaction was taking place that could cause an explosion. This led to an expansion of the evacuation zone to a two-mile radius, after which emergency responders manually emptied five tank cars carrying vinyl chloride into containment ditches, where it was then burned. There have been no reported injuries or fatalities, although regulators are still investigating environmental and health hazards that may be present.

In the weeks following the accident, mainstream media outlets took an unusually heightened interest. This was accompanied by an outpouring of demagoguery and conspiracy theories from numerous politicians, pundits, and activists. The National Transportation Safety Board (NTSB) is still investigating the causes of this accident, but its preliminary report published on Feb. 23 suggests an overheated wheel bearing failed immediately prior to the derailment.

The NTSB’s clear early reporting on the known facts has helped quell some of the misinformation firestorm, but false and misleading claims about the accident are still being circulated and continue to drive the debate on potential policy responses. Policymakers should proceed with caution and develop an understanding of the particular facts of this accident and the relevance of various regulatory proposals before acting.

The suggestion that the Trump administration’s rescission of Obama-era requirements on electronically controlled pneumatic (ECP) brakes is a potential cause of the derailment is false on its face. That 2015 rule was criticized by rail carriers for having costs that exceeded the benefits. In the FAST Act, the 2015 multiyear surface transportation reauthorization, Congress included provisions at Section 7311 that ordered studies on ECP brakes from the Government Accountability Office and the National Academy of Sciences. Congress also required the secretary of transportation to reanalyze the benefits and costs of the rule based on this revised expert input and to repeal the ECP brake requirements if it was determined that the costs exceeded the benefits. Consistent with the law, the Department of Transportation (DOT) rescinded the ECP brake requirements in 2018 following the updated benefit-cost analysis.

But most important to the East Palestine derailment is that even if the ECP brake rule had withstood congressionally ordered scrutiny, it would not have applied to this train. That is because the Norfolk Southern train did not consist of enough hazardous materials railcars to trigger those repealed requirements. The false claims about the ECP brake rule led NTSB Chair Jennifer Homendy to take to social media to correct the record a week before the release of NTSB’s preliminary report.

In another social media spectacle, Transportation Secretary Pete Buttigieg and Sen. Marco Rubio (R-FL) got into a heated argument about automated track inspection (ATI) technologies that also are irrelevant to the East Palestine accident. Sec. Buttigieg implied that Sen. Rubio’s past support for ATI ran counter to rail safety. This is untrue. As I’ve written at length, regulators themselves have found that ATI provides safety benefits over traditional human visual inspections. The issue is that the Federal Railroad Administration during the Biden administration has been shutting down successful ATI pilot programs and denying waivers requested to expand the use of ATI, apparently at the request of unions representing track inspectors. In this case, Sen. Rubio was right to criticize the Biden Department of Transportation for adopting less-safe rail policy.

But Sen. Rubio has also offered up red herrings following this accident. He most recently joined a bipartisan group of populist senators to introduce the Railway Safety Act of 2023, which closely mirrors the regulatory demands made by Sec. Buttigieg prior to the release of the NTSB’s preliminary report. President Biden quickly endorsed the bill. Among the bill’s provisions is a requirement that trains have at least two crewmembers on board, a longstanding priority of organized labor that fears emerging automation technologies. The Department of Transportation is currently pursuing this rule on its own and has admitted that it does not possess “any meaningful data” to support the conclusion that two-person train crews are safer or that one-person crews are less safe (see Reason Foundation’s response to this proposed rule). What’s more, the Norfolk Southern train had three crewmembers in the locomotive cab at the time of derailment and there is no indication that the crew played any part in the accident.

There may be an appropriate role for policymakers once the causes of the East Palestine accident are determined. However, it is important to recognize that rail accident rates are at or near historic lows across all incident types, according to Federal Railroad Administration data. Further, statistics from the Pipeline and Hazardous Materials Safety Administration show that rail is far safer than trucks in transporting hazardous materials, meaning that rail-specific hazardous materials regulations should be balanced against the safety implications of a potential modal shift to trucks likely to occur if rail transportation costs rise. While especially challenging in a polarized and hot-tempered political environment, responsible policymaking will require careful analysis, not reflexive regulation.

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Which State DOTs Plan to Fix Major Truck Bottlenecks?

Ever since 2002, trucking research organization the American Transportation Research Institute (ATRI) has been using truck GPS data to identify the top hundred truck bottlenecks across the 48 contiguous states. Its latest annual report was released last month and is available here.

In most prior years, when I have written about this annual survey, I’ve reported little change from year to year: the same bottlenecks keep appearing, in pretty much the same order of awfulness (e.g., Fort Lee, NJ, where I-95 intersects with SR 4 is nearly always #1). But this year, there is actually some good news. Transportation departments in several states have included fixing a number of these chronic bottlenecks in their current plans.

I had time to review only the top 20 bottlenecks, those with the worst chronic traffic congestion. And the winning DOT is Georgia’s. Its current plans are to reconstruct and modernize all of nine of its ATRI  bottlenecks, all in the Atlanta metro area and most of them involving I-285, the Atlanta ring road known locally as “the Perimeter.”  Georgia’s six major bottlenecks in the top 20 to be rebuilt are as follows:

Texas has four bottlenecks in the top 20:

TxDOT tells me that all four are in its 10-year Unified Transportation Program.

Fast-growing Nashville has one of the top 10 bottlenecks: I-24/I-40 at I-440 East. It will likely be addressed in the state’s forthcoming public-private partnership and choice-lanes legislation, but that legislation has not yet cleared the Tennessee legislature.

Cincinnati has the #15 bottleneck, where I-71 and I-75 come together to cross the Ohio River. That bottleneck will be addressed by the $3.2 billion Brent Spence Bridge project, which will improve the existing bridge and reserve it for local travel and build a new double-deck bridge parallel to the existing one to accommodate both I-71 and I-75. That project has won $1.6 billion in federal grants, to be supplemented by Ohio and Kentucky state transportation funding.

Louisiana made #20 on the list, with the notorious bottleneck where I-10 and I-110 intersect in Baton Rouge, near the I-10 bridge across the Mississippi River. Louisiana Department of Transportation and Development (DOTD) has an ongoing contract for the reconstruction and widening of this segment of I-10. In addition, DOTD is in the planning stage for an additional bridge across the Mississippi, which should also improve traffic flow in the Baton Rouge area. Last fall, a planning study narrowed the locations for the Mississippi River Bridge South project to just three.

California has three of the top 20 bottlenecks, all in the greater Los Angeles area. My three Caltrans contacts confirmed that one of the three—SR 60 at SR 57—will begin reconstruction this spring. But there are no plans within the next 10 years to deal with the other two.

The Chicago area has three bottleneck interchanges in the top 20, but thus far, I have not identified any projects that would directly address any of them.

This is the most positive assessment I’ve made of the annual ATRI report, with serious plans to address more than half of the top 20 bottlenecks. Kudos to the DOTs of Georgia, Louisiana, Ohio, Tennessee, and Texas for taking these bottlenecks seriously.

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TRB Report on Black Americans and Transportation
By Baruch Feigenbaum

In order to better understand transportation’s effects on black Americans, the Transportation Research Board (TRB) Transit Cooperative Research Program (TCRP) is in the process of producing a five-volume study on racial equity. The full title is Racial Equity, Black America, and Public Transportation. The first volume was released in early January.

What is TCRP, and how does the process work? TRB committee members write problem statements for further research and submit them to TCRP staff. The staff meets to select which problem statements should get funded for research, with a focus on statements that are timely and innovative. Once a statement is selected, TRB staff forms an oversight committee of TRB committee members. The oversight committee fine-tunes the topic parameters, issues a request for proposals from contractors, and then selects the winning contractor team based on qualifications.

The first chapter of volume one explains the report’s purpose of understanding how transportation impacts affect black people by linking transportation and the civil rights movement. The second chapter describes the research approach, which sorts government policies into different categories, such as land use. The third chapter discusses economic policies, including housing and transportation, white flight, and spatial mismatch. The fourth chapter discusses health impacts, including air pollution impacts and pandemic policies. The fifth chapter examines social causes, including gentrification and policing. And the sixth chapter includes potential solutions, including changing metropolitan planning organizations’ (MPO) policies.

The report details some clearly racist policies. In chapter 3, section 3, the authors note that often urban Interstates were routed through black communities even when it was not the shortest route. These routings were designed to place a barrier between the central business district and the community. For example, in Atlanta, I-75/I-85 was built in a semi-circle instead of a straight line to separate downtown from the Old Fourth Ward. This occurred even though a straight line would have been cheaper and safer.

In chapter 3, section 4, the authors note how cities such as Denver have prioritized rail construction for a limited number of white constituents while providing insufficient bus service to a larger number of bus riders. The authors also note how most post-World War II heavy rail systems served to move upper-middle-class white residents from the suburbs to downtown, demolishing parts of places like West Oakland, CA, in the process. The authors also note the role of the Bus Riders Union, which successfully sued the Los Angeles County transit provider to force the agency to increase bus service instead of building rail lines. (Unfortunately, once the court-ordered consent decree expired, the transit provider returned to its past ways). In chapter 5, the authors note how bike lanes and light rail can raise property values, forcing out black residents. This occurred in Seattle due to new light rail stations and in Fresno due to a new mixed-use infrastructure project.

But sometimes the report strays from transportation. While some of this research is useful, I question what it is doing in a transportation publication. For example, the report has an entire section on housing discrimination. It details how both the former Home Owners Loan Corporation and the Federal Housing Administration had loan programs that discriminated against black homeowners. Only $120 billion, or two percent of program funds, were disbursed to African Americans. The report also includes an entire chapter on health. The report details the siting of hazardous landfills in North Carolina and Texas, neither of which are related to transportation.

In its conclusions, the report highlights how MPOs need to do a better job of representing all interest groups, not just white business interests, as well as how some transportation ballot measures which did not include projects important to black residents failed. But it does not offer a solution for either. Some of the report’s implied solutions could make the outcomes worse. For example, demolishing Interstate highway segments would likely lead to gentrification displacing black residents. It is far from ideal to live adjacent to a highway and have to deal with increased noise and tailpipe emissions. But it is better than losing your house because you cannot afford to pay the property taxes.

There are also some statements that seem to counter the report’s goals. In one section, the authors note that whites have much shorter travel times to work despite commuting longer distances. The study asserts that the reason is automobile ownership, and if blacks had owned automobiles at higher rates, then travel times would have been the same. If that’s true, maybe the policy should be to subsidize vehicle purchases instead of transit systems, as some transportation economists have recommended.

Finally, I’ll be curious to see the full policy recommendations in volume 3. The report details a 500-year-plus history of racist policies and suggests that government actors are still racist. If the government is so bad, why not look to the private sector or non-profit actors to solve the problem?

Comedian Dave Barry told a joke about how driver #1 got a flat tire because driver #2 intentionally threw a bunch of nails on the road in front of driver #1’s vehicle. Yet driver #1 went to driver #2 to repair his tires. If the government caused these problems, the authors need to make sure their recommendations don’t rely on the people who created the problems to solve them.

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Hyperloop Startups Losing Ground

Ten years ago, Elon Musk introduced a ‘new’ concept that I’d studied in a mechanical engineering course at Massachusetts Institute of Technology in the 1960s: Build evacuated tubes with capsules powered by linear induction motors for truly high-speed surface transportation. We fledgling engineers were excited by the concept, but we had no real idea of how to estimate its cost or solve a number of technical problems. Musk ‘gave away’ the idea, rather than committing to develop it, but that did not dismay half a dozen start-up companies. A recent Bloomberg article recounts that “Hyperloop Dreams Endangered After SPAC Deal Fails” tells part of the story.

Reporter Sarah McBride recounts the 2022 decision by Richard Branson’s Hyperloop One to slash its staff and shift its focus to freight rather than passengers. Not much has been heard from it since then. Her main focus is on Hyperloop Transportation Technologies (known as Hyperloop TT). It had planned to go public on the New York Stock Exchange this month, via a special purpose acquisition company (SPAC), but the SPAC recently backed out, and the offering was scrapped. Recent startup failures include Swissmetro SA (liquidated in 2009) and Arrivo (shut down in 2018).

Hyperloop TT claims to be the leader in this field, touting its full-scale test track in Toulouse, France, pictured in the Bloomberg article. Actually, it’s only 1,000 feet long, far too short to demonstrate accelerating a capsule to 600 miles per hour and then decelerating to a safe stop—which nobody has ever accomplished. In my most recent newsletter article on hyperloop (May 2022), I cited a number of problems about which no solutions have been put forth by advocates or any of the startup companies:

• Maintaining a vacuum in tubes of a thousand miles or more;
• The energy cost of both propulsion and vacuum maintenance;
• Airlocks in stations, to permit the transition from vacuum in the tubes to passenger ingress and egress in normal air pressure;
• Turnouts (switches) in the tubes and how they would work; and,
• Emergency evacuation of passengers.

In a previous article (July 2020), I wrote about two hyperloop studies, one by Lux Research on technical barriers and the other on Hyperloop TT’s proposed Chicago to Pittsburgh route, whose economics are highly questionable. Several years ago, I attended a session on that project at the Transportation Research Board’s annual meeting, which was mostly analysis-free hype that was so egregious that I sent a protest to the TRB’s executive director. That project is still being touted by various public agencies in Ohio and elsewhere in the Midwest. As of now, that appears to be the company’s only live prospect. Bloomberg’s McBride recounts previous company efforts in South Korea (2017), China (2018), and Abu Dhabi (2018), all now defunct.

My skepticism remains, since no solutions have been offered for hyperloop’s technical questions, nor have there been objective benefit/cost analyses following normal best practices. It appears that potential investors are taking note of these shortcomings.

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How is Vision Zero Doing in Denver?
By Baruch Feigenbaum

As cities across the United States grapple with traffic fatalities, many have adopted the Vision Zero concept. Vision Zero was started in Sweden more than 25 years ago. It is an effort to reduce traffic fatalities to zero by some future date. Unfortunately, most of the U.S. cities that adopted the policy don’t have good before-and-after data, so it is difficult to determine whether Vision Zero works.

Denver, in contrast, has robust data. The city adopted Vision Zero in 2017 and set a goal of zero traffic fatalities by the year 2030. Yet a new report by Randal O’Toole for the Thoreau Institute examining the impacts of Vision Zero policies on traffic fatalities in Denver found that the city’s plan has so far failed to meet most of its goals.

The report begins with an analysis of Denver’s 48-page Vision Zero Action Plan. The plan seems to be full of platitudes instead of policy solutions. In the third section, titled, “What We’re Doing,” two of the three pages discuss what steps the city is taking, such as:

• Adding flashing lights to alert motorists of a pedestrian crossing;
• Reducing speed limits on a street that had seen several accidents; and
• Changing a traffic signal to include a protected left turn to minimize conflict between pedestrians and automobiles.

The report’s biggest criticism of the action plan is that while it does list the changes the city is pursuing, the plan does very little to show that these changes will reduce traffic fatalities, especially by enough for the city to meet its 2030 target of zero fatalities. In addition, the vision does little to address motorcyclist safety, despite motorcyclists being the most at-risk group on Denver streets.

The report delves into traffic fatality trends in Denver. While there were zero bicycle fatalities in 2020, the report stresses that that’s not necessarily thanks to Vision Zero changes. Denver also had zero bicycle fatalities in 2006, 2009, and 2013. O’Toole found that a five-year average is a far better indicator of actual trends. Likewise, the report notes that the 33% increase in fatalities during the five years ending in 2020, has not been caused by Vision Zero. The real problem is that Vision Zero is not addressing the factors that lead to fatalities.

Next, O’Toole breaks down fatalities by mode of transportation. The report found that pedestrian fatality rates were 50 per billion pedestrian-miles, bicycle fatality rates were 25 per billion bicycle-miles, motorcycle fatality rates were 130 per billion passenger-miles, and automobile fatality rates were 1.3 per billion passenger-miles. Motorcyclists are 100 times more likely to die in traffic accidents than auto users, pedestrians are 40 times more likely, and bicycle riders are 20 times more likely. O’Toole stresses that these are “rough approximations.”

To provide a fuller picture, the report reminds readers of the benefits of the automobile. From the automobile “democratizing mobility” thanks to the affordability of Henry Ford’s Model T, to the increased number of jobs accessible to workers, automobiles brought a host of benefits to the country and the world. The development of highways and streets also has benefits that aren’t just for automobile users. Roads are essential for emergency services and freight, but the former is most relevant to Vision Zero’s goal of saving lives. O’Toole cites a University of Colorado-Boulder study, which found that “for every pedestrian whose life is saved by slowing of auto traffic, 85 people would die due to delays in emergency services.”

In order to reduce pedestrian fatalities, we need to understand that most such fatalities happen at night because pedestrians are intoxicated, cross away from crosswalks, or are among the homeless suffering from mental illness.

O’Toole offers specific suggestions for policies that Denver’s Vision Zero Action Plan fails to include. Each of the suggestions is based on Denver data, and most rely on separating different modes from one another, via methods such as pedestrian barriers to discourage crossing away from crosswalks, separate bicycle boulevards, and a law mandating that motorcyclists wear helmets.

Most critically, the city should start to use a data-driven approach based on the National Highway Traffic Safety Administration’s Fatality and Injury Reporting System Tool, which would prove invaluable as a means of finding where Denver’s problems lie.

Automobile users have become something of a scapegoat for traffic fatalities. Both the report and Vision Zero advocates are right that roadway design is an important aspect of any move to protect non-automobile users; but O’Toole is also right when he says that Denver’s attempt at Vision Zero seems like little more than an attempt to get fewer people driving. Cities that try to encourage a modal shift for citizens often accomplish little more than creating an automobile-hostile environment.

The city of Denver has a lot of work to do to come anywhere near its goal by 2030 since its current Vision Zero approach is not going to reduce traffic fatalities to anywhere near zero.

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News Notes

Charlotte Express Toll Lanes Green-lighted
On Feb. 15, the Charlotte, North Carolina, Regional Transportation Planning Organization gave the North Carolina Department of Transportation the green light to proceed with plans to procure a project to add two express toll lanes each way to I-77 between the city and the South Carolina border, less than 10 miles away. NCDOT is expected to request proposals for a revenue-financed long-term public-private partnership (P3), similar to the procurement of the express lanes on I-77 north of the city. NCDOT last year received an unsolicited proposal from Cintra, the developer/operator of the existing express lanes, proposing an express toll lane project on the southern corridor. The project is expected to cost in the vicinity of $2 billion.

Toyota Opts for Electric Vehicle Future
The last hold-out among major auto producers last month announced a change of direction. Toyota will now increase its focus on electric vehicles (EVs), following the shift to new CEO Koji Sato, who will take office in April. Sato has called for an “EV-first mindset” that will include a new EV-specialized manufacturing platform. The first of the new EVs will be introduced as Lexus models, while production will continue on its current hybrids and EVs on conventional assembly lines.

Congressman Calls for State Tolling Flexibility
Politico (March 2) reports House Highways and Transit Subcommittee Chairman Rep. Rick Crawford (R-AR) told attendees at the AASHTO legislative conference that he would like Congress to give states the flexibility to toll their own roads. “It’s an important revenue stream, potentially, for states that currently don’t have it… It sounds like I’m cheerleading for tolling — I’m not. I’m cheerleading for giving the states the flexibility to be creative.” And on the same day, Wisconsin House Speaker Robin Voss announced he will try again to get tolling legislation enacted in that state.

Park Over Pittsburgh Interstate Wins Awards
A 2022 project built a park over below-grade I-579 in Pittsburgh’s historic Hill District. The park includes green space, story walls, outdoor classroom space, an amphitheater, and bike and pedestrian paths. The park helps re-unite a community that was divided by the Interstate more than 60 years ago. The project won an Outstanding Civil Engineering Award from ASCE and also a 2023 PCI Design Award from the Precast/Prestressed Concrete Institute.

New Express Toll Lanes Coming to Ft. Worth Area
Under a pre-existing long-term DBFOM P3 concession, Cintra will add one general purpose lane and one express toll lane each way to the congested Loop 820/SH-121/183 Airport Freeway corridor in northeastern Tarrant County. The project is estimated at $300-350 million. Cintra expects the financing, based on projected toll revenue, to be finalized by the end of the year. This expansion is part of the company’s 2009 long-term concession for the North Tarrant Express project, which required the lane additions to be added by 2030. This project appears to be the only express toll lane addition in Texas, due to the legislature’s decade-old moratorium on approving new P3 projects.

Top U.S. City Offices Only Half Full
National data on office occupancy tracked by Kastle Systems shows that as of January 2023, the average office occupancy was only 50.4% of pre-pandemic levels. Stanford University economist Nicholas Bloom told the Washington Post that “Office numbers have flatlined,” due to the increase of flexible work practices between office and home. “Longer run, work from home will clearly rise, as the technology supporting this is improving rapidly.” Also shaping the future of cities is out-migration and in-migration. Data on home searchers from Redfin.com finds 20-30% of local house-hunters in 10 major metro areas are searching elsewhere. For example, the top destination New Yorkers are researching is Miami, and the top destination for Seattle searchers is Phoenix.

First Express Toll Lanes Project in Kansas Breaks Ground
US 69, reportedly the busiest highway in Kansas, will have the state’s first express toll lanes in operation within two years from last month’s ground-breaking, according to the Kansas DOT. The project will add one express toll lane each way in the median of US 69, from 103rd St. to 151st St., the most congested segment. Variable tolls will be used to keep the new lanes from getting overcrowded (and hence, congested). Kansas Gov. Laura Kelly reminded reporters that the new lanes are a choice, available for those with time-sensitive trips and willing to pay for faster and more reliable travel. “This highway is a huge innovation for the state of Kansas,” Kelly added.

Rhode Island DOT Appeals Bridge Toll Decision
Last year a federal court ruled that Rhode Island’s program to charge tolls only to heavy trucks was discriminatory and violated the Commerce Clause of the Constitution. Last month, the Rhode Island DOT asked the U.S. Court of Appeals to review the lower court’s decision, saying that the case raises “important questions related to federalism.” As I wrote at the time, I agree, and I hope the Court of Appeals sustains the lower court’s ruling. The Commerce Clause was included in the Constitution in part to prohibit states from charging tariffs on movements across state borders, which the discriminatory Rhode Island truck tolls were shown to be.

FHWA Replaces “Fix It First” Guidance Memo
Under new Administrator Shailen Bhatt, the Federal Highway Administration (FHWA) has replaced the controversial “guidance” memo issued in Dec. 2021, which implied that state DOTs should prefer projects to fix deferred maintenance to those that expand capacity. After protests from state DOTs in fast-growing states, Republican members of Congress, and a number of business groups, the new policy memo defers to state decision-makers on how to prioritize highway spending and also clarifies that the document “does not have the force of law.”

Three More States Taking Action on Mileage-Based User Fees
In December, the Washington State Transportation Commission voted in favor of replacing per-gallon fuel taxes with per-mile charges. It urged legislators to replace state fuel taxes with per-mile road user charges beginning in 2027. Louisiana’s Department of Transportation & Development announced in February that it plans a state-funded mileage-based user fees pilot project covering up to 4,000 vehicles. Also in February, Oklahoma DOT briefed the state’s transportation commission on its road user charge pilot project, called Fair Miles Oklahoma, to begin in July. Oklahoma’s legislature in 2021 authorized ODOT to create and manage such a pilot project.

Xoox Autonomous Vehicles Operating on Public Road
Xoox, Inc., a self-driving startup owned by Amazon, has developed a passenger shuttle without a steering wheel or other driver controls. Last month it began shuttling employees between its two main buildings in Foster City, CA, on a mile-long stretch of public roadway, at a top speed of 35 miles per hour. Xoox has a state permit to operate driverless on this roadway. Bloomberg reported that Xoox believes this is the first time a vehicle with no onboard controls has operated on a public road.

BP Acquires Major Truck Stop Company
Last month, oil company BP announced the $1.3 billion acquisition of Travel Centers of America, the operator of 281 truck stops near major highways. In a presentation on the deal, BP illustrated a potential future travel center offering EV charging for trucks, a convenience store, biofuels, and eventually hydrogen refueling. Given the national shortage of safe overnight truck parking spaces, and also of EV charging, perhaps BP has the clout to get Congress to repeal the 1960 federal ban on commercial services at Interstate highway rest areas. Even the American Trucking Association’s research arm acknowledges that the ban is an impediment to expanded truck parking and electric vehicle charging.

FDOT Planning to Extend I-4 Express Toll Lanes
One year after their opening on 20 miles of I-4 in Orlando, the express lanes’ success is leading Florida DOT to start researching extensions. Over 10 million trips were taken in the lanes’ first year, with an average of 28,000 drivers per day using them. Studies are under way on extensions of the lanes both north and southwest of Orlando, since major congestion occurs on both of those I-4 segments.

“Modal Shift to Cleaner Transport Fails to Materialize”
That is the headline on a release from OECD’s International Transport Forum in Dec. 2022. The study collected transportation data from the years 2010 through early 2020 from OECD member countries. Some of the findings were that “the share of passenger transport by car increased for all reporting countries between 2010 and 2021,” that “inland freight transport does not show a shift to more-sustainable modes,” and that “rail passenger transport in Europe . . . dropped 51% between 2019 and 2021.”

Ford Dumps EV Startup Rivian
Electric vehicle maker Rivian, which is producing and selling its EV SUVs and pickup trucks, had a terrible 2022. Its share price dropped 82%, wiping out over $75 billion in value. That was bad news for early investors Amazon and Ford Motor Co. Luc Olinga of The Street reported last month that Ford, which had invested $1.2 billion in Rivian, sold 91 million shares early last year before the price plunged, making a gain of $1.8 billion. It sold another 25.2 million shares in May for $700 million, and another 51.9 million shares in the third quarter for $1.8 billion. Overall, at year-end, Ford reported a net loss of $7.4 billion on Rivian and another $2.7 billion loss on Argo. Amazon has not sold its Rivian shares.

Some Good Reading

“Driverless Work Vehicles: On This Side of the Horizon” is a well-researched global overview of commercial applications of autonomous vehicles.

“Off the Rails: Minnesota Transportation After COVID-19” is Randal O’Toole’s across-the-board assessment of what Minnesota transportation planners might do to adjust to our post-COVID world, published by the Center of the American Experiment.

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Quotable Quotes

“The relationship between land use and traffic generation has been known for many decades. There’s nothing particularly new here, although I’m sure the [Baltimore] article will be circulated by the ‘highways are evil’ crowd. The supposed solution in this article is that Americans should live like Europeans, that is, densely packed 900 square-foot apartments in metropolitan areas. My common answer to persons telling me how we should have public transportation like Paris (or fill in the blank) when they return from their vacation is, ‘We can have a European transportation system if we want to live like Europeans.’ Americans have chosen the quality of life they want to enjoy for their families, and it is not the one envisioned in this article.”
—Pete Rahn, private online commentary, Feb.5, 2023 (used with permission)

“The notion of access vs. mobility is a common thread in all our work. Just about everything in America focuses toward mobility for multiple sound reasons. If you want standard store white bread, the nearest 7-11 will do. But if you want really great Russian black bread with raisins, I know this really great baker in Baltimore! . . .  Favorite restaurants, family, and friends all live at distances. They don’t optimize access to you, mostly. . . . If I work at 7-11, I can likely walk to work. If I teach in a university, and shift to another, it is likely 10-15 miles away. Do I move every time I change jobs? The decline of the “center” for shopping, for entertainment, for jobs is a major factor. Small metros are the last bastion of a heavy focus on the center; as that metro grows, satellite centers become alternatives.”
—Alan Pisarski, private online commentary, Feb. 6, 2023 (used with permission)

“Across the rich world, the commercial property industry is in a grim state. Tenants have come to terms with the fact that working from home is here to stay, and are downsizing appropriately. In cities such as Hong Kong, London, and Paris, vacancy rates have hit record highs. Another indicator of the darkening mood is that global investment in offices last year fell by 42%, compared with a 28% drop for property as a whole. A recent paper by Arpit Gupta of New York University and Vrinda Mittal and Stijn Van Nieuwerburgh of Columbia University forecasts that offices in New York could lose almost 40% of their value between 2019 and 2029, equivalent to $453 billion.”
—”Property: The View from the Top,” The Economist, Jan. 21, 2023

“Automated container handling is essential to quicken the pace of cargo movement through port facilities. The technology is costly, and longshore labor unions are fiercely opposed. The International Longshore and Warehouse Union has held up contract negotiations for months over the issue. Lack of automation is one reason U.S. ports rank low in global productivity relative to ports in China and the Middle East. Ensuring quick container flow through ports must be an economic priority, regardless of union concerns.”
—Peter Tirschwell, “How to Prevent the Next Supply Chain Crisis,” The Wall Street Journal, Feb. 6, 2023

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The post Surface Transportation News: Ohio train derailment, induced demand and urban freeway expansion, and more appeared first on Reason Foundation.

​​But cryptocurrencies are also exceptionally volatile over much shorter periods of time. ​Day-to-day price fluctuations of cryptocurrencies eclipse those of traditional currencies, stocks, and precious metals, and do so consistently across assets and time periods. This phenomenon is not entirely driven by the longer-term ups and downs reported in headlines. Bitcoin, Ethereum, and other cryptocurrencies frequently exhibit daily price drops during bull markets and increases during bear markets far in excess of traditional assets. The interactive chart below provides one way to visualize this day-to-day volatility—the daily percentage increase or decrease in price in U.S. dollars from the previous day. 

This interactive tool allows the reader to investigate the phenomenon of day-to-day volatility for different cryptocurrencies, traditional assets, and time periods. During the period 2018–2022, Bitcoin’s average daily change (​​measured as the absolute value of the percentage change from the previous day) was 2.87%, versus the Euro (0.34%), pound (0.43%), and yen (0.35%). Other major cryptocurrencies, such as Ethereum (3.76%), Ripple (4.04%), and Dogecoin (4.55%), exceed Bitcoin’s already-high fluctuations. 

The table below presents this statistic for each asset or index tracked by the data tool. 

Why is the day-to-day volatility of cryptocurrencies important? 

Despite much public discussion about cryptocurrencies as speculative investments or world-changing technology, their success ultimately hinges on widespread adoption as currencies—including as a medium of exchange. Day-to-day volatility creates exchange rate risk over short periods of time. This creates problems for a currency’s usefulness as a medium of exchange if one or both parties to the transaction need to quickly move their money into a different currency. Either the buyer or seller, or both, must take this exchange rate risk, increasing the transaction cost and, ultimately, the price. 

To date, the use of cryptocurrencies as a medium of exchange has taken off in only a small number of market niches, most notably dark net markets where mostly illicit goods are for sale. A 2018 article reported that Bitcoin’s high short-term volatility was adding to the cost and lowering the number of transactions on such platforms. 

There are likely multiple causes for the unusually high volatility of cryptocurrencies. While more widespread adoption may be part of the solution, other likely causes are structural and follow directly from the way cryptocurrencies are designed. Large banks and other financial firms hold huge reserves of traditional currencies, and stocks have market makers, both serving to smooth out short-term volatility and make exchange markets more liquid. Bitcoin, on the other hand, eschews large central intermediaries by design.   

Solutions lie in further entrepreneurial innovation, and that process is already well underway. Bitcoin’s ​​Lightning Network is designed to facilitate faster transactions at a larger scale. Stablecoins, pegged in value to fiat currencies like the dollar or other assets, eliminate high day-to-day volatility by design. They can be used to keep money in the crypto ecosystem—protected from short-term fluctuations and, in theory, easier and faster than traditional fiat currencies--to exchange with Bitcoin or Ethereum. However, their relative novelty opens the door for long-tail risk as well as fraud. 

These and other avenues carry some promise to address day-to-day volatility and make cryptocurrencies more viable for everyday use. But innovation must continue. The Lightning Network and Stablecoins both introduce the scope for large financial intermediaries and dependence on the fiat system that crypto pioneers sought precisely to avoid. Furthermore, the much larger number of people not yet sold on crypto may see these as further complications to already convoluted and risky alternatives to fiat. 

The crypto community must turn away from ​​voices such as Bitcoin maximalists that say the perfect solution is already in hand, and keep innovating and experimenting.  ​Regulators ​could do great harm by making rules that ossify this still-developing technology or cut off as-yet unrealized solutions that only a market process of discovery can deliver. 

We hope that the interactive tool provided here, which offers an intuitive way to visualize the phenomenon of day-to-day volatility in cryptocurrencies, will play a part in opening the conversation and potential for fresh ideas. 

Methodology 

We selected the top 10 cryptocurrencies by market capitalization from CoinMarketCap in addition to FTX’s FTT token. The top 10 cryptocurrencies include seven traditional cryptocurrencies and three stablecoins. We did not include the latter, which track the day-to-day volatility of fiat currencies by design, in the interactive chart, but do report their average daily changes in the summary table. Daily price and exchange rate data are sourced from Yahoo Finance via the R library quantmod. The only modification to the original source data occurred for the Ruble to Dollar data (RUBUSD=X). On Jan. 1, 2016, the original value appears to be off by a factor of 100, this value is divided by 100. Additionally, on June 13, 2022, and July 18, 2022, the adjusted close is outside of the bounds of the high and low—and inconsistent with historical data on the close price from The Wall Street Journal. These two values were replaced with the open price from the following day.

Daily percent change values are calculated from the percent change from the previous trading day’s adjusted close price. Our comparison of daily changes across different types of currencies and assets presents a challenge because different assets trade according to different schedules. Stocks trade on exchanges with daily opening and closing times and close on weekends and certain holidays. Traditional foreign exchange markets stay open around the clock, Monday through Friday, but close on weekends, and this is further complicated by time zones and different holidays globally. Cryptocurrencies trade continually.  

There is subjectivity inherent in addressing this issue. We chose to limit our analysis to the trading days of our traditional stock indices (S&P 500 & Russell 2000), which align with New York Stock Exchange trading days, and use reported adjusted close as the price. While this eliminates a small amount of data from the sample for cryptocurrencies, we conducted robustness checks and confirmed this does not drive our results about persistent differences in day-to-day percent changes. 

The post Examining day-to-day crypto volatility and why it’s important appeared first on Reason Foundation.

Good morning, my name is Ryan Frost, and I’m a senior policy analyst with the Pension Integrity Project at Reason Foundation. Our team conducts quantitative public pension research and offers pro-bono technical assistance to officials and stakeholders aiming to improve pension resiliency and advance retirement security for public servants in a financially responsible way. We have been involved in around 70 pension reforms over the past seven years, all aimed at bringing down long-term risks and costs to the state and taxpayers. Prior to my current role, I spent seven years as the senior research and policy manager for the Law Enforcement Officers and Firefighters (LEOFF 2) Pension System in Washington state. LEOFF 2 has been one of the top-three best-funded public pension plans since its inception in the mid-1970s, and that has primarily been accomplished by keeping it up to date with best practices in plan design and funding policies.

Reason Foundation has worked on some of the nation’s significant pension reforms of recent years, including Arizona’s public safety plan, Michigan’s public-school employees plan, and Texas’ public employees’ plan. Pension plan design is an extremely complex issue. Much like a house, if the plan designer fails to build the pension system’s foundation properly, it can be incredibly costly to fix those later. Alaska is currently dealing with that issue in the Alaska Public Employees’ Retirement System (PERS) and Teachers’ Retirement System (TRS) plans, which have been closed since 2006 yet remain saddled with billions of dollars in unfunded liabilities.

Speaking to Alaska House Bill 22, the state legislature considered a bill identical to this last session, and Reason presented an analysis of the risks to the state in terms of potential unfunded liabilities and short- and long-term costs. Just like last session, our concern is that far too much risk is built into this proposal to reopen a defined benefit pension plan and retroactively undo the risk-reducing measures that Alaska has enjoyed since 2006. The Pension Integrity Project has never seen a defined public benefit plan proposal anywhere in the country with this much risk in the first few years of the proposed plan’s life.

Surprisingly, such a massive plan design change has yet to receive a long-term actuarial study of the potential impacts on the state budget. The only analysis the legislature received last session was a projected six-year cost figure from the PERS actuarial consultant, Buck, and an analysis performed by an outside actuary hired by the bill’s proponents.

We’ve built an actuarial model, using a certified consulting actuary, that allows us to examine and compare costs through many different scenarios, compare benefit levels of the defined contribution plan versus the proposed defined benefit, and perform an accurate risk assessment of the bill, which last year’s bill unfortunately lacked.

To that end, Reason Foundation’s initial modeling suggests that HB 22 could cost Alaska upwards of $800 million in the coming decades. While the proposed ‘new’ defined benefit (DB) plan does have a few modest improvements relative to the legacy pension tier, HB 22 still lacks sufficient controls to justify the proponent’s assertion that there is no risk to state/local budgets, as there is with the current defined contribution (DC) plan today.

The risk from this proposed bill is threefold:

1.          Allowing all previously earned service in the DC plan to be transferred into the proposed DB plan creates massive unfunded liability risk in year one.

Transferring DC balances to a DB pension fund as if they had been there all along sets up a pension obligation bond-like situation where any downturn in stock market performance or lowering of investment return assumptions would quickly create significant unfunded liabilities in the system. There was a lot of discussion at this bill’s first hearing about last year’s proposal almost passing. Let’s say the bill did pass last year, here’s what would’ve happened (and what we warned about last session): All public safety members hired since 2006 would be assumed to transfer all of their assets from the DC plan into a new tier of the PERS DB plan. This effectively means the state would have seen up to 16 years of liabilities added to the plan on day one, all priced at last year’s overly optimistic discount rate of 7.38%. PERS investment returns were negative last year, earning -6%. Missing the long-term assumption on investment returns by more than 13%, this new tier would have had a huge funding hole immediately in year one. The new PERS tier would have added over $33 million dollars in unfunded liabilities before the plan reached one year old.

2.          The current assumed rate of investment returns being used by PERS, which this new proposed plan falls under, is far too high.

Reviewing the landscape of public pension systems nationally, it would be fair to characterize the situation as a race to get down to a 5.5-6% assumed rate of investment returns for other public pension systems across the country. Alaska has followed this trend, lowering its assumed rate from 8% to 7.25% over the last few years.

These jurisdictions also commit to higher current pension contributions because lowering the assumed rate makes previously promised liabilities more expensive. This bill, for some reason, sets the assumed rate 125-175 basis points above that near-term market outlook. The Alaska Retirement Management Board (ARM) has already lowered its expected annual rate of return this year, going down from 7.38% to 7.25%. When the PERS investment return assumption is reduced again in the future—which it most certainly will—this new tier will have instantly created unfunded liabilities.

3.          While proponents claim there is built-in cost sharing, it is not true.

Employee contribution rates are essentially fixed in statute, meaning any poor plan experience that brings required contributions above the maximum rate that employees are set to pay would be borne by the state.

HB 22 is being proposed due to concerns with recruitment and retention challenges. Proponents claim they are having trouble recruiting and retaining members due to the lack of a defined benefit pension to offer to their members. However, this claim does not hold up to the data as, according to the National Police Foundation, 86% of police departments across the country face a shortage of members. Proponents stated to the prior committee that all other states offer a defined benefit for public safety employees. If all of those states are also having issues with recruitment and retention, the obvious question would be, if a defined benefit plan isn’t keeping public safety workers everywhere else, why would it be any different here? We even have an academic working paper showing that retention rates saw no change when Alaska swapped from a DB to DC in 2006.

Supporters of this bill often mention that states like Washington are stealing firefighters from Alaska. That may be true at some level, but is the pension the reason they transfer to become cops or firefighters in Washington? Recent salary data in Washington shows the average police and fire salary across the state is over $122,000 per year and firefighters alone average over $130,000 yearly. Most out-of-state police and firefighters I spoke with when I worked for that pension system pointed out that they nearly doubled their salary by moving to Washington.

Then there’s the issue that Washington is also struggling to hire new public safety, specifically law enforcement, officers. The city of Seattle is struggling to convince its current officers to work overtime as security for Seattle Seahawks games because their officers say they are burnt out from all the other overtime they have to work. This is not an Alaska-specific issue, and it is a common issue across the country. In fact, from our experience of studying and working on reforms of other public pension plans around the country, Alaska’s stated 6% turnover rate is on par or lower than what most other public safety plans across the country are seeing. For example, there’s been a major pension reform push in North Dakota, and its defined benefit pension plan for public employees has a 15% turnover rate per year.

The national trend since the Great Recession of 2007-2009 has been for states to adopt greater risk controls in their traditional pension systems and to move toward a variety of plan design options to avoid re-exposing state and local budgets to the risks of worsening unfunded liabilities. Texas, Arizona, Michigan, and Colorado are among the states that have recently adopted new, risk-managed retirement plans that provide adequate retirement benefits but also do not disproportionately burden employers with financial risk. Unfortunately, HB 22 does not resemble those types of prudent reforms.

In closing, retirement plans for public workers must meet the benefit needs of its members and must not apply unnecessary costs to government budgets. While Alaska’s current defined contribution plan is not without opportunities for improvement, it stands as a valuable benefit that works well for the modern workforce. It does not burden the state with significant debt and costs. House Bill 22, as currently written, would not fulfill these same requirements and could very realistically expose the state to immediate risks of runaway costs.

The post Testimony on Alaska House Bill 22 appeared first on Reason Foundation.

But even under the proposal’s optimistic outlook, the casino’s annual revenue is only a fraction of the annual required contributions to the city’s police and fire pension fund. Due to the gargantuan amount of unfunded liabilities the city already owes, this move is unlikely to mitigate future tax hikes, and a significant effort to fulfill the pension promises made to workers still lies ahead.

For context, Chicago’s police and fire pension fund is about $12.5 billion underfunded. Those unfunded liabilities are expected to grow even bigger this year due to the poor investment returns generated in 2022. The estimated $200 million in annual revenue from the casino is only 9% of the $2.3 billion contribution the city must make yearly to avoid further falling behind in debt. Mayor Lightfoot’s most recent budget does allocate $2 million in extra funds to police and fire, some of which will go to paying down pension debt. Yet even with this and the casino revenue, it is still not enough.

While this is the first time a city is taking this particular approach to filling a public pension funding gap, using gambling revenue to plug a pension hole is an extension of a more common practice among underfunded government pension systems—selling lottery tickets. This type of revenue stream is historically unreliable, seeing as lottery revenues dropped heavily during the COVID-19 pandemic, with people staying home and ordering groceries online (most people buy lottery tickets at grocery stores). While the pandemic was an outlier event, lottery revenues have fluctuated a decent amount from year to year.

The use of novel sources of revenue is not new for Chicago, and unfortunately, other methods policymakers have attempted have been less free-market oriented. In 2003, Chicago introduced red-light cameras as a way to curb traffic accidents, but this later became a crucial revenue source for the city, so much so that, at one point, Chicago lowered yellow-light intervals to catch more people and generate more through fines. Chicago has also tried many unique taxes to gin up revenue, such as a Netflix tax, a soda tax, and, perhaps most controversially, a commuter tax. The commuter tax was intended to tax city government workers who worked in the city but lived in the outlying suburbs, implying they were “freeloading.”

While there are ethical differences between generating revenue from something like a red-light camera vs. a casino, these tax and revenue plans all highlight that Chicago is using desperate tactics in hopes of generating revenue to pay for decades of budgetary mismanagement.

The truth is that the casino revenue will barely make a dent in Chicago’s pension funding shortfalls. The city needs to make substantive pension reforms rather than look for these stopgap measures. Even should the casino succeed, Chicago still needs to raise its contributions, whether through a larger portion of the city’s budget or some shared sacrifice between city employees receiving the pensions and taxpayers. When it comes to retirement benefits, policymakers need to consider alternative plan designs for new employees that do not risk piling unexpected costs on the city’s taxpayers.

Pension reforms will likely be an uphill battle for Chicago, considering legal restrictions set at the state level. The Illinois Supreme Court has struck down public pension reform efforts, such as cost-of-living adjustments and salary caps for benefit payments, as unconstitutional. Despite formidable legal obstacles, these are the types of public pension reforms that Chicago needs to address the source of its hemorrhaging pension debt.

Pursuing inadequate solutions with highly politicized taxes or through a brand-new casino is a futile way to dodge the city’s public pension debt and fiscal challenges head-on.

The post Chicago wants to open a casino to help pay down its public pension debt appeared first on Reason Foundation.

https://doi.org/10.1177/03611981221147048

Abstract

The Interstate Highway System is critically important to the trucking industry. In a 2019 report to Congress, the Transportation Research Board found that much of the system is wearing out. It recommended a 20-year, US$1 trillion program of reconstruction and modernization. However, in its 2021 Infrastructure Investment & Jobs Act, Congress took no action on interstate reconstruction. Several states are considering toll financing for this purpose, but the trucking industry has long opposed any expansion of tolling, despite its need for a modernized interstate system. This paper considers four concerns of the trucking industry—toll roads used as cash cows, the high cost of collection compared with fuel taxes, little value-added for users, and double taxation (tolls and fuel taxes on the same roadway). The paper describes a sketch-level spreadsheet model of a customer-friendly approach to toll-financed reconstruction, using realistic data and assumptions, applied to a generic mid-size state seeking to rebuild four long-distance interstates. The assumptions built into the model respond to the four trucking industry concerns. The model also addresses concerns of state departments of transportation over giving up some of their declining fuel tax revenues. It estimates the net present value (NPV) of fuel tax rebates over 30 years to be less than 7% of the NPV of toll revenues. Toll financing of interstate reconstruction also relieves state fuel tax revenues of the large costs of rebuilding aging interstates. This paper is intended to offer transportation policymakers a set of policy changes that respond to the legitimate aspects of the trucking industry’s expressed concerns.

The Interstate Highway System is generally considered the U.S.A.’s most important multimodal infrastructure, serving personal vehicles, intercity buses, and long-distance truck freight. At the request of Congress, a Transportation Research Board (TRB) special committee carried out a detailed study of the system’s future. Its 596-page 2019 report concluded that much of the system is aging and needs to be reconstructed; it includes many urban interchanges that are bottlenecks; and some long-distance corridors (especially those that are key truck routes) need additional lanes (1). The report estimated the cost at US$57 billion per year over 20 years and proposed a repeat of the original 1956 90% federally funded program, which would require very large increases in federal fuel tax rates.

In its 2021 Infrastructure Investment & Jobs Act (IIJA), Congress did not address interstate modernization or authorize any increase in federal fuel taxes. Despite the system’s name, its corridors are owned and operated by state departments of transportation (DOTs). In the absence of congressional action, state legislatures and DOTs may have to take responsibility for interstate modernization, which raises the question of how best to pay for a project that could cost upwards of US$1 trillion and take several decades.

The TRB report discussed toll financing of interstate reconstruction, noting that up-front financing could get needed projects under way sooner, for corridors that are toll-feasible. In a paper presented at the 2014 TRB Annual Meeting, the current author carried out sketch-level tolling feasibility assessments for each of the 50 states, finding that in all but five of them, the net present value (NPV) of inflation-adjusted toll revenues exceeded the NPV of capital and operating costs (2). In recent years, four states have commissioned their own interstate tolling feasibility studies: Connecticut, Indiana, Michigan, and Wisconsin. In addition, toll-financed replacement of major interstate bridges is under consideration in Alabama and Louisiana, while toll-financed reconstruction of specific corridors has been proposed for I-40 (Arkansas), I-70 (Ohio, Indiana, Illinois, and Missouri), I-80 (Illinois, Iowa, and Wyoming), and I-95 (North Carolina, South Carolina, and Virginia).

The trucking industry is economically the most important user of the interstate system. Those portions that are tolled (e.g., Pennsylvania Turnpike, Indiana Toll Road) derive the largest part of their toll revenue from long-distance trucking. That industry’s two national organizations—the American Trucking Associations (ATA) and the Owner-Operator Independent Drivers Association (OOIDA)—are the most vocal opponents of the increased use of tolling. Yet the trucking industry would could gain important advantages from a modernized system, potentially including dedicated truck lanes in key corridors, more durable pavements requiring less frequent repairs and resurfacing, and the replacement of obsolete and undersized “bottleneck” interchanges.

The question addressed in this paper is whether toll-financed interstate modernization could overcome the long-standing objections of the trucking industry, as well as concerns of state DOTs about the coming decline in fuel tax revenues.

https://journals.sagepub.com/doi/10.1177/03611981221147048

The post Tolling value proposition for trucking and state departments of transportation appeared first on Reason Foundation.

According to The Washington Post, the New Jersey Department of Transportation irritated FHWA Division Administrator Robert J. Clark with traffic board messages such as, “We’ll be blunt/Don’t drive high” and “Hold on to your Butts/Help prevent Forest Fires.”

Clark sent a cease and desist letter to New Jersey DOT claiming that using highway signs for such messages does not “promote the safe and efficient use of the roadway, does not serve a highway purpose, is inconsistent with both law and regulations, and increases the liability risk to the owner of the roadway facility.” 

In dropping the hammer, Clark relied on a revised section of the 2009 Manual on Uniform Traffic Control Devices that reads, “Messages with obscure or secondary meanings, such as those with popular culture references, unconventional sign legend syntax, or that are intended to be humorous, should not be used.”

Federal bureaucrats are not exactly known for their sense of humor, but it is worth noting that highway safety is one area in which New Jersey DOT excels. In Reason Foundation’s Annual Highway Report, New Jersey routinely ranks in the best 10 states for having the lowest fatality rates. The state most recently ranked 4^th in overall highway fatality rate, 9^th in rural highway fatality rate, and 18^th in urban highway fatality rate. New Jersey ranks much worse in categories such as the efficiency of highway spending, quality of pavement conditions, and traffic congestion delays. Perhaps Mr. Clark should worry more about the conditions of highways. 

And New Jersey is not the only state to be threatened. According to the Post and Governor’s Highway Safety Association, some states were warned they could lose federal funding if they continued including humorous messages. 

Yet the federal rule on ‘appropriate’ signs seems to be enforced haphazardly. Tennessee used, “Ain’t nobody got time for a wreck, slow it down.”

Pennsylvania’s recent holiday message was, “Only Rudolph should drive lit/Plan a sober ride.”

Virginia has used, “This isn’t NASCAR, slow down.”

And Mississippi displayed, “Texting and driving? I’m the problem it’s me.”

None of the state highway administrators complained about these messages. Apparently, being lit, NASCAR racing and Taylor Swift lyrics are fine to reference on digital highway signs, but holding on to your butts is not.

The most critical question for drivers and highway officials is straightforward: Do highway safety messages on digital highway signs improve safety?

With relatively limited data, the answer is not clear. Trip Shealy, a Virginia Tech transportation engineering professor, studied how the public responded to such messages and concluded that drivers believed they were effective and were not concerned with their appropriateness.

Shealy’s researchers hooked 300 participants to brain monitors and found that messages using humor or wordplay triggered more brain activity. Put another way, humorous messages are more likely to reach the intended audience. The study found:

The results indicate people perceive all types of non-traditional safety messages as effective. Messages about distracted driving and driving without a seat belt, messages meant to provoke a negative emotion, and messages using statistics are perceived to most likely change driver behavior.

However, a Transportation Research Record study, “Does Displaying Safety Messages on Dynamic Message Signs have Measurable Impacts on Crash Risk?” found that while there were marginal decreases in nighttime crash activity and speeding in places with the messages, neither finding was statistically significant.

A Science magazine study found that when Texas motorists were shown the number of fatalities in the area, the number of crashes actually increased slightly:

Contrary to policymakers’ expectations, we found that displaying fatality messages increases the number of traffic crashes. Campaign weeks realize a 1.52% increase in crashes within 5 km of DMSs [dynamic message signs], slightly diminishing to a 1.35% increase over the 10 km after DMSs.

An Old Dominion University study found:

Results indicate that multi-page messages increased crashes by 1.5% in 2019, and reduced vehicle speed around DMS by 2-4%, relative to single-page messages. Although DMS can provide valuable, actionable information to drivers, DOTs should be more selective in the timing and formatting of messages as to not impose additional externalities on drivers.

A separate panel by the Transportation Research Board indicated that message signs should be simple and not humorous. But the study’s 120-person sample size was much smaller, and it did not find any evidence that humorous signs were bad, but rather “appropriate signs” fit more with transportation departments’ missions.

“Appropriate” can probably be replaced with “boring.” Yet, boring messages do not seem to reduce fatalities, considering the U.S. traffic fatality rate has been on an uphill climb for most of the past decade. 

The best example of the importance of capturing the audience’s attention may be in aviation, which is dramatically different than highway safety but offers some lessons. Southwest Airlines has always used humor in its safety videos. Delta Air Lines did as well during the 2010s. On one flight I was on, the flight attendant directed passengers to place the mask on their child with the greatest earnings potential first, and then help others. I looked around, and almost every passenger was paying attention to the flight attendant. In contrast, Delta’s current sanitized safety videos are ignored by 75% of passengers. A 2015 article in the journal Safety Science found that recall of safety messages improved with humorous briefings. Safety incidents on planes are extremely rare, and airline passengers are different than drivers, but I would much rather be on a plane with passengers who know what to do in an emergency, even if they are making calculations about their child’s future earnings.

On roads, we cannot conclusively say that dynamic message signs improve safety. But we also cannot say that they make safety worse. Highways are owned by the states, not the federal government, and there needs to be overwhelming evidence for FHWA to threaten to pull, let alone justify pulling, a state’s highway funding.

State transportation departments should be able to experiment to find what works best for their highways and drivers.

The post FHWA administrators want to stop humorous traffic safety messages appeared first on Reason Foundation.

Since the 1990s, there have been several attempts to build a publicly funded or financed high-speed rail line linking Dallas and Houston. Ultimately, none of these efforts succeeded. Most recently, in 2013, Texas Central Partners proposed building a privately financed high-speed rail line between the two largest metro areas in Texas. When the project was announced, many passenger rail researchers thought it was an intriguing concept. Privately funded or financed infrastructure could be 20% cheaper than publicly funded infrastructure. In addition, Texas Central’s point-to-point system presented an alternative to California’s three-sides-of-a-square line linking Los Angeles with San Francisco via many much smaller cities.

However, Texas Central’s vision for its project did not match the realities on the ground. Cost estimates quickly swelled from $10 billion to more than $30 billion by April 2020. This author’s quantitative analysis of potential ridership projected 1.4 million passengers per year, a far cry from the 5.9 million passengers per year Texas Central claimed.

A train with such a low ridership could not come close to generating the revenue or profits that Texas Central promised. Given the hundreds of millions of dollars in annual subsidies that would be required to operate Texas Central’s project, private investors showed little to no interest.

Texas Central’s proposal also faced significant opposition. Farmers, ranchers, and other landowners objected to having their land bisected by a train traveling at 200 miles per hour over 30 times each day. Elected officials between Dallas and Houston mobilized to voice their constituents’ opposition to the project. The Texas Legislature passed a law prohibiting the state from spending any funds on the project.

The Environmental Protection Agency refused to sign off on Texas Central’s preferred station in downtown Houston, forcing the company to move its southern terminus to the western suburbs. Finally, freight rail lines objected to Texas Central’s proposed signaling system because it would interfere with existing communications technology.

Facing delay after delay and setback after setback, Texas Central appears to have finally accepted reality. By late June 2022, Texas Central’s chief executive officer and all of its board members had resigned.

Texas Central still faces legal challenges that must be addressed. Due to the company’s ongoing financial difficulties, it remained delinquent on its 2021 property taxes into 2022 and has yet to pay its homeowner association dues in several impacted counties. Despite these facts, it remains unclear whether Texas Central has abandoned the project permanently or merely placed it in hibernation.

Assuming Texas Central attempts to resuscitate the project, this brief examines four barriers to doing so: (1) the continually escalating costs of building and operating high-speed rail, (2) the limited and declining pool of potential ridership, (3) Texas Central’s status as a zombie company, and (4) the lack of federal or state support for Texas Central’s project.

Texas Central High-Speed Rail: A 2023 Update

The post The current status of Texas Central’s proposed high-speed rail line linking Dallas and Houston appeared first on Reason Foundation.

This is a matter for Congress. Supreme Court Justice Brett Kavanaugh asked, “Isn’t it better for–to keep it the way it is, for us, and Congress–to put the burden on Congress to change that, and they can consider the implications and make these predictive judgments?” 

Reason’s brief pointed out that the questions raised in this case are matters of policy, not law, and Congress, not the Supreme Court, should resolve them.

“Whether Section 230 creates good policy is not a question for this Court to decide. That question remains where it was in 1996—with Congress,” Reason’s brief says.  

Congress originally made it clear that Section 230 is part of a law intended not to limit free speech but to allow the Internet to grow “with a minimum of government regulation.” 

Recommendations and “thumbnails” are not content creation. The petitioners argued that when a site creates ‘thumbnails’ that summarize or in some way represent the content they suggest you might want to click on, they are creating content. Chief Justice John Roberts questioned that argument, saying, “…it seems to me that the language of the statute doesn’t go that far. It says that –their claim is limited, as I understand it, to the recommendations themselves.”

This is central to the question before the Supreme Court—Is recommending or suggesting content that a user might want to see the same as creating that content in terms of liability?

As we argued in our amicus brief, this is not content creation. The central value proposition most online platforms offer customers is a way to find the content they want to consume, which requires some means of making recommendations. If any form of “you might like this” is equivalent to “here is what we think about this” in terms of liability, customers will no longer be able to get recommendations. 

Section 230 explicitly excludes most digital platforms from liability. Indeed, Justice Neil Gorsuch points out that Section 230 itself says that a content provider is defined by doing more than “picking, choosing, analyzing or digesting content” (it also includes “transmit, receive, display, forward, cache, search, subset, organize, reorganize, or translate content”). These things are exactly what Google does to online content for its users, as do many other platforms, and so the letter of the law in Section 230 clearly states that Google’s core service is not content creation. 

Justice Kavanaugh stated, “[petitioner’s] position, I think, would mean that the very thing that makes the website an interactive computer service also means that it loses the protection of 230. And just as a textual and structural matter, we don’t usually read a statute to, in essence, defeat itself.”

As we put it in our brief:

“…as both a provider and user of such software, [Google] falls squarely within the class protected by Section 230(c)(1). Insofar as Petitioners are seeking to hold Google liable for the consequences of having presented or organized the’ information provided by another,’ rather than for creating and publishing Google’s own information content, Section 230(c)(1) bars such liability.” 

Actively adopting or endorsing content is required to be liable. There was a lengthy conversation about whether the algorithms are “neutral” when they recommend like to like or if they could cross the line to adopt or endorse some content or be “designed to push a particular message,” as Justice Elena Kagan put it. Google’s lawyers argued that even if their algorithm did in some way push a piece of content, any harm from that content (like libel) flows from the original content, not the platform’s actions with respect to it.

In our brief, we argue that there is a line that can be crossed, but it would have to go beyond the activities defined in Section 230 as immune from liability:  

“There is, after all, a difference between a provider or user suggesting the content of others to its users or followers based on their prior history or some other predictive judgment about likely interest and a provider or user actively adopting such content as its own, such as by endorsing the truth or correctness of a particular message or statement. … YouTube is not taking a stance when it, having collected enormous amounts of data on a user’s interests, points that user to content relevant to those interests. For example, if YouTube sends a list of new cat videos to a user that has watched cat videos in the past, the separate information content of that organizational effort is no more than: ‘You seem to like cats, here is more cat content’.” 

It would be madness to make users of digital platforms liable for likes and shares. Finally, Amy Coney Justice Barrett raised the critical question of how the petitioner’s arguments would affect internet users like you and me:

“So, Section 230 protects not only providers but also users. So, I’m thinking about these recommendations. Let’s say I retweet an ISIS video. On your theory, am I aiding and abetting and does the statute protect me, or does my putting the thumbs-up on it create new content? … [B]ut the logic of your position, I think, is that retweets or likes or check this out, for users, the logic of your position would be that 230 would not protect in that situation either, correct?”

To which the petitioners responded that yes, it would.  

As we point out in our brief:

“Section 230 provides its protection not only to the ‘providers’ of interactive computer services, but to the ‘users’ of such services as well. Removing immunity from Google here would equally remove immunity for persons hosting humble chat rooms, interest- or politics-focused blogs, and even for persons who ‘like’ or repost the information content of others on their blog, their Facebook page, or their Twitter account… Petitioners’ theory is wrong and would lead to absurd results. Section 230 protects both providers and users of interactive computer services from liability for sharing, recommending, or displaying the speech of another. Any attempt to split liability regimes between the ‘providers’ and ‘users’ of interactive computer services, or to distinguish the choices made manually by individual users about what to recommend or highlight to others versus the automated incorporation of the same or comparable choices into an algorithm, would be completely divorced from the text of the statute.”  

Indeed, Justice Kavanaugh pointed out that many of the amici, including Reason Foundation, argued there would be significant damage to the digital economy if Section 230 were pulled back and people could no longer share a broad range of useful information via digital platforms.  

While we still have to wait months for the Supreme Court’s decision in Gonzalez v. Google, seeing the justices’ questions hitting on these crucial points was heartening. The exchanges in oral arguments seemed to crystalize that petitioners are asking the Supreme Court to go against the explicit language of the law Congress put in place to expand liability to online platforms for shared content and further to make users of online platforms liable for any content they like or share. That would be disastrous.  

The post Reason Foundation’s amicus brief in Gonzalez v. Google answers many of the questions raised by Supreme Court justices  appeared first on Reason Foundation.

On June 1, 2020, Massachusetts became the first state in the US to implement a comprehensive prohibition on all flavored tobacco products, including menthol cigarettes. My study for Reason Foundation revealed that cross-state trafficking led to a net increase in cigarette sales for the Massachusetts region after considering the rise in cigarette sales in surrounding states after the ban. 

Now, the medical literature also acknowledges that the increase in cigarette sales has manifested in increases in smoking for various populations, especially those the prohibition intended to target. Indeed, the letter’s authors specifically advise, “As the FDA plans to eliminate menthol as a characterizing flavor in cigarettes, interventions should address possible increases in cigarette smoking among Black females.”

According to Asare et al., the menthol cigarette ban in Massachusetts led to an 8.1% relative decrease in smoking among adults 25 years and older, with the prevalence of current cigarette use dropping from 13.0% in 2019 to 12.0% by 2021. Part of this decrease was due to a reported 56.8% relative decrease in smoking among black men. However, with a 58.6% relative increase in smoking among black women and an equal prevalence of smoking among both genders in 2019, the menthol cigarette ban led to a net increase in smoking among black adults in Massachusetts. 

The authors’ approach involved a difference-in-differences analysis, looking at whether the changes in smoking for various populations in Massachusetts differed from other states throughout the country after the menthol cigarette ban. Referencing individual-level data from the Behavioral Risk Factor Surveillance System (BRFSS) survey, Asare et al. created state-level estimates for the prevalence of current smoking from 2017 to 2021. However, the significant percentage change estimates for the black population are suspicious. As a technical matter, the Centers for Disease Control and Prevention (CDC) instruct researchers to estimate prevalence from the BRFSS with survey weights in combination with strata and primary sampling units (PSUs). Still, the supplementary section makes no mention of strata or PSUs. Regardless, the observed net increase in smoking among black adults, instead of a significant decrease, considerably departs from what researchers expected.

These results undermine the saliency of tobacco flavor ban policies, especially menthol cigarette prohibitions. Like illicit drugs, the black market organizes to fill the void when regulated sellers can no longer legally provide products. In the case of Massachusetts, surrounding states, like New Hampshire, have a cigarette tax that is almost half of that in Massachusetts. This means that when the black market was able to organize, in many circumstances, it could buy cigarettes in New Hampshire and offer buyers in Massachusetts cigarettes at a lower price relative to the previous pre-menthol ban market, which increased access to cigarettes overall.

Much of the original motivation to pursue a menthol cigarette ban was to try to achieve “health equity,” which meant addressing disparities in health between black and white Americans. Although black adults and youth have historically smoked less than whites, the medical literature often reports that they “suffer disproportionately from tobacco-related diseases compared to non-Hispanic whites.” These observations have led influential public health institutions to advocate for menthol cigarette bans, hoping to reduce smoking in the black community further to improve health outcomes. 

But, with the flavor ban in Massachusetts leading to more cigarette sales in the region and an increase in smoking among black women, it seems clear that menthol prohibitions are ineffective mechanisms for improving public health in the black community. Instead, public health officials should promote safer alternatives to combustible cigarettes, such as e-cigarettes, which have proven effective in helping smokers quit.

The post Massachusetts menthol ban increased smoking among black women, research finds appeared first on Reason Foundation.

In March 2022, over a third of the state and local government workers said they were considering quitting, according to a survey by MissionSquare Research Institute and Greenwald Research. This suggests that the worrisome trend of record resignations in the public sector could continue. In response to growing challenges in attracting and keeping valuable workers, lawmakers and government employers are eager to find solutions. Many policymakers are considering whether retirement benefits can be used to improve recruiting and retention. 

But addressing issues with retirement benefit design can be complicated because it is unclear how much value employees attribute to each benefit when they decide on accepting a job offer. Although government employers may assume that retirement benefits can help them attract a quality labor force, research is inconclusive. This topic deserves more attention in the face of ongoing recruitment challenges. One way to investigate further is to ask labor force entrants about their preferences directly. At least one survey suggests that younger public workers might not perceive retirement benefits as a highly motivating factor, contradicting conventional wisdom.

Because retirement benefits make up a large share of the compensation package, a change in the value of retirement benefits can influence employment decisions. The traditional belief is that—other factors being equal—a change in retirement benefits may lead to a change in employment attractiveness and, over time, changes in retention. When researchers study retirement benefits empirically, using data from pension plans, we assume workers’ actions change based on the shift in incentive (retirement benefit). But deriving such a conclusion requires an assumption that employees value retirement as much as other parts of their compensation package, including salary, health insurance, stability, etc. Is that assumption true? 

One way to get a better understanding is to implement a qualitative study tool that would reveal how employees value retirement benefits when compared to other deciding factors. Specifically: Ask prospective employees whether they find specific benefits meaningful enough to motivate their employment decisions. 

An April-May 2022 survey by MissionSquare Research Institute did that by asking 102 fellowship candidates from the national service program Lead For America to gauge their motivation toward public service, impressions of the application process, and other career aspirations. (Figure 1)

Figure 1. Ranking of workplace considerations 

Source: MissionSquare Research Institute

Given a list of eight benefits to public sector employment, personal satisfaction from the job and salary were ranked highest, and life insurance and retirement benefits ranked lowest. According to the respondents, health insurance benefits are still very important for young workers, ranking third in the survey’s list of priorities. Moreover, even nontraditional benefits such as tuition assistance, student loan repayment, employee assistance programs, and childcare assistance ranked higher than retirement benefits in the survey. 

This finding reveals important insight into how these Gen Z employees think about retirement benefits. If retirement benefits are not valued as much as other benefits, perhaps public sector employers are overinvesting in pensions at the expense of other components, like professional development programs and childcare. 

Public sector employers should prioritize understanding the work components that matter to their employees. MissionSquare’s small survey of young workers reveals that retirement benefits might not be a high priority for the incoming labor force. So perhaps that is not the right way to attract and retain valued workers. Judging by the responses of this young group of public workers, policymakers should further survey a broader sample of government workers because they may find similar results suggesting they should prioritize recruitment and retainment policies that improve personal satisfaction and general compensation.

The post Survey finds pensions are not a high priority for young government workers appeared first on Reason Foundation.

In a new Reason Foundation policy brief, Public Education Without Boundaries, our team analyzes how school finance systems can get in the way of dollars following students across school district boundaries. Advocates of backpack funding should also pay attention to how dollars follow students between individual public schools, between public and private education environments, and how the whole education funding system ultimately ties together. In each case, backpack funding hits new roadblocks and requires different policy solutions.

1.       District-to-District Backpack Funding

An important subset of backpack funding concerns how education dollars follow students when they attend public schools outside of their residentially-assigned school district boundaries. Without strong funding portability mechanisms, school districts have weak financial incentives to welcome transfer students via cross-district school choice. The recent policy brief, Public Education Without Boundaries, tackles this problem and identifies three primary culprits preventing funding portability between public school districts.

First, most states have a group of school districts that are “off-formula,” meaning the districts can raise more than all the funding they are entitled to under their state’s main funding formula from local tax sources alone. Put simply, off-formula school districts create funding portability problems because they often don’t lose or gain funding when students transfer out or transfer in.

A second problem for funding portability between school districts is local education funding, which often comes from local property taxes. These taxpayer funds are often raised to support public school operations and finance construction projects, but because these local taxpayer funds aren’t raised based on student enrollment in schools or the district, they again don’t follow students when they transfer out of a school district.

The third funding source that doesn’t follow students easily is any state funding stream that’s not based on current enrollment figures or is not based on enrollment at all. To illustrate, in 2018, Missouri’s K-12 funding system funded 194 school districts based on past revenue amounts rather than current their student counts. Again, this means that a student transferring into any of those Missouri school districts doesn’t generate new funds for the district and that a student transferring out doesn’t take any funding away from the district if they leave.

Achieving backpack funding between school districts means finding ways to make these kinds of education funding sources—which don’t typically follow students—portable. 

One model for how to do this is in Wisconsin, which sets a single, statewide per-student funding amount that follows each student to their new school when they transfer to a new district. That calculated amount accounts for state and local funds–including some dollars that are not portable–which are then deducted from a sending school district’s state revenues. While this amount doesn’t include all funding devoted to a student in their home district, it exemplifies a way that other states can factor in education revenues from different sources and ensure that they come out of a sending district’s budget and follow transfer students out and to their new schools. 

2.     School-to-School Backpack Funding

Importantly, even if policymakers follow examples like Wisconsin to ensure education dollars are portable across school district boundaries, ensuring that funding follows students within school district boundaries when students transfer to a new school within the same district is a separate challenge. While all states have funding formulas ensuring that at least some education dollars follow students across district boundaries, none have statewide policies requiring that districts implement backpack funding at the school level. Therefore, implementing school-to-school backpack funding is a district-level decision that only a small subset of school districts across the country have implemented to some degree.

The standard method most school districts use to allocate dollars within their boundaries is to allot staffing and program-specific funding to each school. Under this common model, school resources aren’t usually thought of in terms of dollars. Budgets are largely administered at the district level, so school principals aren’t directly dealing with the financial effects of students transferring in or out of their schools.

This widespread practice of districts allocating staffing and programs to individual schools has several negative effects on within-district school choice as well as overall funding fairness. When dollars don’t automatically follow children between schools, districts might not be willing to allow for within-district choice because it can complicate budgeting for each individual school. 

Additionally, it’s long been noted that this budgeting practice based on staff positions leads to large per-student funding disparities between schools within the same school district due to differences in staff salaries between campuses. And as new state reports on federally mandated school-level spending data show, this practice often shortchanges schools serving high-need students. 

Achieving backpack funding within districts requires a different toolkit than what’s required to get backpack funding between districts. At the local level, school district leaders need to commit to a weighted student funding mechanism to fund individual schools and implement it with fidelity so that schools are funded solely based on the individual needs of the students they serve. 

Similarly, state policymakers could also advance legislation that requires districts to fund their schools on a weighted funding model and that gives students the option to choose schools within their boundaries. While these efforts would require substantial cultural shifts whereby districts place more budgeting responsibility on individual schools, they would lead to school-to-school backpack funding that fosters both public school choice and funding fairness.

3.       Public-to-Private Backpack Funding

Another definition of backpack funding expands the previous definitions to include non-public education environments. An example of public-to-private backpack funding would be universal education savings accounts (ESAs)—like the accounts recently implemented in states like West Virginia, Iowa, and Arizona. Universal education savings account programs are for all students in a state, regardless of their income or whether they are currently enrolled in public schools, private schools, or homeschooling.

In most cases thus far, students only qualify for an education savings account once they have withdrawn from the public school system. Also, ESAs and private school vouchers are often tied to the per-student amounts under the state’s education funding formula. When a student withdraws from a public school district to utilize an ESA or voucher, that state per-student amount generally leaves the district and follows the student. 

However, the problems that occur with district-to-district backpack funding also apply to public-to-private backpack funding. Local funds outside of the formula and state grants outside of the formula don’t typically follow ESA students, and off-formula school districts won’t typically see a reduction in funding when a student leaves to use an ESA. 

4.       Universal Backpack Funding

Finally, having a universal ESA is not all that’s required to have universal backpack funding. To achieve true universal backpack funding, policymakers need a single mechanism that allows for district-to-district, school-to-school, and public-to-private education choices. Education savings account amounts would need to be calculated similarly to how the per-student funding amount is calculated in the Wisconsin example above so that non-portable education funds become portable. 

Coming up with a single mechanism that accommodates all forms of backpack funding requires policymakers to make the public K-12 funding system more compatible with ESAs. When public school funding mechanisms have a mixture of portable and non-portable dollars, it’s difficult to have ESA amounts that are similar to the per-student funding levels in the public schools without costing the state extra money to make up the difference between the education dollars that follow students out of a school district and the dollars that are left behind in the district losing the student. 

As more universal education savings account bills make their way through legislatures and to governor’s desks across the country, policymakers should also consider how universal backpack funding can help streamline their education funding mechanisms so that all students are funded the same way, regardless of the schools they attend or the environments they are educated in.

Universal backpack funding would help break down the divide that exists between students being educated in public and private environments and ensure that all education funding follows students wherever they go to learn.

The post Clearing up definitions of backpack funding appeared first on Reason Foundation.

• Analysis and comments on Hawaii SB 375
  • Feb. 15, 2023, comments are here (pdf).
  • March 1, 2023, comments are here (pdf).

• Analysis and comments on Hawaii SB 669
  • Feb. 15, 2023, comments are here (pdf).
  • March 1, 2023, comments are here (pdf).

The post Comments and analysis of legal marijuana proposals and regulation in Hawaii’s SB 375 and SB 669 appeared first on Reason Foundation.

On a CalChiefs podcast, which its creators describe as “the voice of the California Fire Service,” Southern Marin Fire Protection District Deputy Chief Ted Peterson provided some details on exactly how municipal fire departments are seeking to take over emergency medical services (EMS) delivery from county-level EMS systems: increased reimbursements for transporting Medi-Cal patients through the Public Provider Ground Emergency Medical Transport (PPGEMT) program.  

The federally-funded program is increasing nearly threefold, but the private ambulance companies that perform most of the EMS work for counties in California cannot access it. Thus, union officials argue that since municipal fire departments are already handling the first responder element of EMS and can access PPGEMT funds as a public agency, why not let these municipal fire departments control it all, draw more federal money, and strongarm ambulance contractors already providing services today into accepting less money for the same work by taking over their contracts from counties?  

One reason the fire unions’ desired scenario would be problematic lies in their chosen accounting methods, which ensure fire unions would receive much more money for doing no more actual work. The federal reimbursement of the PPGEMT program doesn’t rely on any formal financial reporting documents, but a standardized, averaged reimbursement rate fueled by informal cost reports that are “proprietary to each agency so they cannot be shared,” as Peterson notes. Basically, each fire department must, on its own, determine how much it costs to perform its first responder function,s and those costs are averaged out to a flat reimbursement rate.  

Setting aside obvious questions like how government cost reporting could possibly ever be considered “proprietary” and not transparently reported like other government budget figures, the podcast mostly served as a rallying cry for fire departments to adopt similar accounting practices and gimmickry to ensure those “informal” and “proprietary” cost reports show losses as high they can get away with, even encouraging colleagues to “appeal” if they get audited over their cost reports. 

Over time, Peterson says, the increases will lead to “billions” of dollars for fire departments “for not doing anything except filling out some forms” and “increase(ing) our cost per transport two to three times what it is today.” 

While shielding private intellectual property and trade secrets from public view is not unusual in private businesses in market competition, the same is not true of governmental budgetary information and financial statements, which require public, transparent reporting. Public agencies should not get special treatment to hide their accounting methods from taxpayers. 

But there’s no reason to stop at accountability of accounting methods. For EMS to maintain effectiveness, much less improve, competition needs to be preserved. That becomes increasingly difficult as municipal fire agencies exploit their ability to access taxpayer funding to dominate EMS, while private ambulance company workers provide most EMS services. Peterson speaks of fire agencies playing a part of the larger EMS “team,” but typically, on a team, those who contribute the most get paid the most. 

Instead, private ambulance companies could find themselves at the mercy of whatever municipal fire department administrators are willing to give them, threatening the exit of providers. The fire takeover of EMS in the city of Chula Vista has already shown that. The city raised the money provided for EMS to nearly $4,000 per trip, but the subcontractor company running the ambulances received less funding than they did under the previous arrangement and, overall, less than the fire agency that managed, but didn’t provide, the actual ambulance services.   

What’s more, the Chula Vista fire department blamed the ambulance company for the rate increase it fought for, even though the incremental new revenue from the rate increase went to the fire department.  

Those tactics threaten the exit of ambulance providers from the system entirely, which would be bad for taxpayers since fire departments are so dependent on them. Even if fire departments invest enough in ambulances, equipment, and services to provide full EMS, without competition and transparency, who is to say whether taxpayers are getting the best allocation of their funds? 

Ironically, the podcast inadvertently highlights the need to emphasize cost and accountability. For example, if it costs over $2,000 for a trip to bring first responders to an accident, as Peterson claims in the podcast, the first thing to ask should be if there’s a way to do that more efficiently. How many emergency calls actually require the use of a ladder truck and personnel? Peterson says that departments charging much less were found to understate costs—should they not be subject to competitive pressure? Are there no better ways? 

A level playing field between public and private actors best ensures EMS services in California toe the line between competitiveness and providing care to all patients. But California’s existing laws prohibit private EMS service providers from dedicated PPGEMT funding, so as fire agencies take over EMS, they can hold that funding over private providers’ heads based solely on their status as public agencies, as Chula Vista’s experience shows.  

More so, EMS providers asking for federal reimbursement should open their cost accounting to the public. Fire departments insisting the cost accounting of their EMS first responder functions that go to determining federal awards remain hidden from public scrutiny should raise a red flag for every taxpayer. If fire departments are so confident their claims are legitimate, they should welcome the added transparency. 

The post With EMS takeover attempts, California’s fire departments seek more taxpayer funding to do less  appeared first on Reason Foundation.

In the 21 states examined, public K-12 enrollment declined in every state except for three states and the District of Columbia. The AP and Stanford found that public K-12 enrollment dropped by approximately 711,000 students in those locations. California and New York experienced massive enrollment declines, with nearly 271,000 and 133,000 students leaving public schools. 

By contrast, K-12 enrollments increased in other schooling sectors. Homeschool enrollment grew by about 184,000 during the pandemic, as likely would’ve been expected, with the homeschooling sectors in Florida and New York growing the most. 

Private school enrollments also grew, but more modestly, increasing by nearly 103,000. Florida, again, and Tennessee experienced the most significant growth in their private schools. 

Yet, the private and homeschool sector growth only accounted for about 40% of public school enrollment losses. Dee estimated that population changes, such as students moving to other states and declining birth rates, accounted for more than a quarter of public school enrollment losses. 

At the same time, the report estimated that 240,133 students remain unaccounted for. These unexplained losses featured most prominently in California and New York, where nearly 152,000 and 60,000 students remain missing, respectively. 

Some absences are likely due to unregistered homeschooling and families not enrolling their children in kindergarten, which is optional in nine of the 21 reviewed states. In these cases, Dee estimated that skipping kindergarten accounted for almost 40% of unexplained absences.

Nonetheless, some students have not attended school for multiple years now. Researchers have previously estimated that the lifetime earnings of students who experienced just one year of learning loss could be reduced by more than 9%, so there will be long-term concerns about many of these students and their futures. 

These public school enrollment declines have also hastened financial crises for many school districts that were unprepared for them, especially urban ones. For instance, Minneapolis Public Schools announced an impending fiscal crisis due to declining enrollment last fall.

With fewer students in public schools and an increasing number of families more comfortable with switching schools, public school districts will need to up their game as they navigate a more competitive education marketplace. Research shows that school districts can positively respond to competitive pressures by implementing measures like open enrollment. 

Policymakers should weaken school district monopolies, so students have options outside of their residentially-assigned schools. Oftentimes students drop out of school because of bullying by other students, not feeling like they fit in with classmates, not getting the academic attention they need, or conflicts with teaching staff. Policies, such as education savings accounts and open enrollment, provide students with flexible schooling options to transfer to schools that fit their needs. Education savings accounts, in particular, allow for significant educational customization, paying for tuition, books, physical therapy, transportation, and much more.

From the states

State policymakers continue to advance school choice proposals nationwide.

The Utah State Senate failed to pass a proposal (S.B. 166) to make microschools legal in the state.

In Idaho, the Senate Education Committee passed a proposal (S.B. 1038) that would establish approximately 6,600 education savings accounts. These accounts could be used to pay for various approved education expenses, such as private school tuition or textbooks. There are no income restrictions on the accounts. 

The Arkansas Senate passed Gov. Sarah Huckabee Sanders’ LEARNS Act (S.B. 294), which would initially establish education savings accounts for students who are homeless, in foster care, have disabilities, or are assigned to failing public schools. However, student eligibility would expand by 2026 to all K-12 students. At the same time, the proposal would also remove any caps on charter schools and student transfers through open enrollment. Currently, the bill has 25 cosponsors in the Senate and 55 cosponsors in the House, providing a supermajority and majority, respectively.

What to watch

South Carolina policymakers are thinking about expanding open enrollment. Proposals in the South Carolina House and Senate would expand public school choice, allowing students to transfer to public schools other than their assigned ones. Currently, some public school districts in the Palmetto State permit students to participate in within-district open enrollment, but the new proposal would require all school districts to participate in cross- and within-district open enrollment. During his testimony, Reason Foundation Senior Policy Analyst Christian Barnard recommended adding transparency provisions to strengthen the proposal.

Texas governor’s State of the State address calls for school choice reforms. Texas Gov. Greg Abbott called K-12 education an “emergency item” this legislative session. Noting that Texas successfully implemented education savings accounts (ESAs) for students with special needs during the pandemic, Gov. Abbott stated that Texas now needs to establish universal state-funded ESAs for all Texas families. 

Recommended reading 

A Poor Poverty Measure
Ishtiaque Fazlul, Cory Koedel, and Eric Parsons at Education Next

“While it has been understood for some time that school lunch enrollment as a poverty indicator is blunt and prone to error, the magnitude of the problem has not yet been fully appreciated. In exploring the rules, features, and processes of the National School Lunch Program, we find that the program’s design, incentives, and lack of income-verification enforcement likely contribute to the oversubscription.”

Stockton, Calif., School Officials Could Face Criminal Charges after Audit Finds ‘Sufficient Evidence’ of Relief Fund Fraud
Linda Jacobson at The74

“The audit by an independent California agency largely focused on a questionable $7.3 million contract paid for with pandemic relief funds. In 2021, former officials appeared to ram through the purchase of 2,200 ultraviolet air filters designed to kill COVID despite multiple warnings that they weren’t following laws and procedures, the report said.”

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Are you a state or local policymaker interested in education reform? Reason Foundation’s Education Policy team can help you make sense of complex school finance data and discuss innovative reform options that expand students’ educational opportunities. Please reach out to me directly at jude.schwalbach@reason.org for more information.  

The post Funding Education Opportunity: Examining public school enrollment losses and sectors with gains, state education legislation, and more appeared first on Reason Foundation.

But the real bombshell came two weeks later when FTC Commissioner Christine Wilson made a self-described “noisy exit” from the commission in the form of a Wall Street Journal op-ed on Feb. 14. It wasn’t Khan’s overhaul of antitrust law that Wilson said drove her out–the commission is bipartisan and dissent is commonplace. It was Khan’s alleged “disregard for due process and the rule of law” and “abuses of government power,” Wilson wrote, that prompted her, the lone Republican commissioner. to leave the FTC. (Noah Phillips, the commission’s other Republican, resigned in October 2022.) 

Wilson cites in detail Khan’s refusal to recuse herself from the commission’s failed bid to block Meta’s acquisition of Within. Before she joined the FTC, Khan had argued Meta (at the time named Facebook) should not be allowed to make any further acquisitions. Wilson says she objected to Khan’s refusal to recuse herself on both due process and ethical grounds but was overruled by the Democratic commissioners and Khan herself. Wilson made a similarly futile attempt to object to the recently proposed FTC blanket ban on non-compete clauses in employment contracts. 

The FTC is not an organization intended to be adversarial to the companies under its regulatory purview, but rather a neutral arbiter of whether any harm would come from mergers and other conduct it scrutinizes.  

More information regarding the rule violations alleged by Wilson is likely forthcoming. But those who have followed the antitrust philosophy of Khan and her allies on the progressive left should have little trouble connecting the dots between their antitrust goals and the wrongdoings alleged by Wilson. Fundamental to Khan’s vision is the scope and necessity for “good” government power to act as a check on bad “concentrated private power.” 

Khan ignited the left’s newfound interest in antitrust with a 2017 paper critical of the widely adopted consumer welfare standard (which focused on prices) as weak and overly permissive to mergers. Her Yale Law Review article took aim at Amazon, specifically its capacity for predatory pricing to harm competitors and vertical integration to compete with sellers on its own platform. Amazon was but one example. The point was encouraging a much more active use of antitrust enforcement to check what Khan and others believed was the outsized influence of large corporations—a point driven home by the title of Columbia Law professor, and Khan ally, Tim Wu’s book, The Curse of Bigness. 

Under this logic, the potential bad conduct by large private firms is limited only by one’s imagination. And prior to its ascendance in the Biden administration, the movement alternately known as “hipster antitrust,” “break up big tech,” and New Brandeisianism put its imagination to work. In addition to product market monopoly, there was labor market monopsony, vertical restraints, coercion and gatekeeping, and (as in the case of Meta and Within) power in predicted markets of the future. Perhaps the starkest case of this movement believing big is bad is their belief in the threat of market power to democracy. Some on the left have argued that large corporations, through their money, could boost certain political campaigns (likely to candidates who disagree with such hyperactive use of antitrust enforcement). 

None of these scenarios are implausible, but they remain hypothetical. Rather than clarify the types of conduct deemed anti-competitive, a long and expanding list for regulators to scrutinize is de facto discretionary power. In effect, the New Brandeisians sought to move from the consumer welfare standard of antitrust enforcement to the standard that mandates companies compete in the manner that regulators would like them to. 

Khan’s goal of restraining the growth and dynamism of American business as an end unto itself was on full display in Nov. 2022 when the U.S. Securities and Exchange Commission issued new policy guidance regarding its role under Section 5 of its charter to prohibit “unfair” competition. Claiming a mandate that went beyond antitrust legislation and court precedent, the commission stated that it could take action against competitive conduct deemed “coercive,” “exploitative,” “abusive,” or “restrictive,” leaving these terms subjective and undefined.

It was, as Wilson noted in her resignation op-ed, an “I know it when I see it” approach. Wilson’s concerns about due process and the rule of law appear well-founded. 

Khan now faces the public allegations that, in her first year as FTC chair, she waged war on the perceived specter of concentrated private power by concentrating an unprecedented amount of public power for herself and friendly FTC commissioners.

Thus far, her efforts have almost entirely failed. The tides could turn as neither Republicans nor Democrats appear eager to bury their respective hatchets with big tech. But the biggest name in the movement once sarcastically labeled the hipster antitrust movement as a throwback to the days before the consumer welfare standard has instead garnered criticism and a high-profile resignation for allegedly neglecting legal norms that have stood far longer tests of time.

The post FTC Chair Lina Khan’s consolidation of power is a feature of her approach to antitrust, not a bug  appeared first on Reason Foundation.