Commentaries Archive - Reason Foundation Free Minds and Free Markets Thu, 09 Mar 2023 16:34:56 +0000 en-US hourly 1 Commentaries Archive - Reason Foundation 32 32 Ways the SECURE Act 2.0 can help people save for retirement Thu, 09 Mar 2023 16:32:43 +0000 The law provides additional flexibility for tax optimization of retirement distributions and reduces tax code rules that perversely inhibit lifetime annuity solutions.

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The Setting Every Community Up for Retirement Enhancement Act of 2022 (SECURE 2.0) was enacted as part of the Consolidated Appropriations Act of 2023 (HR 2617), the $1.7 trillion omnibus spending bill signed by President Joe Biden in Dec. 2022. Among the long list of changes adopted in the law are some that improve how employer-sponsored defined contribution retirement plans can better deliver financial security in retirement. SECURE 2.0 moves these retirement programs closer to the defined contribution (DC) plan design best practices long promoted by Reason Foundation’s Pension Integrity Project, but it also illuminates the overly complex nature of our tax and labor laws governing these arrangements. 

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.


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. 

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Analyzing Nebraska’s proposed legislation impacting school finance and property taxes Thu, 09 Mar 2023 06:20:21 +0000 Two bills are being considered that aim to increase the state’s role in financing K-12 education and decrease local property tax burdens for school district residents.

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During their first legislative session under Gov. Jim Pillen, Nebraska policymakers are considering legislation that aims to increase the state’s role in financing K-12 education and decrease local property tax burdens for school district residents. Specifically, two state bills address the fact that Nebraska is one of the most property tax-dependent education systems in the country, and many of its rural school districts get no state equalization aid under the state’s K-12 funding formula. However, while the legislation would help alleviate property tax burdens, there’s a substantial exception baked in that would prevent taxpayers from getting dollar-for-dollar property tax relief from the increase in state funds.

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.

Table 1
Revenue SourceAmount
TOTAL REVENUE FROM LOCAL SOURCES (exc. Private grants, donations)$6,240,608
TOTAL REVENUE FROM STATE SOURCES (exc. SPED aid, SPED transportation)$340,054
LB 583 Estimates 
Foundation Aid Estimate$663,855
Estimated % increase from Foundation Aid10.05%
3% of State & Local Revenues with Exclusions$198,237
Property Tax Reduction Estimate$465,618
*All calculations are estimates based on the author’s interpretation of the bill text and are for illustrative purposes only. 

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.

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Florida should abolish capital punishment, not make it easier Thu, 09 Mar 2023 05:01:00 +0000 In Florida, 30 people have been exonerated while they were awaiting execution since 1972.

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Florida Gov. Ron DeSantis recently signaled an interest in making it easier for juries to hand down the death penalty. Florida lawmakers have responded with state legislation to make it happen. Currently, juries in Florida must unanimously recommend capital punishment, but House Bill 555 and Senate Bill 450 would lower the threshold to just eight out of 12 jurors. This would be a troubling development for justice in Florida.

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. 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.

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Federal judge: Restrictions on gun ownership violate medical marijuana patients’ Second Amendment rights Thu, 09 Mar 2023 05:00:00 +0000 Federal firearm policy should not discriminate against users of medical marijuana.

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A federal judge recently ruled that a government ban blocking medical marijuana users from gun ownership is unconstitutional. The ruling labeled the practice ‘concerning.’ That is an understated description for a ban that has had very real consequences on Americans across the country.  

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. 

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Sustainable highway funding requires charging the drivers who use them Wed, 08 Mar 2023 17:00:00 +0000 The true costs of building and maintaining highways and bridges should be paid for by those who use them.

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In recent Public Works Financing columns, I’ve discussed the growing trend of equity concerns, such as offering free and reduced-rate trips to lower-income drivers to use express toll lanes and the separate trend of politicians disguising the real costs of using highways. In terms of effective transportation policy, the bad news is both trends are getting worse, with serious consequences for future highway revenue adequacy.

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.

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Chicago wants to open a casino to help pay down its public pension debt Tue, 07 Mar 2023 05:01:00 +0000 Chicago recently announced it is in the process of opening a new casino with the intent to use its revenue to pay down significant unfunded liabilities in the city’s public safety pension plan. According to estimates in the recommendation report … Continued

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Chicago recently announced it is in the process of opening a new casino with the intent to use its revenue to pay down significant unfunded liabilities in the city’s public safety pension plan. According to estimates in the recommendation report by Chicago Mayor Lori Lightfoot’s office, the casino will cost around $1.7 billion to build and generate roughly $200 million per year.

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.

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FHWA administrators want to stop humorous traffic safety messages Fri, 03 Mar 2023 22:07:57 +0000 Boring messages do not seem to be reducing fatalities, considering the fatality rate has been on an uphill climb for most of a decade.

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Across the country, Federal Highway Administration (FHWA) division administrators, the liaisons between FHWA and state transportation departments (DOTs), are cracking down on state DOTs for serious violations—posting humorous messages on their digital highway message signs.

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 4th in overall highway fatality rate, 9th in rural highway fatality rate, and 18th 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.

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Reason Foundation’s amicus brief in Gonzalez v. Google answers many of the questions raised by Supreme Court justices Wed, 01 Mar 2023 19:20:48 +0000 Congress originally made 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.” 

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On Feb. 21, the United States Supreme Court heard oral arguments in Gonzales v Google. (You can listen to the arguments here via C-Span.) Reason Foundation submitted an amicus brief on the case in January, and I found it interesting to see how some of the justices dug in on the issues raised in our brief.  

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.  

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Massachusetts menthol ban increased smoking among black women, research finds Wed, 01 Mar 2023 17:49:50 +0000 On June 1, 2020, Massachusetts became the first state in the US to implement a comprehensive prohibition on all flavored tobacco products

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A new research letter published in JAMA Internal Medicine concludes that the menthol cigarette ban in Massachusetts led to a net increase in smoking among black adults. Amid the Food and Drug Administration’s proposal to ban menthol cigarettes in the United States, the new analysis by Samuel Asare, principal scientist in tobacco control research at the American Cancer Society, et al. suggests that prohibiting menthols, the cigarettes preferred by black smokers, might be counterproductive to stated public health goals and calls for better health equity.

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.

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Survey finds pensions are not a high priority for young government workers Wed, 01 Mar 2023 16:46:24 +0000 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.

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The Great Resignation, the noticeable shift in employees leaving their jobs at faster rates during and after the COVID-19 pandemic, has had a significant impact on the public sector workforce.

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 

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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.

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With EMS takeover attempts, California’s fire departments seek more taxpayer funding to do less Wed, 01 Mar 2023 05:00:00 +0000 A level playing field between public and private actors best ensures EMS services in California balance competitiveness and caring for all patients.

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Taxpayers throughout California should be concerned that firefighter unions are trying to convince local governments across the state to reshape and expand municipal fire departments’ control over emergency medical services. This move would have major implications for accountability, public safety costs, and government finances overall.

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. 

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FTC Chair Lina Khan’s consolidation of power is a feature of her approach to antitrust, not a bug Thu, 23 Feb 2023 22:10:00 +0000 New Brandeisians, led by Lina Khan, seek to move away from the consumer welfare standard of antitrust enforcement.

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The Federal Trade Commission and its chair Lina M. Khan have had a difficult start to 2023. On Feb. 1 a California federal district judge rejected the FTC’s attempt to block social media giant Meta’s acquisition of virtual reality fitness startup Within–a decision the FTC opted not to appeal. While few observers ultimately expected the FTC to prevail in court, the case was viewed as an early test of Khan’s attempt to “remake antitrust law” at the FTC, meaning its speedy and categorical rejection was bad news for Khan and her radical antitrust insurgency. 

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.

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Arkansas could be the 12th state to enact a robust open enrollment law Thu, 23 Feb 2023 16:00:35 +0000 The LEARNS Act would provide universal school choice for all Arkansas families by 2026.

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For too long, Arkansas students’ public school options have been limited by residential assignment. This outdated and unfair method of school assignment sorts students into schools based on the geographic location of their homes.

This means that access to better public education options can depend on a family’s ability to essentially “buy” seats to better public schools through their mortgage inside the right school district boundaries.

However, a new Arkansas proposal aims to level the playing field, letting families pick their schools— public or private —regardless of their income. Introduced by State Sen. Breanne Davis, the LEARNS Act (Senate Bill 294), has already garnered the support of a supermajority in the Senate. The proposal also has 55 cosponsors in the state House and is strongly supported by Gov. Sarah Huckabee-Sanders.

This proposal would provide universal school choice for all Arkansas families by 2026. Children with disabilities, in foster care, homeless, and those assigned to failing schools would first gain access to an Education Freedom Account (EFA). But all children in the state would be eligible for an account within three years. Families could use their EFA to pay for approved education expenses, such as private school tuition, fees, school uniforms, and supplies. 

In addition to private school choice, the proposal would vastly expand the Arkansas Opportunity Public School Choice Act–the state’s cross-district open enrollment program. Cross-district open enrollment lets students transfer to public schools in school districts outside their assigned one. 

While all public school districts are required to participate in cross-district open enrollment, the policy is crippled because program participation is capped at 3% per school district. This means very few students can transfer through cross-district open enrollment.

Caps on participation help school districts retain their monopoly over the students that are geographically assigned to them. This means that school districts have little incentive to compete for new students or address the concerns of the students and parents assigned to their schools.

The LEARNS Act, however, would eliminate these arbitrary participation requirements. This reform would make Arkansas the 10th state to adopt a robust mandatory cross-district open enrollment law and the 12th state to have a law that requires mandatory open enrollment.

Any student could transfer to a public school outside their assigned school district. Moreover, students could transfer to their new public school for free, as they should be able to, since Arkansas is one of the 24 states that explicitly prohibits public schools from charging tuition to non-resident students.

Cross-district open enrollment is an essential form of school choice since it often lets students access better schooling options. For example, research from Texas and California found that students often transfer to schools with better test scores or more highly ranked than their assigned schools.

Moreover, in 2016 and 2021, California’s nonpartisan Legislative Analyst’s Office found that students used the state’s cross-district option to transfer to schools that offered Advanced Placement or International Baccalaureate courses, specific instructional models, or emphasized career preparation in particular fields.

Similarly, research on Ohio’s open enrollment program showed achievement benefits. It increased on-time graduation rates for transfer students who consistently used open enrollment, particularly those in high-poverty urban areas.

Open enrollment is a popular choice among families. For instance, participation in Wisconsin’s mandatory cross-district open enrollment program increased from 2,500 students during the 1997-98 school year to 70,000 students 23 years later. 

If signed into law, Arkansas’ refurbished open enrollment program would be a noteworthy example of a good education policy that lets students attend schools that are the right fit for them. The LEARNS Act could also weaken public schools’ unfair monopoly over students and encourage competition between schools. Significantly, families’ school choices would no longer depend on where they can afford to live, and instead, parents and students could choose the best schools for them.

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Three common mistakes in cannabis legalization proposals this year Wed, 22 Feb 2023 18:00:00 +0000 While legalization proposals have evolved and improved in many ways over the past decade, mistakes have also been replicated from state to state.

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More than a dozen states are now considering legislation to create new legal medical marijuana or adult-use recreational cannabis markets. That is in addition to a pending ballot question appearing in Oklahoma next month that would enact a new adult-use marijuana market. 

While state cannabis legalization proposals have evolved and improved in many ways in the decade since Colorado and Washington voters approved the first adult-use markets, some mistakes have also been replicated from state to state.

Here are three common mistakes seen in statewide proposals being considered this year.

Social equity plans are poorly designed to achieve nominal goals 

Advocates for social equity within the cannabis industry argue that restorative justice measures are necessary to compensate for decades of discriminatory government action during the drug war. President Richard Nixon’s administration admitted racist motives in pursuing and promoting the drug war, and there is a lot of statistical support demonstrating that the drug war has been prosecuted in discriminatory ways. 

However, most social equity plans found within this year’s state legislative proposals fail to target relief toward actual victims of the drug war—those who were arrested or convicted and have borne the collateral consequences of those convictions, such as barriers to employment, higher education, or small business loans. Instead, they create loopholes that allow third parties to intercept the benefits intended for these victims. These programs do not restrict eligibility to those arrested or their immediate families. Instead, a person can qualify to intercept benefits intended for these victims if they lived in a neighborhood where others were arrested or if they agree to hire entry-level employees from this neighborhood, regardless of whether those hired suffered any damages from the drug war.  

Such broad eligibility parameters allow social equity programs to be manipulated. Illinois offers a cautionary example. Illinois’ only operating social equity dispensary is owned by “wealthy and connected” insiders, according to the Chicago Tribune, including a retired city narcotics detective. Their dispensary opened recently in the affluent River North area of Chicago. This group qualified as a social equity licensee simply because they pledged to hire at least six employees from neighborhoods with historically high arrest rates—even if the specific employees hadn’t been arrested.

States should rethink legislative language allowing non-victims of the drug war to intercept cannabis business licensing preferences or other relief measures intended for victims of the drug war.  

Better yet, states should avoid capping the number of business licenses available and minimize fees so that individuals with modest means can afford to compete. Current legislative proposals would erect substantial barriers to entry into the legal cannabis marketplace, including a limitation on the number of licenses and exorbitant licensing and application fees. The well-heeled tend to dominate when marijuana business licenses are limited. As former Minority Cannabis Business Alliance Executive Director Amber Littlejohn says, “The best thing you can do for social equity is open up the market.” 

New York’s experience shows that high barriers to entry can impede the transition of legacy suppliers to the regulated marketplace and result in the perpetuation of the drug war. There, state and local authorities have begun a broad campaign to arrest unlicensed cannabis retailers or seize their assets. Meanwhile, barriers to the legal market are so tight that regulators only approved 36 dispensary licenses statewide despite receiving 900 applications, and the first legal location didn’t open until nearly two years after authorizing legislation passed. 

Current legalization proposals in Delaware, Hawaii, Maryland, Minnesota, and Nebraska would replicate these flawed approaches. Instead, states should restrict the eligibility for social equity criteria to direct victims of the drug war or their immediate families and minimize barriers to entry into the legal marketplace. 

Residency requirements for licensure are unconstitutional 

Federal courts have been clear that the states that condition cannabis licensing upon an applicant’s residency within the state run afoul of federal Dormant Commerce Clause provisions that prohibit state-imposed barriers to the free movement of people and capital. Courts have already struck down residency requirements in Maine and New York on that basis, while Colorado and Oregon proactively repealed their requirements. Still, state residency requirements or preferences have been included in current cannabis legalization proposals in Iowa, Nebraska, New Hampshire, and Tennessee

Labor peace agreements cannot be required as a condition of licensure 

Federal courts have also been clear that the National Labor Relations Board has exclusive jurisdiction to regulate private-sector labor relations. In 1986, the U.S. Supreme Court specifically ruled that issuance of a privileged type of business license could not be conditioned on the applicant signing a labor peace agreement. While California, Illinois, and New York have unlawfully imposed this requirement, Michigan regulators abandoned the proposal after hearing testimony from Reason Foundation. Current proposals in Delaware, Hawaii, and Minnesota would make this mistake. 

While states should legalize cannabis, experience in states that have already legalized shows that flawed legislation and regulatory rules can cause the resulting legal marijuana markets to struggle. Additionally, some legislative flaws invite lawsuits that could imperil or delay adult-use marijuana markets.

Many of the current marijuana legalization proposals being considered by states across the country could be strengthened by correcting these common mistakes. 

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Public pension fund trustees have a perfect path to avoid the politics of ESG investing Thu, 16 Feb 2023 15:25:24 +0000 ESG is a political construct and has no direct correlation to how a pension system should invest its assets. 

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It seems almost everyone involved in government, politics, and public pensions wants to talk about environmental, social, and governance (ESG) investing for public pension systems. Depending on who is commenting, they will tell you ESG is either completely necessary for the strong long-term performance of investments or ESG will preclude any possibility of strong performance in the future. The reality, of course, is that ESG is a political construct and has no direct correlation to how a pension system should invest its assets. 

Environmental, social, and governance issues are commonly packaged together in investment discussions through the ESG acronym, but a closer examination of these components raises questions about the value of grouping these things together.

It is evident that the concept of ESG investing owes its existence to politics by simply looking at its components. Why else would environmental, social, and governance criteria be lumped together other than for political positioning? Why not past, present, and future?  Or animal, vegetable, or mineral? 

Some idealists with a political agenda made the determination that these separate elements, ESG, were, in total, critical for long-term investing success, as well as other broader goals. They were also successful in positioning these three elements as a singular, necessary approach to investing success. ESG opponents then emerged, and the debate commenced. Through years of engagement, even opponents contributed to the idea that these three elements should be treated as one. Their position then became one where absolutely no credence could be given to any ESG investing criteria.

A prudent person, on the other hand, can see elements in standalone environmental, social, and governance issues that should be considered when public pension systems are making investment decisions. That same prudent person would also see that not every one of these issues should be applied to each and every investment decision. In fact, it is just as foolish to eliminate all such criteria from investing as it is foolish to include all such criteria. 

Fortunately, public pension fund trustees must follow prudent fiduciary standards, which set boundaries on how investment decisions are to be made. Given this, public pension fund trustees are afforded a perfect path to avoid the purely political argument that ESG investing has become. Fiduciary standards require that pension fund trustees make investment decisions based on providing the best possible financial outcomes consistent with the pension plan’s objectives for the plan’s participants and for the plan itself. 

All-in or all-out ESG investing is not sound, prudent fiduciary policy.  Therefore, public pension fund trustees should make investment decisions based on practical and sound financial criteria, not based on political ESG classifications that prioritize other factors above returns and volatility. The likely outcome of prudent decision-making is that some decisions will be made that align with the ESG approach, and others will not. All of these decisions, however, must be made for the good of the pension plan’s members and not to satisfy political agendas. 

The practical approach to responsible public pension system governance is there, fiduciaries just need to follow it.

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California should stop relying on taxation by citation Thu, 16 Feb 2023 05:01:00 +0000 Using fines and fees to generate government revenue undermines justice and fiscal responsibility in California.

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Across the country, state and local governments use fines and fees as a source of revenue to fund public services. But reliance upon this taxation by citation is not only a threat to individual liberty, it can also undermine public safety and result in fiscal instability. A new Reason Foundation policy brief shows why using fines and fees to generate government revenue undermines justice and fiscal responsibility in California.

Fines and fees are commonplace throughout the justice system. In many cases, fines are considered desirable because they are an intermediate form of punishment. Slapping someone with a fine is less severe than incarceration but is tough punishment for many low-level offenses. A person may be charged a fine for criminal or civil infractions. In addition to fines, a person might also be charged a host of assessments, fees, and surcharges explicitly intended to raise government revenue and offset the costs of administrating the justice system.

Traffic tickets are among the most common sources of fine revenue in California. The hidden fees attached to traffic fines can add up fast. For instance, the base fine for going 15 miles per hour over the speed limit in Orange County is just $35. But, after a menagerie of assessments, fees, and surcharges are added, the total ticket amount typically climbs to $226. Ticket revenue is then used for many government purposes unrelated to the traffic ticket, including funding the construction and maintenance of court buildings, DNA testing, and county emergency medical services.

Cities, counties, and the state government all get a slice of ticket revenues. Among the various hidden fees in California traffic tickets is a 20 percent state surcharge which adds $7 to a $35 speeding ticket. As State Assemblymember Adam Gray once explained, that surcharge was created in 2002 to help alleviate the budget deficits of that time and was supposed to be rolled back in 2007. But, 15 years after the supposed expiration, California continues to generate revenue for the state government via the surcharge from traffic tickets.

The primary responsibilities of the legal system are to promote public safety and uphold justice. Pressure to raise revenue, at best, undermines—and at worst, directly conflicts with—those responsibilities. A recent report from Catalyst California and the American Civil Liberties Union of Southern California found that the Los Angeles Sheriff’s Department dedicates significant time and resources to traffic stops with few public safety benefits.

Fines and fees are also highly regressive relative to alternative revenue sources. In other words, they tend to burden lower-income individuals disproportionately. A $226 speeding ticket is a minor inconvenience for many Southern Californians but could be catastrophic for many other lower-income drivers. According to a recent Federal Reserve report, nearly one-third of Americans could not afford a $400 emergency expense if it arose.

California lawmakers have wisely passed several reforms in recent years aimed at reducing fines and fees. For example, California notably became the first state to abolish all administrative fees in juvenile delinquency cases back in 2018. And the state’s counties are now no longer allowed to charge fees to cover the cost of incarceration, legal representation, electronic monitoring, probation, home supervision, or drug testing in juvenile cases.

Last year, the California State Assembly rolled back late fees on outstanding court debts. Previously, if someone missed the initial deadline to pay their traffic ticket, they’d be fined an additional $300 regardless of how much they owed. Now late fees are capped at $100. The legislation is estimated to have relieved more than $500 million in outstanding court debts.

Those reforms represent meaningful progress in reducing government’s reliance on fines and fees. Unfortunately, taxation by citation remains widespread across the state. More reform is needed. Reducing the remaining laundry list of assessments, fees, and surcharges that are added to traffic fines would be good next steps.

A version of the column first appeared in the Orange County Register.

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The effect of menthol bans on cigarette sales: Evidence from Massachusetts Wed, 15 Feb 2023 17:44:18 +0000 The data from Massachusetts and neighboring states show the menthol ban did not stop people from buying cigarettes, with sales increasing by seven million packs in the year after Massachusetts' flavored tobacco ban.

The post The effect of menthol bans on cigarette sales: Evidence from Massachusetts  appeared first on Reason Foundation.

With the Food and Drug Administration proposing a federal rule to ban the sale of menthol cigarettes across the country, policymakers should examine the consequences of similar legislation and whether the bans have achieved their public health goals. On June 1, 2020, Massachusetts became the first state in the United States to implement a comprehensive ban on the sale of flavored tobacco products, including menthol cigarettes.

The ban has served as a test for what other states and municipalities might expect if they enact similar prohibitions on flavored tobacco products. Although officials often promote tobacco control policies as ways to protect public health, the unintended consequences of menthol cigarette bans on total cigarette sales have puzzled many public health officials and raised important questions about the effectiveness of the prohibitions.

In my analysis of the comprehensive flavored tobacco ban implemented in Massachusetts, the data show that the prohibition of menthol cigarettes was followed by millions of additional cigarette sales in the six-state region of Massachusetts and its bordering states. The year following the ban on menthol cigarette purchases saw 15 million fewer packs of menthol cigarettes sold than the year before the ban. However, approximately 22 million additional packs of nonmenthol cigarettes were sold in those states in the year after the flavor ban, leading to a net increase in cigarette sales.

In the 12-month period following the implementation of the comprehensive flavor ban in Massachusetts, the state sold 29.96 million fewer (22.24% less) cigarette packs compared to the prior year. However, a total of 33.3 million additional cigarette packs were sold during the same post-ban period in the counties that bordered Massachusetts in the states of Connecticut (3.05 million additional packs), New Hampshire (25.84 million), New York (1.04 million), Rhode Island (6.01 million), and Vermont (1.21 million). Thus, considering the change in cigarette sales in the entire six-state region, there was a net increase of 7.21 million additional cigarette packs sold in the 12 months after the menthol cigarette ban in Massachusetts, a 1.28% increase in cigarette sales compared to the prior 12-month period before the ban.

A graph charting changes in menthol sales in Massachusetts and neighboring states over the course of 2020

A paper by Samuel Asare et al. (2022) published in JAMA Internal Medicine publicized a reduction in cigarette sales in Massachusetts following the menthol cigarette ban but failed to include all but one of the bordering states in its analysis. Additionally, the paper analyzed Nielsen Retail Scanner data, which only represented approximately 30% of all US mass merchandiser sales volume that year. In contrast, the Management Science Associates Inc (MSAi) data in my analysis represents all cigarette distribution throughout the entire US.

In conclusion, policymakers must be careful about enacting prohibitions for a variety of reasons, including when the banned product is still available for sale in nearby municipalities. This is especially true when tax rates in neighboring states are relatively low. In 2020, the sales tax for cigarettes in New Hampshire ($1.78 per pack) was approximately half that of Massachusetts ($3.51 per pack), which further incentivized bulk purchases of cigarettes and allowed for a sizeable smuggling market for black market sellers after the flavored tobacco ban was implemented. 

With similar flavored tobacco prohibitions being proposed in states like Maryland, which currently has a cigarette sales tax of $3.75 a pack, policymakers should keep in mind that neighboring Virginia has a much-lower sales tax of $0.60 per pack and that the cross-border smuggling of cigarettes would inevitably follow a menthol cigarette prohibition in Maryland.

The data from Massachusetts and neighboring states show the menthol ban did not stop people from buying cigarettes, with sales increasing by seven million packs in the year after Massachusetts’ flavored tobacco ban. Massachusetts’ flavored tobacco ban primarily sent buyers to others states and illicit markets, so other cities and states should consider the real-world impacts of implementing similar prohibitions.

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California’s schools need to adapt to the state budget woes Tue, 14 Feb 2023 05:00:00 +0000 Gov. Gavin Newsom’s recently-released budget projects a $22.5 billion deficit, which means school districts will likely need to rightsize operations.

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California’s public school students recently showed historic declines in standardized test scores due in part to school closures and other COVID-19 pandemic-related learning disruptions. Amidst a growing state budget device, state legislators and local school leaders need to help students get back on track with smart policymaking.

California Gov. Gavin Newsom’s recently-released budget projects a $22.5 billion deficit, which means school districts, especially those experiencing dramatic student enrollment declines like the Los Angeles Unified School District, will likely need to rightsize operations. School districts should be finding cost savings in areas such as reductions to the currently very generous post-employment health care and dental benefits for retirees, which are controlled at the district level.

California policymakers should also allocate any remaining federal funding for pandemic relief to tutoring services and programs that allow local school leaders the most discretion over how to use the money to help students. As of Sept. 30, 2022, California schools had spent just over 43 percent of the $21.5 billion federal stimulus funds allocated to the state’s school districts and charter schools during the pandemic. School districts need to ensure they don’t create new costs that outlast federal funding set to dry up. Schools must be shrewd about whether or not to add new staff. Many school districts aren’t in a financial position to make new hires due to their declining student populations.

Los Angeles Unified and Oakland Unified School District have heavily invested in tutoring, universal summer school, and small-group literacy programs since the spring of 2020. These programs may help explain why each school district gained ground in some reading metrics and experienced less significant overall National Assessment of Educational Progress (NAEP) score declines than many other urban school districts across the country. And because different student populations have vastly different learning needs, the more discretion local leaders have on how to use these resources, the better.

At the state level, policymakers should resist the urge to funnel education dollars through specific grants and earmarks. These programs make it difficult for school leaders to prioritize the programs they see helping their students when budget cuts are necessary.

Finally, California must consider ways to provide families with more education choices. Improving the state’s public school open enrollment programs is one way to do so. Ensuring that all public schools are participating in within-district and cross-district open enrollment would allow students to enroll at public schools that better fit their academic and social needs.

A 2021 study conducted by the nonpartisan Legislative Analyst’s Office gave the state’s biggest open enrollment option, the District of Choice program, good marks. Students using the program often enrolled in higher-performing school districts, and districts that lost students to the program showed increased community engagement in an effort to win families back. By consolidating and expanding California’s open enrollment offerings, policymakers would empower more families to find education options that better fit their children’s needs. Unfortunately, a recent Reason Foundation study of K-12 open enrollment policies found California’s open enrollment programs fall short in every key benchmark, so much work is needed.

With the state facing a significant budget deficit, federal COVID funding to schools set to dry up in 2024, and the need to help students make up for learning losses suffered during the pandemic, California’s schools and policymakers have their work cut out for them in 2023. But practical solutions like improving open enrollment policies and rightsizing schools can start to put the state on the right path to providing a higher-quality education to California’s students.

A version of the column previously first appeared in the Orange County Register.

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How states can learn from Wisconsin’s cross-district open enrollment system Mon, 13 Feb 2023 06:01:00 +0000 The term school choice often brings to mind vouchers, education savings accounts, or charter schools. But another form of school choice is critical to giving families options that might better fit their needs: cross-district open enrollment. While many states allow … Continued

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The term school choice often brings to mind vouchers, education savings accounts, or charter schools. But another form of school choice is critical to giving families options that might better fit their needs: cross-district open enrollment.

While many states allow students to transfer to schools across district lines, only nine states implement robust policies that ensure students have access to schools with available seats. A new Reason Foundation policy brief shows promising results and highlights how Wisconsin’s cross-district open enrollment system can serve as a model for policymakers in other states.

For starters, Wisconsin’s open enrollment program has shown tremendous growth. The number of participants has grown from 2,500 students in the 1998-99 school year to more than 70,000 students in the 2021-22 school year.

The figure below compares enrollment in Wisconsin’s public schools and choice programs over time. While public school enrollment in Wisconsin has fallen precipitously, cross-district open enrollment has continued to grow, even outpacing the growth of private school choice in recent years. 

Importantly, the study suggests that cross-district open enrollment helps students access better schools, finding that districts that see net gains through the open enrollment process tend to have significantly higher ratings on the state’s report card than districts that lost students. This finding supports the idea that parents are in the best position to make decisions for their kids and that open enrollment is a viable vehicle for putting them in the driver’s seat.

While multiple factors have contributed to the success of Wisconsin’s cross-district open enrollment policy, a significant factor is that a substantial portion of students’ per-pupil funding follows them to their new school districts. For regular program students, Wisconsin transfers $8,125 to the receiving school district from the residentially assigned district. This represents about 59% of the average combined state and local spending per student in the state and exceeds the average per-student state contribution by a little more than $1,000.

Wisconsin’s approach creates a win-win by leaving behind some funds to cover fixed costs for the sending district and providing a strong financial incentive to accept transfers for the receiving school district.

For transfer students with special needs, this amount goes up to $12,977. The importance of this increased value should not be lost. Historically, Wisconsin school districts would reject transfers due to claims that they were unable to meet student needs. By offering a higher transfer funding amount, districts are incentivized to take on more challenging students who are often most in need of new opportunities.

A final key component to Wisconsin’s success is that school districts can only reject transfer students’ applications for limited reasons, such as grade level capacity and the applicant’s discipline or truancy records. Otherwise, school districts must accept all transfer applicants so long as open seats are available. In fact, school districts must implement a lottery if the number of transfer applicants exceeds the number of available seats. This limits the arbitrary rejection of students and encourages families who need a change to apply in a relatively transparent process.

Open enrollment is just one tool in the education reformers’ toolbox, but its important potential should not be underestimated. Since open enrollment only involves public schools, there is the potential to bring along new allies who may be reluctant to support other forms of school choice. Wisconsin’s open enrollment program is not perfect, but the state’s ambitious program can serve as a starting point for other states looking to open up public school choice.

For more information, please see the policy brief, “K-12 open enrollment in Wisconsin: Key lessons for other states.

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Louisiana has been detaining people beyond their legal release dates for over a decade Fri, 10 Feb 2023 18:54:50 +0000 Louisiana’s routine practice of overdetention is not only unjust, but it also comes at a steep cost to taxpayers.

The post Louisiana has been detaining people beyond their legal release dates for over a decade appeared first on Reason Foundation.

On April 16, 2019, Brian Humphrey was sentenced to three years in prison in the 26th Judicial District Court in Bossier Parish, Louisiana. However, the sentencing judge gave Humphrey credit for the time he had already served in jail and suspended his sentence. Humphrey could have been released immediately, but it was not until about a month later, on May 13, 2019,­­ that he became a free man. Humphrey spent 27 days “overdetained” because of administrative delays. Humphrey is just one of the thousands of people overdetained in Louisiana each year.

Humphrey is the named plaintiff in a 2020 class action lawsuit filed against the secretary of the Louisiana Department of Public Safety and Corrections (LDOC), James LeBlanc. Following Humphrey’s lawsuit, the U.S. Department of Justice (DOJ) launched an investigation into Louisiana’s prisoner release practices. The Department of Justice investigation concluded that the Louisiana Department of Public Safety and Corrections “routinely confines people in its custody past the dates when they are legally entitled to be released from custody, in violation of the Fourteenth Amendment.”

The DOJ investigation report further noted that “of the 4,135 people released from LDOC’s custody between January and April 2022, 1,108 (or 26.8 percent) were held past their release dates.” On average, overdetained individuals were held 29 days past their release date. A startling 24 percent of those overdetained in Louisiana were held for over 90 days.

Louisiana’s routine practice of overdetention is not only unjust, but it also comes at a steep cost to taxpayers. According to the U.S. Department of Justice report, the Louisiana Department of Public Safety and Corrections paid parish jails at least $850,000 in fees for the time individuals were incarcerated beyond their lawful sentences over a four-month period. That translates to approximately $2.5 million in annual costs associated with overdetention in the state.

The problem of overdetention isn’t limited to Louisiana. In 2002, a $27 million suit was settled in Los Angeles County that involved overdetention and illegal strip searches. Another $6.2 million settlement was reached in the District of Columbia in 2015, also involving overdetention and strip searches. More recently, in 2022, a class action suit was filed against the Baltimore Central Booking and Intake Center, and a $300 million suit was filed against New York City, both involving overdetention of inmates.

While overdetention may occur in other jurisdictions, the state of Louisiana is an outlier. Notably, LDOC has been aware of the problem for over a decade. A 2012 internal report and legislative audits conducted in 2017 and 2019 highlighted a consistent pattern of overdetention due to administrative delays, poor data management, and a lack of clearly defined procedures.

LDOC’s outdated computer systems might be at least partially to blame for lengthy delays. The Corrections and Justice Unified Network (CAJUN) is the primary software that LDOC uses to manage its prison system. The software was developed in 1970 and was last updated in 1991. In 2015, the software was supposed to be replaced by a $3.5 million dollar system (Offender Management System-OMS), but the new system was quickly abandoned after less than two months because “it caused confusion and interrupted work efficiency.” LDOC has continued to rely on CAJUN since. In some cases, moving paperwork between departments requires government employees to physically drive documents across the state.

A 2017 audit of Louisiana’s management of offender data found that the tracking of offender data through CAJUN was sometimes inaccurate. The audit revealed numerous “material weaknesses in internal control procedures.” Eleven percent of files reviewed in the audit showed that inmates were at a different facility than what was reflected in CAJUN and 38% of users with access to the system were no longer employed at LDOC.  Notably, the audit concluded that LDOC’s procedures for calculating release dates were inconsistent and could produce errors. The Legislative Auditor recommended implementing a review process for all initial sentence computations.

In a response to the 2017 audit, LDOC Secretary James LeBlanc said, “Calculating each offender’s release dates is a complex process with up to 20 different criteria that impacts the computation process.”

LeBlanc went on to describe LDOC’s efforts to provide employees with training and resources to address challenges associated with high turnover rates and frequent legislative changes that impact sentence computation. A subsequent audit in 2019 found no improvement.

As Maybell Romero, associate professor of Law at Tulane University, told The Advocate, “This isn’t rocket science. Every other state — at least most of them — has a system that works.”

LDOC’s current practices cannot continue. The DOJ report includes several remedial recommendations, including substantial technological upgrades and the decommissioning of CAJUN. The DOJ also recommended the establishment of new policies and procedures related to personnel training, interagency coordination, and quality assurance and supervision.

At a minimum, LDOC should adopt all of the DOJs recommendations, although the severity and duration of the agency’s misconduct suggest that broader cultural changes are necessary. Other jurisdictions should also take note of LDOC’s failures and take proactive measures to avoid unlawful overdetention.

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