Quality of Life in Missouri

Author
Sonja Erickson
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Recently, the state of Missouri has garnered unwanted press attention as one of the worst states in which to live.  In 2014, Forbes magazine, Time magazine, USA Today, Politico.com, and Wallethub.com published reports which analyzed a number of “quality of life” indicators which consistently place Missouri near the bottom of the list.  Most notably, USA Today ranked Missouri as the 8th “Most Miserable State in the USA,” CNBC ranked Missouri the 3rd worst of “America’s 10 Worst States to Live In,” and Wallethub.com declared Missouri the 9th “Worst State for Working Moms.”

Is this bad press warranted?  Possibly.  Although some measures are clearly subjective (such as the Gallup polling of respondents’ happiness and sense of well-being), most are based on reasonable methodologies using respected data sources, including the U.S. Census Bureau, the Bureau of Labor Statistics, the Centers for Disease Control and Prevention, and Moody’s Analytics.  Each of these reports uses a variety of indicators and all put Missouri near the bottom of their rankings, suggesting that Missouri’s poor performance related to quality of life issues is not an anomaly based on one particular methodology or data set.

“Quality of life” as measured in each of these reports is a combination of indicators which are weighted to reflect the physical, economic and emotional well-being of a state and its residents.  These indicators include a fairly wide range of measures, including access to health care, employment, household income, educational attainment, parental leave policies, recreational opportunities, obesity rates, and crime rates.  Several indicators are common to more than one report:

This brief synopsis suggests that by most standard “quality of life” measures, Missouri is lagging behind.[1]  This is significant because, as the CNBC and Forbes report titles suggest, the quality of life in a state can affect its appeal to business and future economic growth.

The news isn’t all bad for the Show-Me state. For example, although CNBC ranked Missouri the third worst state for quality of life, this was just one of many measures that led CNBC to rank Missouri overall as the 23rd best state for business.  In this analysis, the low quality of life ranking was offset in part by Missouri having one of the lowest costs of doing business (#11), and strong infrastructure and transportation (#13).   Research quantifying the role that quality of life indicators play when businesses are determining where to locate is not definitive, so the perception that Missouri does not offer a good quality of life may or may not directly affect the state’s ability to foster a successful business environment.[2]

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However, the national perception that Missouri is failing to address and prioritize quality of life issues is real, and has prompted some analysts and newspaper editorial boards to raise questions about whether this perception, and its reality, are hurting Missouri’s efforts to attract and retain businesses and workers.[3]  For example, the Missouri Department of Economic Development currently promotes Missouri’s “low-cost business climate and incentives.”[4]  However, four of the six reports above include business costs in their quality of life measures and Missouri still ranks toward the bottom.  Similarly, the Missouri Economic Development Council’s 2014 legislative agenda focused on supporting tax credits for key economic development initiatives, and updating Missouri’s tax credit system.[5]  Neither addresses quality of life issues, such as education, access to healthcare, environmental quality, family leave policies and crime rates, all of which receive significant attention in the national press, and may create a more appealing business environment.

Likewise, the General Assembly has chosen to double down on tax cuts and incentives as a way to lure businesses to Missouri, in part to compete with its neighbor to the west, Kansas.  Much has been written about Missouri’s “race to the bottom” with Kansas. [6]  As Kansas Governor Sam Brownback and the Kansas Legislature have created aggressive tax incentive packages to lure businesses away from Missouri, Missouri lawmakers have argued in favor of following suit to even the playing field.  Most recently, the General Assembly voted to override the governor’s veto of Senate Bill 509, which will cut the state’s top individual income tax rate and enact a special deduction for business income reports on personal tax returns.[7]

Scholars with the Institute of Public Policy have noted that businesses do not base investment location decisions primarily on tax rates.  Other variables, including labor, utility and transportation costs, are more important considerations.[8]   National data from Earnst & Young and the Tax Foundation show that Missouri is already a low tax state, suggesting that if low taxes spur economic development, Missouri should be “experiencing substantially higher levels of economic development” than higher tax states, and it is not.[9]  Further, because tax cuts would likely result in reduced spending on state services valued by businesses, numerous studies indicate that cutting taxes further will yield no economic gain and could have a negative impact on economic growth for the state.[10]

Accordingly, while the ramifications of Kansas’ policies and Missouri’s recent legislative actions are not yet known, initial results do not look promising.  Data shows that in metropolitan Kansas City, the competition between the two states has cost taxpayers hundreds of millions of dollars and generated little or no economic growth.[11]   Since enacting Governor Brownback’s tax cuts in 2013, Kansas has added jobs at a slightly slower pace than the country as a whole, and the net growth in registered businesses was smaller after the 2013 tax cuts than in 2012 (and dramatically smaller than pre-recession levels).[12]   In May 2014, Moody’s lowered Kansas’ bond rating and the state’s S&P bond rating was lowered the following August.  Both actions were based on the opinion that Kansas’ massive tax cuts have not been offset with spending cuts, creating an expected budget shortfall and raising concern that Kansas’ budget is “not structurally aligned.”[13]  As state revenues in Kansas plummet, funding levels have declined dramatically for higher education, local health departments, the state’s Judiciary, and programs for families living in poverty.[14]

This raises some important questions for Missouri lawmakers.  Are “business friendly” tax incentives, and policies that support a good quality of life, mutually exclusive?  If tax policies designed to lure businesses to the state create a substandard public educational system, will those businesses be able to attract and maintain a quality work force?  Can a state successfully attract businesses promoting quality of life measures, such as health, safety and education?  Instead of a “race to the bottom” with Kansas, is there another way forward for Missouri that combines an appeal to business with a commitment to improving the state’s quality of life?

One answer might be to shift our focus north, away from Kansas and toward Iowa.  A Midwestern neighbor, Iowa has a Republican governor and a divided legislature.  Like Missouri, it shares a major metropolitan area with another state (the “Quad Cities” of Davenport and Bettendorf in Iowa and Rock Island, Moline and East Moline in Illinois). However, Iowa has taken a different approach to economic development for its state and consistently fares well both in quality of life measures and in ranking for business appeal.

So, what is Iowa doing differently than Missouri?  In the Quad Cities, Iowa and Illinois have agreed to promote and coordinate business development throughout their shared metropolitan area.  Also, Iowa Governor Terry Branstad is leading the charge to make Iowa “the healthiest state in the nation in just five years” a goal he argues “is not only critical to the economic viability of our state, but also critical to the quality of life for all Iowans.”[15]  The Iowa Economic Development Department also focuses on the connection between quality of life and a favorable business environment.  In addition to touting the state’s favorable tax policies for business, the department emphasizes quality of life issues in Iowa, including cost of living, the health of its workforce, short commute times, outdoor recreational opportunities and work-life balance.   The department promotes the educational attainment of Iowa’s residents as a crucial component of successful business development, noting that companies need to have “access to an educated pool of workers,” and a strong educational system to attract talented workers seeking to “maximize personal goals and successfully raise their family.”[16]

This last point is important because a commitment to quality of life issues can be used not only as a tool to recruit new businesses and workers to Missouri, but can also help ensure that the state continues to have a pool of quality workers going forward.  Policy decisions which consider many of the quality of life measures discussed above could reap significant financial rewards in the future.  For example:

  • Investing in education will create a more educated work force, and high-quality public schools will be a draw to those looking to start or relocate their business. Both could help attract the knowledge-based businesses that will be critical to the 21st century economy.
  • Investing in infrastructure and transportation will improve the quality of life for all residents, as well as provide necessary tools and reduced costs for conducting business. The improvement in quality of life as a result of this investment can, again, be used to attract more economic development.
  • Investing in the health of Missouri’s workforce, including ensuring access to affordable healthcare and programs to support healthy lifestyles, would reduce healthcare costs to business and will improve the health of workers in the labor pool, ultimately lowering health-care costs for all involved. Being seen as a state with low health-care costs could attract more economic development.

Clearly rankings such as those discussed here cannot be used as firm evidence that Missouri is at a competitive disadvantage for attracting businesses to locate or relocate in Missouri.  A substantive analysis of the differences in economic development and community development programs, tax policies, labor relations, and the myriad elements that influence those decisions is out of the scope of this analysis.   However, Missouri policy makers can use this “bad press” as a starting point for meaningful discussions about what constitutes a good quality of life for Missourians, and how the state’s legislative priorities can be aligned to ensure that Missouri will be seen as a great place to live and to do business in the 21st century.

How do Missourians Compare?

[1] Reports can be found at: “The Most Miserable States in the USA:” http://www.usatoday.com/story/money/business/2014/02/23/most-miserable-states/5729305/; “America’s Top States for Business 2014:” http://www.cnbc.com/id/101758236; “The Best States for Business and Careers:” http://www.forbes.com/best-states-for-business/list/; “The States of Our Union…Are Not All Strong:” http://www.politico.com/magazine/story/2014/01/states-of-our-union-are-not-all-strong-102547.html#.VK2a_ivF_y5; “Best and Worst States for Working Moms:” http://wallethub.com/edu/best-states-for-working-moms/3565/; “The Worst States to Live in (According to People Who Live There):” http://time.com/77196/the-worst-states-to-live-in-according-to-people-who-live-there/.

[2] David Salvesen and Henry Renski, “The Importance of Quality of Life in the Location Decisions of New Economy Firms,” January 2003, Center for Urban and Regional Studies, University of North Carolina at Chapel Hill.  The authors conducted a literature review focused on the link between business location decisions and quality of life.  They found that “there is little empirical evidence of the effectiveness of an economic development strategy based on quality of life.”(p. v.).  However, a recent survey of entrepreneurs and business owners suggests that “a skilled workforce and high quality of life” were the primary considerations when selecting a location for their companies, and that taxes were not “a significant factor” in this decision.  See Michael Mazerov, “More Evidence That You Can’t Lure Entrepreneurs with Tax Cuts,” found at http://www.offthechartsblog.org/more-evidence-that-you-cant-lure-entrepreneurs-with-tax-cuts/

[3] For a discussion how dramatic tax cuts could affect Missouri’s quality of life and ability to attract business, see Amy Blouin and Tom Kruckemeyer, “Racing to the Bottom:  Senate Gives Initial Approval to Extreme Tax Cut Bill Which Would Devastate Missouri Services, Infractructure, and the State’s Economy,” The Missouri Budget Project, March 8, 2013.

[4] “Favorable Business Climate,” Missouri Department of Economic Development, found at http://www.ded.mo.gov/financial-professional-services/why-missouri-/favorable-business-climate.

[5] Found at the Department of Economic Development’s website http://www.ded.mo.gov/businesses/BusinessAssistance.aspx; Missouri Economic Development Council “2014 Legislative Agenda,” found at http://www.showme.org/Leg_updates/leg_agenda_2014.pdf.

[6] For example, see Ray Hartmann, “Race to the Bottom:  Missouri need not follow Kansas off a fiscal cliff,” St. Louis Magazine, November 15, 2013; and “Look at the facts, not the myths, on job growth in Johnson and Wyandotte counties,” editorial, Kansas City Star, August 27, 2014.

[7] For example, see St. Louis Post-Dispatch, “Another magical, destructive tax-cut bill must die,” April 18, 2014.

[8] Stallman, Judith, Andrew Wesemann and David Valentine, “Comparing Taxes in Missouri and Surrounding States,” May, 2013, Institute of Public Policy, p. 9, found at https://ipp.missouri.edu/.

[9] Ibid., p. 8.

[10] Stallman, Judith, David Valentine and Andrew Wesemann, “Public Expenditures and Economic Growth.” August, 2013, Institute of Public Policy, found at https://ipp.missouri.edu/.

[11] The Economist, “Kansas and Missouri – The new border war:   Missouri calls for an economic truce with Kansas,” March 22, 2014 (from the print edition, but found online at http://www.economist.com/news/united-states/21599368-missouri-calls-economic-truce-kansas-new-border-war).

[12] Leachman, Michael and Chris Mai, “Lessons for Other States from Kansas’ Massive Tax Cuts,” March 27, 2014, Center on Budget and Policy Priorities, p. 10.

[13] Wilson, Reid, “Kansas bond rating downgraded after tax cuts,” The Washington Post, August 6, 2014.  http://www.washingtonpost.com/blogs/govbeat/wp/2014/08/06/kansas-bond-rating-downgraded-after-tax-cuts/

[14] Leachman, Michael and Chris Mai, “Lessons for Other States from Kansas’ Massive Tax Cuts,” March 27, 2014, Center on Budget and Policy Priorities, p. 6-7.

[15] From http://www.iowahealthieststate.com/about/governors-message.

[16] From http://www.iowaeconomicdevelopment.com/WhyIowa.