Month: January 2017

Like most kids of my generation we watched a lot of Bugs Bunny cartoons.  In those stories Bugs was definitely motivated by carrots and by Elmer Fudd’s “stick” in the form of a shotgun.  This post is about the carrot and stick approach being used by the legislature to dismantle Oklahoma’s defined benefit public pension plans.   In my last post “Fouling Our Nest….Egg” I provided information about the Oklahoma Teachers Retirement System (OTRS) taken from its most recent actuarial report which is available here https://www.ok.gov/TRS/Publications/Actuarial_Reports/index.html

Most important I showed what happens to the more than one billion dollars that flows into the system from education employees, their school districts and other employers and dedicated revenues from the state.  For every $100 in new payroll $24 is paid into the system coming, approximately, $7 from employees, $10 from their employers and $7 from the state.  In effect that $24 is actuarially allocated $10.50 to pay for the future benefits of the contributing employees (made up of the employees’ $7 and $3.50 from their employers) and the remaining $13.50 ($6.50 from employers and $7 from the state) to pay off the system’s Unfunded Actuarial Accrued Liability (UAAL) which is over $7 billion, but on track to be retired in 23 years.

Following the direction from the Oklahoma Council of Public Affairs and their ilk our legislature has been anxious to phase out the state’s defined benefit (DB) pension plans and replace them with defined contribution (DC) plans.  Here are the definitions:

•      Defined Contribution Plan: A retirement plan, such as a 401(k) plan, a 403(b) plan, or a 457 plan, in which the contributions to the plan are assigned to an account for each member, and the plan’s earnings are allocated to each account, and each member’s benefits are a direct function of the account balance.

•      Defined Benefit Plan: A retirement plan that is not a Defined Contribution Plan. Typically, a defined benefit plan is one in which benefits are defined by a formula applied to the member’s compensation and/or years of service.

As more fully addressed in my October post “Turkish deFright” the legislature used a “stick” (the 2014 HB 2630) to provide for the end of the OPERS DB plan for state employees by simply mandating that it would be closed to new employees who, instead, would use a DC plan for their retirement.  For political (teachers engender more sympathy than “bureaucrats”) and legal reasons, I suspect, Representative McDaniel and others are choosing to use a “carrot” approach to ending the OTRS DB plan and moving new school employees to a DC plan.  The carrot is spelled out in HB 1162 and HB 1172 he has filed for the 2017 legislature to consider.

By raising the retirement age two years for new members of the DB plan HB 1162 simply makes the existing plan less attractive.  Using the numbers from the actuarial study we see that effectively the current active and contributing members are paying $7 and their employers $3.50 for every $100 earned for the retirement benefits they will eventually receive.  But that calculation includes all active members, those under the more generous Rule of 80, the previous Rule of 90, and the tighter Rule of 90 that now applies to new employees.  I don’t know what the amounts would be but clearly the value of the employer’s contribution to a new employee under McDaniel’s plan will be well less than $3.50 that is the average of all.  However, to keep a comparison simple we’ll “stick” with $3.50.  So a new employee pays $7, the employer kicks in $3.50, and the remaining $13.50, coming from the employer and the state, goes to pay off the system’s UAAL.  Bottom line, the employee pays $7 and gets a $10.50 value.  And the state’s promise to retirees like me is kept.  Whoop De Do.

What I just said is essential to understanding the “carrot” McDaniel wants to offer new teachers and school employees.  It is an actuarial fact, fully documented and supported by the most recent OTRS actuarial report, that for every $100 of payroll generated today, under the current DB plan, $24 is paid into the system of which $10.50 goes to support the future retirement of the current employees who are contributing their 7% or $7.  The remaining $13.50 goes to pay off the systems unfunded liability for those already retired and some still working whose earlier years of service were not fully funded.  This $13.50, which is made up of the state’s $7 and the employers’ excess above the $3.50 needed to fund each year’s current promises to current teachers and school employees, will be needed regardless of how the legislature may change the plan in the future.  It could be more in which case the UAAL will be paid off sooner (just like paying more toward your mortgage); it could be less but that would lengthen the time to pay off the UAAL and could even endanger its long run solvency.  The best way to view this is that the $13.50 is “off the table” and what we have to work with is the $10.50, $7 from the teacher and $3.50 from the employer school district.    

Now for the carrot.  HB 1172 mandates the creation of an optional DC plan within OTRS.  A new school employee has a 30 day window to decide whether to join the DC plan or not.  Those who don’t, if they are teachers, will then be in the DB plan; other school employees can opt in or out of the DB plan.  By joining the DC plan the employee is required to contribute a minimum of 4.5% of payroll, or $4.50 for every $100 of payroll.  The employer is required to “match” with 6% being $6 for every $100 of payroll.  The employer is also required to remit the difference that would have been paid to the DB plan if the employee had joined it.  That amount, on the average, is about 10%, or $10 per $100, from above (the employer percentage is generally 9.5% but is much greater for employees paid with federal grants so averages a little more than 10%).  Bottom line the employee pays $4.50 and gets a $10.50 value. 

Here then is the carrot.  If a newly employed teacher in August, 2018 asked me whether she should opt for the new DC plan or default to the legacy DB plan I would have to say to her that in each case you will have the same amount ($10.50 per $100) or percentage (10.5%) of your salary working for your retirement but it will cost you 7% to get that through the DB plan and only 4.5% through the DC plan.  That 2.5% difference, or $2.50 per $100 of payroll, stays in your pocket.  There are other pros and cons to consider (will be addressed in my next post) that might alter my recommendation if the starting math was more equal, but it’s not.  The scheme that will go into place if HB 1172 is enacted is a clear “carrot” to move all new employees into the new DC plan, certainly fulfilling the objective of McDaniel and the OCPA, but it comes at a significant cost. 

There ain’t no such thing as a free lunch even if it’s only carrots.  That 2.5% or $2.50 per $100 must come from somewhere and it does.  Note that for the existing DB plan the actuary tells us that the employer’s 10%, or $10 per $100, gets split 3.5% to the current employees and 6.5% to help pay off the UAAL.  This split changes with HB 1172; going forward 6% will be allocated to the current employees who opt in the new DC plan leaving only 4% to pay off (under the “remit the difference” requirement) the UAAL.  Assuming new employees figure this out and depending on how quickly the actuary projects this de facto “closing” of the DB system, this will certainly slow down the reduction of the system’s UAAL and may even put it on the path to insolvency.

The carrot can even get juicier.  If a new employee participant elects to put at least 7% into the DC plan then the employer “match” increases to 7%, meaning 14% is working for the new employee’s retirement contrasted with only 10.5% for the old employee in the DB plan (or $14 compared to $10.50 per $100 of payroll).  And this takes away another 1% from the employers’ pay down of the system’s UAAL, making the split 7% to the new employee and only 3% to the debt, further worsening the DB plan’s long run stability.  Yet I can see the postings on the OCPA’s blogs as their self-fulfilling prophecy plays out, saying they told us so, that the DB plans are disasters and aren’t we glad that at least new employees were “saved” by the DC plans.  We have met the enemy and it is us.

My hunch is that this blatant robbing Peter (old teachers) to pay Paul (new teachers) will not become part of the conversation about HB’s 1172 and 1162 because the math is confusing at best and can be made deceptive at worst.  Both Peter and Paul deserve better.  What would help is if the legislature would commission an actuarial study of the financial impact of this proposed legislation so that they understand the facts before taking action.  The Oklahoma Pension Actuarial Analysis Act was enacted some years ago to require both a two-year process and an actuarial analysis of proposed legislation that would have a “fiscal impact”.  Unfortunately, this law defines “fiscal impact” as only a law that would increase benefits for current or retired employees without funding the change.  It does not consider stripping away revenues that support existing benefits as having a “fiscal impact”.   Therefore, the legislature’s actuary has already certified these bills as “non-fiscal” and thus no analysis is required—just more limited thinking.

As always lunch is on me for the first to identify the photo location—hint:  it and the one before are “up the hill” from the photo on the “Short and not the Point” post. 

   

      

 

 

 

As I shared in my initial blog post, “Hello World”, my first substantive introduction to the shoddy “research” done by the limited-thinkers at the Oklahoma Council of Public Affairs was taking the time to analyze their policy paper “Saving Workers’ Retirement” which provided like-minded Oklahoma legislators with their marching orders, namely first “save” the Oklahoma Public Employees Retirement System (OPERS) and then “save” the others, particularly the Oklahoma Teachers Retirement System (OTRS).  Here are direct quotes from the paper:

“Oklahoma must transition into a defined-contribution retirement plan for all new non-hazard duty government employees and teachers….Establish a defined-contribution (DC) plan, effective July 1, 2014, for all new state (OPERS-eligible) employees….Establish a defined-contribution (DC) plan, effective July 1, 2016, for all new teachers and judges.”

The OCPA’s minions got off to a good start in 2014 by passing HB 2630 which, after an unsuccessful court challenge, implemented a defined contribution plan for the vast majority of new state employees in late 2015 (See my October post “A Turkish deFright”).  Now it looks like step two is front and center for the 2017 legislative session with the filing of two bills, HB 1172 that would implement an optional defined contribution plan for new education employees and HB 1162 that would raise the retirement age for new education employees entering the existing defined benefit plan by two years, from 60 to 62 to qualify for an early retirement, otherwise from 65 to 67.  Just like the OCPA’s misnomer “Saving Workers’ Retirement”, the bills’ author Representative McDaniel (not our beloved Jeannie who was termed out) chose deceptive titles “The Retirement Freedom Act of 2017” and “The Pension Protection Act” respectively.

Where the 2014 HB 2630 used the “stick” of abruptly forbidding new state employees from participating in the existing defined benefit pension plan (which is over 93% funded so definitely not in need of “saving”), McDaniel’s bills appear designed to work in tandem as a “carrot” to lure new education employees into a cheaper and likely low-performing defined contribution plan that will not provide retirement security for Oklahoma’s future teachers and school employees.  Apparently it’s not enough to hold teacher pay flat for eight straight years, now they want to remove the one bright spot in teachers’ compensation package—a sound retirement.  In this post and a couple more I will try to explain why these bills are deceptive and not helpful to current and future school employees; bear with me while I drone on and eventually wax eloquent, I hope.

First we need a status report on OTRS.  My initial post linked to this document “Ten Facts” that summarized my thinking about Oklahoma’s public pensions at that time.  I wrote it in 2014 after OTRS had experienced some really positive financial changes, namely the elimination of assumed COLA’s for retirees (Representative McDaniel likely deserves some credit for this), increased employer contributions and superior investment performance.  The two years since, 2015 and 2016 (fiscal years ending June 30) have not been as good but the system is stable and remains on track to full funding in about 20 years.

The 2016 actuarial report specifically shows the funding period has increased from 14 to 23 years, primarily because the board has directed the actuary to assume a 7.5% return on investments, lowered from 8%, going forward.  Unfortunately, after several stellar years of investment performance, even ranking as a top performer nationally, OTRS experienced a bad year with an overall investments loss of 2.2% seemingly driven by substantial losses in its three Limited Partnership (oil and gas I think) investment funds.  A “bad” year, though, is not necessarily an indication of poor management any more than the previous “good” years indicated investment genius on the part of the board.  With defined benefit pension systems it’s always about the long run averages and OTRS remains in a healthy position if current funding streams are kept in place.

Here is a table that summarizes OTRS performance over the last ten years.

Or here for a clearer view:   OTRS 2017

Note there are two entries for 2016, the first in italics for what it would have been if the 8% assumption had been left in place and the last row for what is actually the report’s final numbers for FY 2016.  The two most important numbers to watch, in my opinion, are either AV% or MV% (two ways of determining the funding ratio with around 100% being the eventual goal) and Years, showing how many years it is likely to take the system to reach 100% funding, which should remain under 30 and trend downward.  Again, FY 2016 was not a proud result for OTRS but its fundamentals remain sound and, like OPERS, if left alone does not need “saving” though will take longer.

Now for the nitty gritty that a defined benefit retirement system’s actuarial report reveals to us.  Look again at the table and the entries at the bottom.  For this post let’s focus on 2016 and see what it tells us.  In FY 2016 about $1.020 billion was paid into OTRS by employees (the 7% required contribution), employers (like school districts) and the state (dedicated revenues from sales, income, gross production taxes and other sources).  That amount means that for every $100 of payroll, $24 is paid into OTRS which is indeed a heavy burden.  Of that $24 employees contribute a little under $7, employers a little over $10 and the state a little under $7.  Now here’s the nitty of the gritty, having all the current employees working another year (FY 2016) and earning the total payroll of $4.255 billion adds a little over $445 million to the system’s project cost or liability.  The actuarial term for that is “normal cost” and for OTRS in 2016 (and for the 2017 projection) is 10.47% of payroll.

Now go back to that $100 of payroll we analyzed above.  Again the $100 generates $24 in new revenue to the system, but the normal cost calculation tells us (rounding) that only $10.50 is needed for the additional costs/liability imposed by that new payroll.  Clearly the system needs that $10.50, but what about the other $13.50 (a little under $575 million in total)?  Isn’t that excess?  Yes and no.  It is in excess of what the current year employees’ payroll is going to cost the system, i.e. normal cost, but it is not in excess of what the system needs.  That $13.50 is necessary to pay off the past sins of our elected officials who committed to pay benefits in the future but did not provide sufficient funding to support those promised benefits.  Actuaries call that the Unfunded Actuarial Accrued Liability (UAAL) which for OTRS is a whopping $7.615 billion.  It is legally a debt of the state and, again, current projections are that if the $13.50 is kept in place it will be paid off in 23 years.

Looking again at the $10.50 normal cost, we see that education employees are contributing $7.00, so the cost to employers and the state of the current benefit structure for current employees is only $3.50 for each $100 of payroll.  For newer employees the cost is even less because I think even a limited-thinker should see that employees grandfathered in with the Rule of 80 or the old Rule of 90 are costing more than new employees coming in under the modified Rule of 90 (higher minimum retirement age).  I will come back to this in a later post but two eloquent conclusions for now:

Regardless of how the system may change for new employees going forward, the state (and its employers) is still on the hook for the $13.50 per $100 of payroll ($575 million annually) until the system is fully funded (23 years); and

Providing the current level of benefits promised to new education employees going forward under the current defined benefit system costs less than $10.50 per $100 of payroll ($445 million annually) and $7.00 ($295 million annually) of that is paid by the employees, meaning the cost to employers and the state is only $3.50 per $100 of payroll ($150 million annually).

Now that we have a basic understanding of the current OTRS defined benefit plan’s funding structure, in the next post (“What’s Up Doc?”) we’ll dissect Rep. McDaniel’s “carrot”, so stay tuned but don’t hold your breath.

As always lunch on me for the first to ID the photo location.

  San Diego Harbor ID’d by Kevin Byrne.  Statue of iconic photo of sailor kissing a nurse in Times Square, New York City on Aug. 14, 1945, V-J Day–always something to think about and remember.

Sometimes I think the OCPA’s heartburn with public education is really that they don’t want an educated electorate so they can feed us all the same silly drivel and their busy readers, like Oklahoma legislators, will swallow without checking.  A recent post by “Contributor” Vicki Alger on January 10, 2017 says this:

Oklahoma’s per-pupil spending is up, student-teacher ratio is flat

According to the latest available data from the National Center for Education Statistics, since 1999 the number of students per teacher in Oklahoma’s public school system has risen from 15.7 to 16.2. Per-pupil spending has risen from $8,624 to $9,728.

Source: National Center for Education Statistics. Real per-pupil expenditures (in 2013-14 dollars) shown include capital outlay and debt service expenditures and are calculated based on average daily attendance.

It is accompanied by this graph, the fairly flat line being the students per teacher ratio over time and the other being the expenditures:

https://nces.ed.gov/programs/digest/current_tables.asp

I doubt that Vicki Alger, who is with a California equivalent of the OCPA, wrote the headline.  The brief text of what she likely did provide says that both data streams, the pupil/teacher ratio and the expenditures per pupil, have risen.  So why does headline say the expenditures are up (deceivingly true) but the pupil/teacher ratio is flat (absolutely false)?  Answer:  whether true or false that is the message the OCPA fellows are hired to proselytize.   The message is that the bloated public education blob has more and more money but it must be wasted because clearly it’s not going to the classroom, i.e. lowering class sizes.

The graph of any data series, no matter how much it varies, will appear flat if you use a large enough scale on the vertical axis.   Here’s where Alger says she got her data.   https://nces.ed.gov/programs/digest/current_tables.asp

When I look at the most recent and earlier tables needed to fill in all the data points, such as the current “Table 208.40. Public elementary and secondary teachers, enrollment, and pupil/teacher ratios, by state or jurisdiction: Selected years, fall 2000 through fall 2013” on the NCES website, I see the entry “15.1”, not “15.7” for 1999 (found in the 2004 “Table 66.  Teachers, enrollment, and pupil/teacher ratios in public elementary and secondary schools, by state or jurisdiction: Fall 1997 to fall 2002”).  We’ll suppose the OCPA is just sloppy and not trying to shave 0.6 off the rise in the pupil/teacher ratio. 

Using the correct data and a more reasonable scaling on the vertical axis the graph now looks like this:

For more readability you can click here for a pdf of my spreadsheet.

PT Ratio 99 to 13 Chart Smaller

Regardless it is clear that the headline statement “student-teacher ratio is flat” is just a flat lie.  From 1999 to 2013 it rose from 15.1 to 16.2, an increase of 7.3%.  From its lowest level, just before the Great Recession and the wholesale decimation of Oklahoma’s tax base as recommended by the OCPA, in 2007 of 13.7 it has increased 18.2% to the 16.2 they characterized as “flat”.  They must believe you and I are limited-thinkers.

I could not find original data on the NCES website that mirrored the “Real per pupil expenditure (in 2013-14 dollars)” shown in Alger’s graph.  The closest current tables I found were Table 236.70

Current expenditure per pupil in average daily attendance in public elementary and secondary schools, by state or jurisdiction: Selected years, 1969-70 through 2013-14

and Table 236.75

Total and current expenditures per pupil in fall enrollment in public elementary and secondary schools, by function and state or jurisdiction: 2013-14

Alger’s data is based on “total and current expenditures”, using “average daily attendance” instead of enrollment, with amounts adjusted to “2013-14 dollars” for inflation.  None of the current tables I see on the NCES site incorporate all three elements so I’m guessing Alger did some actual work to arrive at her numbers.  What is interesting is that combining all three of these elements together will generate the largest possible amount for each year in the data set.  Students miss school so using average daily attendance which is lower than daily enrollment generates a higher ratio (dividing by a smaller number).  “Total and Current” expenditures adds capital spending into the equation—increasing the numerator makes for a larger ratio.  And finally using “real dollars” means increasing the ratios for past years by the amount of inflation that has since occurred.  Good arguments can be made for these changes, just interesting that each has the effect of making the expenditure per student amounts greater which supports the OCPA narrative that the public education blob is bloated.

Since I couldn’t replicate her numbers I took the easy way out and used current Table 236.70, and its predecessors, to generate the data set that produces a graph very similar to Alger’s expenditure per student, just lower numbers.  Here is the graph and table:

Or click here for a possibly clearer version:  PPExpend 00 to 14 Chart Smaller

The most recent year, 2013-14 at $8,526 appears larger than every earlier year.  However 2009-10 at $8,511 (capturing the early flow of ARRA funding thanks to President Obama and Congress for prioritizing public education in designing the economic stimulus to counter the Great Recession) is a close second and in current dollars, according to (https://www.bls.gov/data/inflation_calculator.htm) an official inflation calculator, would be worth $9,240 in 2013-14. 

Therefore the real message/point of the data from the NCES is that in recent years the pupil/teacher ratio has not remained flat, rather it has increased 18.2%; and expenditures per pupil in current dollars have not increased, but rather have declined by 7.7% from the high point at the beginning of the Great Recession.   That is a not so short and very different point than the OCPA drivel.

As always lunch is on me for the first to identify the location of the photo.  Congrats to Kevin.

Or Pooping in the OCPA’s Backyard

   ID’d by John Zachritz                         Saguaro National Park, Tucson, AZ

The impending confirmation hearing on the appointment of Oklahoma Attorney General Scott Pruitt to head the nation’s Environmental Protection Agency reminds me that I promised in my 12/3/2016 post O Regulation! My Regulation! to say more about the SBA study underlying OCPA President Small’s unqualified statement that federal regulations cost US businesses $1.75 trillion annually.  This from my post referring to his post on www.ocpathink.org:

It didn’t take long to find a post on October 14, 2016, “Free Market Friday:  A Simple Truth” by Jonathan Small, President of the OCPA.  He relays “According to a study by the Small Business Administration, federal regulations drain from $1.75 trillion to $2.02 trillion from our economy each year.” 

His statement is supported by the SBA study by Nicole V. Crain and W. Mark Crain commissioned by the Small Business Administration, Office of Advocacy, titled “The Impact of Regulatory Costs on Small Firms” dated September, 2010.  The report does estimate the annual cost of federal regulations at more than $1.75 trillion and that the burden is 36 percent greater on small businesses than on large firms (500 or more employees).  Their estimate of the total cost is broken into four categories:  economic (a catch-all of anti-trust, foreign trade, financial, etc., regulations); environmental (like clean air and clean water); tax compliance (like collection and payment of employment and income taxes); and occupational safety and health and homeland security (like mine safety inspections and airport security).  The largest category, according to their report, is economic so I focused first on it.

Defining and measuring the “costs” of complying with regulations is a challenging exercise that may on the surface appear easy to do.  One experience I had with this was when my employer school district acquired a site for the construction of a new elementary school from the city that had previously been used for the disposal of sludge, i.e. the sewage from housing additions that subsequently were placed on city sewer service.  When it became known that the site may also have been used for the disposal of street sweepings, including manufacturing areas that used heavy metals, the school district was required to incur the expense of having further environmental impact analysis performed.  My best memory is that the analysis led to the inclusion of some mitigation work, i.e. removal of sludge and covering with new dirt, as part of the site preparation prior to construction of the new school.  Those additional expenditures would be included in the costs of complying with federal regulations and increased the cost of the project.  Although we were inconvenienced by the process we recognized that it was needed to assure that a site to be used by children would not cause them to be exposed to heavy metals (think Flint, Michigan today).

While the authors of the SBA study were able to use similar costs aggregated by federal agencies for the last three categories of regulations they found no satisfactory source for the category of economic regulations, again the largest component of the stated $1.75 trillion total.  Instead they kind of backed into it by using what is called regression analysis to produce a model of different countries’ economic output per capita and using the World Bank’s Regulatory Quality Index as an independent variable.  If I followed their logic, and not certain I did, after obtaining a model that accurately predicted economic output per capita for 25 countries, including the United States, with the Regulatory Quality Index explaining 9.4% of each country’s economic output (higher quality means more output) they did a simple proration to conclude that if the United States had a perfect (according to the World Bank) regulatory environment its output would be 8.7% greater—according to their model—and that amounts to $1.24 trillion out of our $14+ trillion economy (2008 dollars).

This sounds really horrible, at least that would be the headline message Mr. Small and the other limited-thinkers at the OCPA would have you take away.  But here’s a couple of thoughts.  First we should learn more about the Regulatory Quality Index before depending on it as a basis for driving our discussion about the merits of federal regulations.  Here’s as far as I got, namely to find this from the World Bank, an “Ease of Doing Business” ranking of 190 countries based on their business friendly regulatory environment, showing the United States ranked number 8 out of 190 (http://www.doingbusiness.org/Rankings).  That certainly generates a very different headline and starting point for discussion than Mr. Small’s lament about $1.75 trillion.

Second we would need to learn more about the limitations of the methodology used by the report’s authors.  At one point in my life, a senior economics student with a minor in mathematics and statistics, I could have taken a crude stab at critiquing the report.  Now doing that would be way out of my league (and far, far beyond any of the “fellows” at the OCPA).  But thinking about it brought back memories of my part time job as a research assistant for two of my economics professors.  They were working with housing quality data from the U. S. Census and attempting to build a regression analysis model with that data (I wish my memory was more specific about their work).  My role was to transfer the data from the Census, and I think other sources, to computer punch cards (we’re talking 1968-1969 here), and then collate those data cards with the punch cards that specified the mathematical calculations for the regression analysis for submission to the university’s mainframe computer for processing.   Usually I would submit a stack of cards in the evening, after making changes/additions as directed by the professors, and then pick up the results the next morning for them to review.

One memory from that experience was a little amusement that the professors’ underlying theories for the model they were seeking to construct would change as they sought the magic combination of independent variables that would yield a statistically significant result, and in turn the basis of a publishable paper which, in the increasingly mathematical world of economics, was what was expected.  That experience makes me wonder about the selection of independent variables (i.e. “fixed broadband subscribers per 100 people”) by the Crains (authors of the report) and their choice of 25 countries (why not 190?); but I’m way out of my league here and will leave that to their peer reviewers.

Another memory was my amazement at how rapidly our nation’s housing quality had improved during the three decades of data available to us.  This excerpt from a recent article captures the underlying change:

The first Census of housing in 1940 labeled 45.4 percent of owner-occupied units as substandard, which was defined as housing which lacked complete plumbing facilities or was dilapidated. This share dropped sharply over the next several decades, falling all the way to 6.1 percent in 1970 according to Clemmer and Simonson’s analysis in a 1983 article in the AREUEA Journal.  (http://housingperspectives.blogspot.com/2013/02/the-return-of-substandard-housing.html)

Most of the “substandard” housing was classified as such because it lacked complete indoor plumbing.  I remember being a little befuddled by that because I knew my father had grown up in a perfectly fine small-town house in Oklahoma with an outhouse in lieu of an indoor bathroom.  To me then that was just different—not substandard like one that was “dilapidated”.  In fact, of our children’s four grandparents–two still alive as were all four to see in this new millennium–three grew up with outhouses and thus in housing that was likely part of that 45.4 percent in 1940.  To me today I quite agree that my father and my in-laws grew up in substandard housing, but no worse for the wear I’d also say, just lots of fun stories to hear about reading the Sears catalog cover to cover, tipping over outhouses on Halloween, and how every boy signed up for a school sport when the new school building included hot showers.

Today I suspect there are few locations in the United States where one could construct a new house without complete indoor plumbing facilities.  The first requirements one would face, if one preferred to have an outhouse, would be local zoning and building code regulations.  If such were not in place where OCPA President Small resides, and I purchased a lot next to his and constructed a house with no indoor plumbing to remove my wastewater, i.e. put an outhouse in the back yard next to his back yard, I suspect he would quickly become a fan of government regulation.  He could regale the local authorities with all kinds of arguments about health, water quality, odor, etc. as reasons why my freedom to choose how I eliminate my wastes and wastewater, imposes costs upon him, his family and our neighbors.  By impinging on my economic freedom, i.e. by passing laws that regulate disposal of my poop, Mr. Small and our neighbors would reap significant benefits.  But now my new house will cost tens of thousands more dollars because I’m required to send my poop and wastewater into a proper disposal system.  Translated if we look at this scenario and only ask is it right for government to impose tens of thousands of dollars of regulatory costs on me, without considering the benefits bestowed on my neighbors, then we are not seeing the full picture.

That is why President Small of the OCPA is a limited-thinker—he only wants you to think of regulations as “draining” production from the economy—without giving any consideration to the benefits received from those regulations.  Fortunately, the authors of the report, the Crains, are not so limited or cynical.  Here is what they say in their report:

Government regulations pervade modern life in America and other nations with few exceptions. Regulations are needed to provide the rules and structure for societies to properly function. This research, while mindful of this fact, does not consider the benefits of federal regulations, but looks at the overall costs imposed by them.  Little stock is taken of the cumulative effects.

By “cumulative effects” they mean comparing the benefits to the costs.  And this also from their report:

This report does not address the benefits of regulation, an important challenge that would be a logical next step toward achieving a rational regulatory system. The annual accounting statements compiled by OMB move toward such a system by presenting partial estimates of benefits as well as costs. This report, thus, should be seen as a building block toward a broader understanding of the costs of regulation, much of which creates important and substantial benefits. Like data on federal budgetary outcomes, the regulatory cost estimates inform the discussion about the balance between public and private sector control over resources. 

When the Arkansas poultry industry was shown to be using the Illinois River as its outhouse next to Oklahoma’s backyard (my attempt at a metaphor for the deterioration of water quality in the Illinois River which when I floated it in the 70’s was clear to the river bottom) former Attorney General Drew Edmondson took action to stop the obvious harm.  Unfortunately, his successor has not shown the same concern.  However hope springs eternal (too bad clean water doesn’t) so perhaps we can rely on Scott Pruitt as head of the EPA to assure that the benefits, not just the costs, of environmental regulations are considered before moving to eliminate or weaken them.  I won’t hold my breath–but perhaps I should, or at least acquire a face mask like many in China’s cities now do.

I conclude by sharing with you a couple of excerpts from the book Progressive Oklahoma, written by my now deceased former colleague at Tulsa Junior College, and as fine a softball second baseman as I was left fielder, Danney Goble.  I used to read these passages to my students at TJC when discussing the economics of government regulations.  Excerpts from Progressive Oklahoma by Dr. Danney Goble

Lunch is on me for the first to identify the location of the photo above, which is not of me pooping but rather avoiding a prickly seat while thinking in one of America’s fine national back yards.

These days when Tulsans hear the term “crybaby” many will think about the bicycle race day of Tulsa Tough that includes an ascent from Riverside Drive up Lawton Ave. (this is the Hill) to 13^th Street and back to Riverside on Galveston Ave. 

The same hill, except ascending on Houston Ave., greeted those of us who were early Tulsa Run participants a little over a mile from the finish line.  My father and I were among those who ran the first Tulsa Run in 1978.  We ran together at the same pace for most of the race and passed many who were walking up what we called “Houston Hill”.  For the record, that first year I ran my personal best of the approximately 25 Runs I participated in over the next 30 years till hanging up my shoes after the 30^th Run in 2007—also the year my father passed away.   That first year I outpaced my father by only 15 seconds even though he was 25 years my senior.  His example of disciplined cardio training and exercise begun in his late forties, after a diagnosis of nearly fatal angina, inspired me to do the same beginning in my late twenties and continuing today.  After 10 years Houston Hill was retired and the course re-oriented to a gentler ascent along Boulder Ave.

While Houston Hill never made me a crybaby or a walker—I always enjoyed passing many other runners on the Hill—I must confess to being a crybaby about the Electoral College.  Regardless I still read through the gloating messages on the OCPA site, like Jonathan Small’s post on 11/17/2016 “Policymaking Vindication” in which he congratulates the Oklahoma Legislature for rejecting efforts to elect our President by a national majority vote and Trent England’s post on 11/13/2016 “Trump result is a victory for the Electoral College” wherein he makes a tortured argument to rationalize why it is a good thing for our democratic process to have the winner of the popular vote be the loser. 

Then my eyes turned to the Education Policy piece by Greg Forster “Why Government governs Its Schools Wrong (And How to Fix It)”, November 1, 2016.   He offers five recommendations about how to improve “government schools” by improving their governance.  His first recommendation is that school district elections should be held at the same time as presidential elections so that the election of school board members won’t be controlled by the teachers’ unions and others whose interests are primarily financial and selfish.  His point is that when an election is stand-alone only those voters who are really interested in subject of the election will turn out to vote and therefore must be bad for our economy and democracy. 

Having stood for election eleven times (more including primaries) in Tulsa as a candidate for school board and city offices, always on a date well removed from the presidential election, I have some perspective on his proposition.  Most voters in my elections seemed to fall in one of three categories:  they were employees of the school district or the city, they were personally interested as parents, contractors or neighborhood/issue activists, or they were just good citizens who took the time to inform themselves and vote.  Regardless of their primary motivation at least they were making a reasonably informed decision.  Under Mr. Forster’s plan many, if not most, voters would make decisions about our schools and cities as an afterthought, i.e. they would show up to vote for their presidential candidate and find they are also asked to choose among local candidates about whom they’re not informed.  It also would become quite expensive to compete for voters’ attention as a school board or city council candidate when advertising media are dominated by the presidential and other higher profile contests.

More importantly why isn’t it enough for Mr. Forster that every registered voter has had the same opportunity to vote?  I think it is obvious that he is just another crybaby, namely that he doesn’t like the schools run by locally elected school boards so he wants to blame the school board election dates for thwarting what he believes is the true will of the majority, i.e. to get rid of government schools, just like I want to blame the Electoral College for giving us two presidents, out of the five most recent elections, who lost the popular vote.  I’ll believe he is not a crybaby when he also advocates getting rid of midterm elections for all federal and state-wide offices (and while we’re changing the Constitution(s) to do that we can get rid of the Electoral College as well!), because if voting for school boards is important enough to coincide with presidential elections then so too must he want all senators, representatives, governors, etc. to be selected at the same time when maybe at least half of the electorate shows up to vote. 

Election Turnout

In the future I’ll say more about Mr. Forster’s other recommendations, but here’s a comment on this one:   “Transparency is another area of major need, especially in finances. Our government school system is enormous, and almost totally opaque. Its finances are kept in outrageously Byzantine ways. If you doubt it, go try to find out even a simple piece of information, like how much money your state spends per student on special education.”  Mr. Forster, someone connected with the OCPA has created a “Data Tool” using Oklahoma’s OCAS data reported by all school districts to the State Department of Education.  The Tool captures expenditure detail by Function and Object codes.  Oklahoma school district expenditures are also coded by Program code.  The program code for special education expenditures is 239.  The ‘someone” who created the Data Tool can surely provide you with the statewide total for program code 239 expenditures and then show you how to divide by the number of students (all students or special education students, whichever you mean).  That will give you “how much money your state spends per student on special education”.  You don’t have to go to Istanbul, or even Constantinople, for that.

Lunch is on me for the first to identify the location of this blog’s “thinker” photo.