One benefit of doing the right thing is that it just works better. We know that innovation and choice are good for parents and kids, but the economic and social impacts can also be a game changer for our state.  School choice for Mississippi can help create jobs, lower the crime rate and reduce welfare dependency. School choice works and will help average Mississippians get back to work.

The following is the abstract from a new study released by the Institute for Market Studies at Mississippi State University titled Mississippi’s Game Changer: The Economic Impacts of Universal School Choice in Mississippi.

Mississippi has a unique opportunity to improve its future economic condition through implementing a fully universal Education Savings Account (ESA) program. We forecast the economic impacts of such a program accrued through decreased criminal activity, increased high school graduation rates, and increased lifetime earnings. Our models assuming a higher rate of program participation find:

● Mississippi would pass West Virginia in 14 years on per capita personal income, and the advantage would grow to around $2,300 per person by the year 2036.
● Mississippi’s streets would have 9,990 fewer felons and 13,824 fewer misdemeanants by 2036, leading to a reduction of over $384 million in costs to society.
● Mississippi would have 7,798 more graduates by 2036, leading to social benefits in excess of $1.6 billion.

Our models assuming moderate rates of program growth find:

● Mississippi would pass West Virginia in less than two decades on per capita personal income and the advantage would grow to around $700 per person by the year 2036.
● Mississippi would have 6,191 fewer felons and 8,566 fewer misdemeanants by 2036, leading to a reduction of over $238 million in costs to society.
● Mississippi would have 5,338 more graduates by 2036, leading to social benefits in excess of $1 billion.

Read the full study HERE

Lotteries tend to be popular with the public because they conjure up dreams of easy money and the good life. Indeed, Mississippi voters approved the concept of a state lottery in 1992 when they repealed a constitutional ban on lotteries. That same year, Mississippi’s first dockside casino opened. While many forms of gambling are now legal in Mississippi, state law still prohibits the operation of a lottery and the in-state purchase of lottery tickets. 

In evaluating whether Mississippi should legalize the lottery, lawmakers should realize, first and foremost, that the lottery is a kind of tax – and that, in particular, it is a regressive, or unfair, tax that has negative social impacts.

The Lottery is a New Tax

The primary purpose of a state-monopolized lottery is to generate revenue for the state. This reality is not well understood. There are essentially two types of lotteries: those operated by private vendors; and those controlled by government. Because private lotteries have historically been plagued by corrupt practices (and not infrequently government-run lotteries as well), states have sought to control their own lotteries.

Currently, all but a handful of states have state-controlled lottery monopolies. These monopolies are unique insofar as they are not “natural monopolies.” Road building, sewerage provision, and until recently, mail delivery, are examples of natural monopolies typically presumed to be properly controlled by government. In the case of the lottery no overriding financial or logistical reason justifies a government monopoly.

The state’s monopoly over the lottery allows it to charge a price for the lottery ticket that is well above what a private lottery might charge. This excess charge is essentially a tax. The tax is around 27 percent, but it varies in every state. This 27 percent surcharge is what in gambling parlance is called “the vig.” It’s what “the House” gets regardless of the outcome. In the case of the lottery, the House is the state – and it has a big edge. After the government gets its take, the rest of the money generated by the lottery will go toward winnings and administration. Then, the actual winner has to pay state and federal income taxes on top of that.

It might seem strange to think of the lottery as a tax. The Tax Foundation explains:

Lottery revenue meets all three tests for defining a tax. Current U.S. Supreme Court Justice Stephen Breyer laid out the criteria for defining a tax when he decided the San Juan Cellular case for the First Circuit Court of Appeals in 1992. Breyer argued that a judge should consider who imposes the assessment, who pays the assessment, and what the revenue is spent on.

In the case of a lottery, the Mississippi legislature would be imposing the assessment – just like any other tax, as opposed to a targeted fee imposed by a state agency. Likewise, lottery ticket buyers represent “a broad swath of the public,” rather than a “narrow group that benefits from a particular government service.” In its application, the lottery thus functions like a tax, rather than a fine or fee. Finally, lottery revenue is generally fungible, or at least spent on a “broadly defined benefit.” In short, the lottery meets all three legal tests for defining a tax.

The following statements by lottery proponents confirm this conclusion:

“The Legislature is not passing any revenue (tax increase). That (lottery revenue) is money available for education – should be spent on education.” – Mississippi Attorney General Jim Hood

“When you’re looking at some of the challenges that we’re having and you see a revenue bill that would generate somewhere between 50 and 60 million dollars – just an estimate – I think that's something that needs to be taken seriously by the members of both the House and the Senate.” – Mississippi Governor Phil Bryant

“I think it should go to education. But in as much as when we earmark money, sometimes we take that money from that department, so with that in mind, the best thing would be to just put it in the general fund.” – State Rep. Alyce Clarke

In summary, the lottery is a “revenue bill” that will be passed with the intention of generating money for the General Fund, or at least, for a broadly defined purpose, such as education. In other words, it meets the legal definition of a tax.

Lottery proponents often balk at defining the lottery as a tax, asserting that buying a lottery ticket is voluntary. Because the state would hold a monopoly over the lottery, however, the tax is not voluntary at all. In order to purchase a lottery ticket, consumers must pay the lottery tax. True, participating in the lottery is not mandatory, but neither is purchasing a car, earning income, or doing all manner of things that are taxed. As long as the primary purpose of the lottery is to generate revenue, and as long as a significant portion of lottery profits are collected as revenue, the lottery is a tax.

Under Mississippi’s joint legislative rules (rule 18), all bills generally related to revenue must be accorded a 3/5 vote by the legislature. Because the lottery is a tax (and, at a minimum, related to raising revenue) any bill that would create a state-controlled lottery must pass by a 3/5 vote in the Mississippi legislature. Otherwise, the lottery will be challenged in state court.

Because the lottery is a tax, its fiscal impact must also be evaluated in light of other forms of taxation. While all taxes influence behavior in some way, economists generally agree taxes should have low compliance costs, be fairly applied and minimize negative social impacts.

The Lottery is a Bad Tax

In comparison to other taxes, the lottery is particularly bad policy. To begin with, the lottery is an inefficient tax with high administrative costs. Observes economist Dr. Roy Cordato: “To raise a dollar’s worth of state revenue through a lottery could cost anywhere from 20 to over 50 times more than it would cost to raise the same dollar through other forms of taxation.” These administrative costs are thought to range between 15 percent and 20 percent and go toward advertising and paying retailers who sell lottery tickets.

In addition, the lottery is an unfair, or “regressive” tax. Generally speaking, “a regressive tax imposes a greater burden (relative to resources) on the poor than on the rich.”

In 2015, Americans spent $73 billion on lottery tickets. That’s about $630 for every household in the United States. It’s also about the same amount spent on the SNAP (Food Stamps) program annually. According to the Associated Press, Americans spend more on the lottery than on “movies, video games, books, music and sports tickets combined.” 

Every American household, however, is not spending $630 on the lottery. Generally, the poorest one-third of Americans buy more than half of all lottery tickets. Even the North American Association of State and Provincial Lotteries, an industry association group, acknowledges 25 percent of lottery players earn less than $25,000 annually.

A report from Harvard’s Shorenstein Center on Media, Politics and Public Policy reviews some of the academic literature demonstrating the regressivity of the lottery tax:

A 2012 report in the Journal of Gambling Studies finds that “those in the lowest fifth in terms of socioeconomic status (SES) had the ‘highest rate of lottery gambling (61%) and the highest mean level of days gambled in the past year (26.1 days).’”

A 2011 study, also in the Journal of Gambling Studies, concludes the “poor are still the leading patron of the lottery.”

A 2010 report in the Journal of Community Psychology observes that “lottery outlets are often clustered in neighborhoods with large numbers of minorities, who are at greatest risk for developing gambling addictions.”

Likewise, a 2009 survey commissioned by the South Carolina lottery found that those earning less than $40,000 a year constitute the majority of lottery players, even though they make up less than one-third of the state’s population. Another 10-year study that looked at lottery sales data in 39 states found “a strong and positive relationship between sales and poverty rates” (but not a similar relation between poverty and movie ticket sales, movies being an alternative form of inexpensive entertainment). The authors, however, conclude that “the poor are relatively more likely to see the lottery as a financial investment, and relatively less likely to play for entertainment.” Similarly, other research suggests lottery ticket purchases are financed by forgoing basic necessities. Generally, the breakdown is a 3 percent reduction of spending on food; and a 7 percent reduction on rent and other items.

Again, all this is to say that the lottery is a regressive tax disproportionately paid by low-income people.

In terms of tax policy, it’s also helpful to consider what kind of behavior a lottery tax encourages or discourages. The real question here is whether a state lottery would encourage more gambling or whether it would merely capture gambling that is already occurring via other lotteries in neighboring states.

The answer is complex. Clearly, Mississippi is hoping to both capture a market that exists (and is being diverted to other states) and also develop a new market. The strongest argument for a state lottery is that the state is losing lottery tax revenue to other states when Mississippi residents buy lottery tickets in other states. Interestingly enough, the two states immune to this dynamic – Alaska and Hawaii – do not have state lotteries.

Clearly, for many Mississippi residents, travelling to another state to buy a lottery ticket constitutes an investment of time and money – what economists call an “opportunity cost.” Some evidence suggests that, all things being equal, large jackpots are necessary to attract middle-class and out-of-state customers to buy out-of-state lottery tickets. When the jackpot is high enough, people will drive to another state to buy a lottery ticket. These same customers are more likely to play the lottery as a form of entertainment.

By contrast, low-income players disproportionately favor scratch-off (instant win) lottery cards; and the largest segment of lottery revenue (as high as 80 percent) comes from scratch-off games. For this reason, scratch-off cards represent the worst, and most regressive, form of lottery taxation. While the state is likely “losing” some revenue to players who cross the border to play scratch-offs, the spontaneous nature of such play suggests the loss is minimal. No doubt, a legalized lottery will see targeted advertising aimed at creating new players for these games. As in other states, much of this advertising will appear in low-income neighborhoods. As in other states, every year will see new marketing plans aimed at attracting new players. As in other states, new and more games will be developed with the hope of increasing frequency of play. In order to keep generating revenue from the lottery tax, the government will become the foremost proponent of gambling in Mississippi.

Some readers will note that this brief is silent about the ethics of a lottery. From an economic perspective, a lottery is destructive because it is a nonproductive activity. As stated above, the lottery, at best, is a form of entertainment; at worst, it is encouraging poor financial decisions by those who can least afford to gamble away their resources. In terms of tax policy, the lottery constitutes a high new tax with a regressive impact on the majority of players.

HB 1425: Necessary Regulatory Reform
that Will Protect Consumers and Lower Prices

Executive Summary

• The Supreme Court recently ruled that many occupational licensing boards may be sued for engaging in anti-competitive practices. Approximately two dozen of Mississippi’s boards are vulnerable to lawsuit.

• There are, essentially, three ways to protect our boards from legal action: 1) place them under active state supervision; 2) reduce the boards to having only an advisory role; or 3) reconstitute board membership so as to remove members currently practicing in their respective field.

• The Court, as well as the Federal Trade Commission and both the previous and current White House administrations, is skeptical that unrestrained occupational licensing serves the public interest.

• Occupational licensing drives up prices, limits opportunities for workers and, in some cases, originated in prejudicial attitudes aimed at keeping African Americans out of select professions.

• HB 1425 is narrowly tailored to address the concerns raised by the Supreme Court and will protect state occupational licensing boards from frivolous lawsuits while encouraging licensing boards to respect free market principles.

Full Analysis

“Government has nothing to give anyone except what it first takes from someone else,” reads Principle 5 of Governing by Principle. For this reason, the best way for government to foster prosperity is to remove barriers to opportunity rather than directly intervene in the economy. Some of these barriers include a lack of education and job training, high taxes, and heavy regulatory burdens. These barriers kill the dreams of entrepreneurs before they even take flight.

While lawmakers in Mississippi have done an admirable job in recent years of advancing educational opportunity and cutting taxes, the challenge of regulatory reform remains. The basis of government regulation is the responsibility to protect public safety, health and welfare. These are broad categories that easily lend themselves to abuse. So is there a limit to government regulation?

High Court Places Limits on Occupational Licensing Boards

The U.S. Supreme Court has weighed in on this question, determining that regulatory practices that give industry participants an unfair market advantage are impermissible. Explained the Court in its recent N.C. Dental Board v. FTC case:

Federal antitrust law is a central safeguard for the Nation’s free market structures. In this regard it is “as important to the preservation of economic freedom and our free-enterprise system as the Bill of Rights is to the pro­tection of our fundamental personal freedoms.” The antitrust laws declare a considered and decisive pro­hibition by the Federal Government of cartels, price fixing, and other combinations or practices that undermine the free market.

On the basis of these principles, the Court held that occupational licensing boards that are controlled by “active market participants” (that is, people who currently practice in the profession or occupation regulated by the board) do not enjoy sovereign immunity (immunity from lawsuits) unless the boards are under the “active supervision” of the state. Cautioned the Court:

Limits on state-action immunity are most essential when the State seeks to delegate its regulatory power to active market participants, for established ethical stand­ards may blend with private anticompetitive motives in a way difficult even for market participants to discern. Dual allegiances are not always apparent to an actor. In conse­quence, active market participants cannot be allowed to regulate their own markets free from antitrust account­ability. … Parker immunity requires that the anticompetitive conduct of nonsovereign actors, especially those author­ized by the State to regulate their own profession, result from procedures that suffice to make it the State’s own.

In short, the Court has ended the practice of unaccountable boards being given free reign within their own sphere. If boards are going to be comprised of “active market participants” that directly benefit from the regulations they impose, especially if those regulations keep competitors out, these boards must be made accountable to state government. And while the Court allows for some leeway in how this supervision is carried out, “the State’s review mechanisms [must] provide ‘realistic assurance’ that a nonsovereign actor’s anticom­petitive conduct ‘promotes state policy, rather than merely the party’s individual interests.’” At a minimum, these mechanisms must meet the following standards:

• The state’s review must be substantive and not merely a procedural rubber stamp;
• The state “must have the power to veto or modify particular decisions”;
• The state may not itself be “an active market participant”;
• Regulatory actions must be based on a “clearly articulated state policy” that implies state endorsement of the action.

What’s Wrong with Occupational Licensing?

The Supreme Court has been relatively tolerant of a variety of regulatory schemes (e.g., Wickard, Chevron, Whitman), which makes the N.C. Dental Board decision all the more significant. While the case may have further implications for other regulatory actions, it most immediately applies only to occupational licensure.

The textbook definition of occupational licensure is that it “is a form of government regulation requiring a license to pursue a particular profession or vocation for compensation.  Government licensing generally entails the creation of a licensing board that sets standards for entry into the profession and demands fees to sustain its regulatory activities. Consumers are familiar with licensed professionals, like doctors and lawyers, but do not realize that many other trades require a license or that activities licensed in one state are often not licensed in another.

According to a 2015 White House report on occupational licensing:

• Estimates suggest that over 1,100 occupations are regulated in at least one State, but fewer than 60 are regulated in all 50 States, showing substantial differences in which occupations States choose to regulate. For example, funeral attendants are licensed in nine States and florists are licensed in only one State.

• The share of licensed workers varies widely State-by-State, ranging from a low of 12 percent in South Carolina to a high of 33 percent in Iowa. Most of these State differences are due to State policies, not differences in occupation mix across States.

• States also have very different requirements for obtaining a license. For example, Michigan requires three years of education and training to become a licensed security guard, while most other States require only 11 days or less. South Dakota, Iowa, and Nebraska require 16 months of education to become a licensed cosmetologist, while New York and Massachusetts require less than 8 months.

In a rare case of agreement between the Obama and Trump administrations, acting Federal Trade Commission Chairman Maureen Ohlhausen is creating an Economic Liberty Task Force to address burdensome occupational licensing requirements. Ohlhausen explains:

The public safety and health rationale for regulating many of those occupations ranges from dubious to ridiculous. … Market dynamics will naturally weed out those who provide a poor service, without danger to the public. For many other occupations, the costs of added regulation limit the number of providers and drive up prices. These costs often dwarf any public health or safety need and may actually harm consumers by limiting their access to beneficial services. Other evidence suggests that such regulations are unnecessary or overly broad.

Mississippi regulates a high number of professions. A review by the Institute for Justice found that Mississippi licenses 55 out of 102 mid-to-low-level professions. We license court clerks (only 3 other states do that); residential drywall installers (8 other states); and landscape workers (9 other states). Somehow, nearly every other state manages to get by without licensing these trades.

Numerous studies have demonstrated that, by and large, occupational licensing has no correlation with public safety, health or welfare. Observes the White House report:

Licensing laws also lead to higher prices for goods and services, with research showing effects on prices of between 3 and 16 percent. Moreover, in a number of other studies, licensing did not increase the quality of goods and services, suggesting that consumers are sometimes paying higher prices without getting improved goods or services. … Most research does not find that licensing improves quality or public health and safety.

In fact, the licensing of some professions has more ominous roots. According to research by the Cato Institute:

Before the Second World War, black Americans were increasingly successful in becoming plumbers, barbers and electricians. Trade unions convinced states legislatures to pass laws that made it difficult for them to gain licenses. … By 1941, all of the states of America except Virginia and New York had passed licensing laws obstructing black men who wanted to become plumbers, barbers, and/or electricians. The laws exploited the fact that black people tended to be less well educated and poorer to exclude them from these trades. Simply by being required to pass written exams and pay for courses, they were obstructed. … The purpose of such licensing laws may have been to discriminate against blacks or to reduce competition or both. Whichever it was, it was certainly against the public interest.

This is not say that all occupational licensing is racist, but the coincidence between licensing and prejudice suggests just how easily so-called attempts to protect the public welfare can go astray. This subjective nature of many licensing policies is what prompted the Supreme Court to force states to realign their licensing practices with objective standards that protect the public welfare while preserving the free market.

HB 1425: A Restrained Approach to Occupational Licensure Reform

Prompted by the N.C. Dental Board decision, the Mississippi legislature is considering a bill that would meet the standard of “active supervision” required by the Supreme Court. The bill would do the following:

• Create an Occupational Licensing Review Commission comprised of the governor, secretary of state and attorney general;

• Give this commission the authority to “review the substance” of occupational regulations and approve, disapprove or suggest amendments to these regulations, excluding disciplinary actions;

• Articulate a state policy regarding occupational licensing that defines the various types of occupational regulation, promotes competition, and uses the “least restrictive regulation to protect consumers.”

HB 1425 takes a restrained approach toward addressing the reforms required by the Supreme Court. The bill does not call for a total overhaul of the state’s occupational licensing practices. Such an overhaul, suggests the Federal Trade Commission, would entail limiting board activity to an advisory role or restricting board membership to those with no financial interest in the regulated profession.

HB 1425 also does not apply to all boards, but only those controlled by “active market participants.” The bill does not radically expand the governor’s authority over licensing boards, but disperses this review power to other statewide officers.

Again, it is worthwhile recalling that the Supreme Court requires “active state supervision” that is substantive and will be evaluated based on “all the circumstances of the case.” There is no other way to read this guidance than to presume that the state must provide for something like the active review process mandated by HB 1425. All in all, HB 1425 is aligned with a narrow reading of the N.C. Dental Board case that will protect state occupational licensing boards from frivolous lawsuits while also encouraging licensing boards to respect free market principles.

Combatting Welfare Fraud in Mississippi with Commonsense Reforms

A bill (HB 1090) before the Miss. Senate implements a number of best practices aimed at combatting welfare fraud. The bill would save the state an estimated $40 million [1] annually by verifying eligibility for Medicaid and SNAP/food stamps. The bill also creates oversight procedures – like tracking where EBT (food stamp) and TANF cards are used – to discourage fraud.

Medicaid Fraud

The U.S. Government Accountability Office (GAO) warned again this year, as it has for the past 14 years, that Medicaid is a “high-risk” program owing to “vulnerabilities to fraud, waste, abuse, and mismanagement.” An estimated $60 billion in Medicaid expenditures are thought to be lost to fraud each year. Likewise, according to the National Conference of State Legislatures, “Fraud and abuse in Medicaid cost states billions of dollars every year, diverting funds that could otherwise be used for legitimate health care services.”

There are basically two types of Medicaid fraud: provider fraud and enrollee fraud. While the federal government apparently has no mechanism in place to accurately track fraudulent Medicaid spending, its Centers for Medicare & Medicaid Services estimates that “eligibility errors” account for the majority of payment “errors.”

This suggests that the majority of Medicaid fraud is generated by ineligible recipients. Such recipients are generally misreporting identity, residency, citizenship status and/or income. Identify theft, for example, is rampant in Medicaid. Arkansas recently audited its Medicaid rolls and found 20,000 enrollees with “high-risk” identities, many of them using stolen or falsified Social Security numbers. Illinois conducted a similar review and found 14,000 dead people on Medicaid.

Under federal law, the Miss. Division of Medicaid is supposed to verify eligibility on an annual basis. States have the option of relying on “self-attestation” for eligibility and cross checking this information against a federal database (PARIS) that is supposed to verify Social Security number usage.

In 2016, the PARIS database flagged only 2.4 percent of Mississippi Medicaid recipients as having a Social Security number used by someone in another state. By contrast, other states are finding an average fraud rate of 10 percent after implementing the reforms mandated by HB 1090. These states are using private-sector databases to quickly and inexpensively verify ongoing eligibility.

HB 1090 would require the Division of Medicaid to enter into a competitively bid contract to hire a vendor to monitor ongoing Medicaid and SNAP/food stamp eligibility. The vendor would only be paid out of the savings generated by catching fraud. The vendor would not be able to actually remove anyone from Medicaid or any other welfare program, but would only flag suspicious information, leaving it up to Miss. Medicaid to investigate and handle the removal of verified cases of fraud.

States that have implemented similar monitoring systems have seen a return on their investment of well over 10 to 1. Illinois, for instance, is saving almost $400 million annually. Pennsylvania saved $710 million in 18 months. Minnesota estimates annual savings of $307 million.

At least 11 other states are currently running or have recently run some form of enhanced welfare verification audit: Alaska, Arkansas, Illinois, Kansas, Maine, Massachusetts, Minnesota, Missouri, Pennsylvania, Rhode Island, and Wyoming.

Welfare Fraud & Abuse

The eligibility verification system created by HB 1090 would apply to all Mississippi welfare programs administered by the Division of Medicaid and the Department of Human Services (DHS), including SNAP/food stamps and TANF. Food stamp fraud in Mississippi is a serious problem, if only judging from the many cases of fraud reported in the media. According to a 2012 report in the Daily Journal, “In the last fiscal year alone, 1,705 people were disqualified from Mississippi’s Supplemental Nutrition Assistance Program – SNAP – for making false claims and bilking the program out of more than $2.7 million.”  These 1,705 cases of fraud represent 0.2 percent of total enrollment. The actual fraud rate is likely much higher.

“The application process for SNAP is based on an ‘honor system,’ trusting the applicants truthfully submit their income and number of dependents,” acknowledges DHS fraud investigator Ken Palmer. In particular, DHS has found that a number of recipients do not report income, causing “the client to get taxpayers’ dollars that they were not entitled to.”

While DHS’s efforts at catching fraud are appreciated, the department is relying on a “pay-and-chase” model that enables fraudsters to remain on the rolls indefinitely, until and unless they are actually caught. Using existing technology to review welfare eligibility on a quarterly basis would speed up the process of eliminating fraud, saving the state money and sending the message that fraudsters shouldn’t target Mississippi.

In addition to proactively verifying eligibility, HB 1090 reigns in welfare abuse by eliminating several loopholes used by the Obama administration to gut landmark welfare-to-work reforms signed by President Bill Clinton in 1996.

Federal law, for example, requires most working-age (18 to 50) able-bodied, childless adults to cycle off of food stamps after 3 months unless they are working, training or volunteering for at least 20 hours a week. Under a “waiver” offered by the Obama administration, Mississippi dropped this requirement from 2009 to 2016. The state has similar waivers that have eliminated income and asset tests for food stamps. These are still in place.

Kansas is another state that reinstituted the able-bodied adult work requirement, but then tracked 41,000 former recipients to analyze the results. Half obtained employment almost immediately, and almost two-thirds were working within a year. Incomes rose by an average of 127 percent a year, with many finding permanent well-paying jobs in a variety of industries. Other quality-of-life measures, like marriage rates, also increased.

HB 1090 would require legislative permission for Mississippi to again waive food stamp work requirements. The legislature would also have to statutorily authorize any waivers eliminating income and asset standards.

Other states have found good reason to implement the reforms in HB 1090. Michigan discovered it had thousands of lottery winners on welfare. “I feel that it’s OK because I have no income, and I have bills to pay,” admitted one million-dollar winner. “I have two houses.”

Since Michigan, like Mississippi, does not have an asset standard, even multimillion-dollar winners could legally remain on food stamps until public outrage forced a change in law. In Ohio, the millionaire son of an Iranian prince was found to be receiving both food stamps and Medicaid. The man reportedly held $4.2 million in a Swiss bank account, lived in an 8,000 square foot home and had a BMW and Lexus parked in his four-car garage. In his defense, the fraudster claimed, “It was our right to apply [for food stamps] and I applied. If you don’t like the system, change it.” Ohio’s welfare programs, not unlike Mississippi’s, waive asset standards. “I answered every question asked by benefit workers,” claimed the man.

Along with restoring federal welfare-to-work reforms, HB 1090 would provide state policymakers with additional information as to how the state’s welfare benefits are being utilized. Among other things, the bill would track out-of-state welfare usage. When Maine ran such a check, they found $3.5 million worth of transactions in Florida, including hundreds of thousands of dollars in withdrawals from ATMs near Walt Disney World. In turn, when Florida ran such a check, they found 3,500 of their food stamp recipients were also receiving food stamps in at least one other nearby state, including Mississippi. The bill would also codify and expand the list of prohibited ATM (TANF) transactions at liquor stores, casinos and strip clubs to include spas, nail salons and similar locations.

Note 1: A fiscal note from the Department of Human Services, prepared by The Stephen Group, estimates annual savings from Medicaid verification of $6.9 million in General Fund savings and $6.2 million in federal savings from the SNAP/TANF reforms. (Mississippi pays about 25 percent of the cost of Medicaid while the federal government pays about 75 percent. The federal government pays the full share of SNAP/TANF costs, though the state is responsible for administrative costs.) The Stephen Group report assumes a fraud rate of 1 percent for Medicaid managed care; 1 percent for SNAP; and 2 percent for Medicaid long-term care. Other states that have conducted similar reviews have identified much higher fraud rates, depending on the nature of the audit: Illinois (34 percent); Arkansas (ranges between 3, 12 and 24 percent); Minnesota (17 percent). Based on the experience of other states, we anticipate an average eligibility fraud rate of 10 percent of total enrollment, which would be roughly 72,000 cases based on FY2016 average monthly enrollment of 728,704 (excludes CHIP). Not every enrollee costs the same, but annual spending per enrollee in Mississippi is $5,913: the range being $18,592 for the most expensive enrollees to $2,403 for the least expensive. If we use the very conservative estimate of $3,000 per year in enrollee costs (much less than The Stephen Group assumes), we arrive at the following: $3,000 x 72,000 cases divided by 6 months = $108 million. Based on our current FMAP, this translates into $27 million in savings for a half year. If the audit is run twice in a twelve-month period, this number will double to $54 million. Hence, we conservatively assume savings ranging from $27 million to $54 million, the average of which is $40 million. To be clear, the savings other states are seeing is not only from a one-time review of their rolls, but from constant monitoring. We recommend a quarterly audit, resulting in even greater savings. We also estimate there will be some administrative savings as non-eligible individuals drop off of the SNAP/TANF rolls. The Stephen Group report estimates the enhanced eligibility and other reforms will cost about $3 million annually, but expects federal funding to cover as much as two-thirds of this amount. Assuming the cost is even as high as $2 million annually, this would result in a return on investment of 20 to 1.

Protecting Freedom of Conscience
from Government Discrimination

Why is the "Protecting Freedom of Conscience from Government Discrimination Act" (HB 1523) needed today?

Before the Supreme Court case regarding same-sex marriage (Obergefell v. Hodges), we saw states discriminate against people who believe in one man/one woman marriage. For instance:

• California judges were barred from joining organizations that affirm one man/one woman marriage.

• A Washington state judge was admonished by the state judicial commission for saying he was "uncomfortable" with performing same-sex marriages due to his religious beliefs. He was ordered to not make such statements in the future.

• Governments in Illinois, Mass., and D.C. cancelled contracts to Christian-run adoption agencies because they only place a child with a married mother and father, even though the agencies referred other couples elsewhere.

Then, during oral arguments in Obergefell, the U.S. Solicitor General admitted that the tax-exempt status of private universities and colleges (and, by implication, all religious organizations) that define marriage as the union of one man/one woman would "be an issue" if the Supreme Court found a constitutional right to same-sex marriage -- which it did.

Following the Obergefell ruling, the pressure to approve of same-sex marriage has only increased for religious schools, nonprofits, public employees, small business owners and others. All of these individuals and organizations should be protected from government coercion that would force people with sincerely held beliefs about one man/one woman marriage to violate their conscience.

What does HB 1523 do?

The Protecting Freedom of Conscience from Government Discrimination Act (HB 1523):

• Protects individuals and entities from being penalized by the state or local governments for their moral or religious beliefs that marriage is the union of one man and one woman.

• Protects individuals and entities who believe that sexual relationships are properly reserved to such marriages -- such as a religious school that requires students and faculty to refrain from engaging in sexual activity outside of marriage.

• Protects individuals and entities from being penalized for believing that "male" and "female" are biologically based.

• Is supported by a majority (63 percent) of Miss. voters from both parties and every major demographic.

What does HB 1523 NOT do?

The Protecting Freedom of Conscience from Government Discrimination Act does NOT:

• Change the legal definition of marriage.

• Hinder or slow the process for providing marriage licenses to same-sex couples.

• Prevent the government from providing benefits or services authorized under state law.

• Create a "license to discriminate."

The Protecting Freedom of Conscience from Government Discrimination Act is focused on preventing government discrimination. States should not be in the business of forcing pastors, business owners and public employees to affirm conduct or practices that violate their sincerely held beliefs. Our government should never discriminate against, punish, or penalize people based on their sincerely held belief that marriage is the union of one man and one woman.

[For a PDF version of this analysis, click here.]

Last year, proponents of a state Constitutional amendment related to public schools obtained enough signatures to place the amendment, known as Initiative 42, on the November 2015 election ballot. In this year's legislative session, the legislature exercised its Constitutional power to pass an alternative amendment, known as Alternative 42A, which will appear on the same November ballot. Both of these proposed Constitutional amendments are described in this paper.

Mississippi Center for Public Policy is not taking a position for or against either amendment. However, we provide analysis so that voters know what they are being asked to vote on. After we posted our initial analysis of Initiative 42, the group known as Better Schools Better Jobs (BSBJ), responded. That organization, also known as "42 for Better Schools," is the primary organization supporting the Initiative. BSBJ posted our analysis on their website, along with their response. We welcome the discussion and have included their response verbatim - and our analysis of it - in this paper. Our analysis of 42A is new and has not drawn a response.

SECTION 201. To protect each child's fundamental right to educational opportunity, The Legislature the State shall, by general law, provide for the establishment, maintenance and support of an adequate and efficient system of free public schools upon such conditions and limitations as the Legislature may provide. The chancery courts of this State shall have the power to enforce this section with appropriate injunctive relief.

The Initiative's "title" appears on the ballot in the form of a question and is supposed to reflect the purpose of the Constitutional amendment. The title for Initiative 42, however, will read as follows:

MCPP Original Analysis. This amendment says nothing about funding. While the phrase, "establishment, maintenance and support" could be construed to be related to funding, that phrase is already in the Constitution. This amendment does not propose to change that phrase.

BSBJ Response: The amendment says that the State of Mississippi is responsible for the "...maintenance and support of an adequate and efficient system of free public schools." Clearly, the words "maintenance and support" mean funding. The more important word, however, is "adequate." Contrary to every other state in the U.S., Mississippi's Constitution currently does not require that children be provided an adequate education, only a free one.

The amendment states that our children should be provided at least an adequate education. The amendment leaves it up to the legislature to determine how it will establish, maintain and support an adequate and efficient system of public education, but it requires the legislature to provide support (funding) for an adequate education.

MCPP Analysis of BSBJ Response: Point well taken with regard to whether the amendment relates to funding. We appreciate BSBJ's pointing this out, since our goal is not to tell people whether they should support or oppose the Initiative; our goal is to ensure that the public has an accurate description of what they will be asked to vote on. We said the maintenance and support phrase "could be construed" as being related to funding, which is true, but as a practical matter, it is more accurate to say this phrase is generally construed by courts to be related to funding.

However, BSBJ's statement that the Constitutions of "every other state in the U.S." require "adequate" funding is simply not accurate. A number of states do not have such a requirement in their Constitution.

Most importantly, it is difficult to understand BSBJ's contention that the legislature would retain any authority over the amount or use of school funding. In three places, the proposed Constitutional amendment deletes references to the legislature and/or its authority over the educational system. It then adds a provision giving power of enforcement to courts. Here is the relevant wording (proposed deletions are struck through, and additions are underlined): "The Legislature State shall, by general law, provide for the establishment, maintenance and support of an adequate and efficient system of free public schools upon such conditions and limitations as the Legislature may provide." The chancery courts of this State shall have the power to enforce this section with appropriate injunctive relief. For more on this point, see questions 3 and 5 below.

2. What Court Would Have Jurisdiction, and Why Does That Matter?

MCPP Original Analysis. The last sentence in the amendment gives the power to "the chancery courts of this state." Because the State of Mississippi would be the defendant in any lawsuit filed to enforce this section of the Constitution, the lawsuit would have to be filed in Hinds County Chancery Court. There are four Hinds County Chancery Judges, each of whom is elected only by the citizens of a district of the county. One of these judges would be assigned to hear the case, meaning a judge from the Jackson area, who is elected by a small number of people in Hinds County, would have full authority to decide not only how much money is sufficient but how the money is to be spent. The legislature would have no ability to limit the impact of the judge's rulings (see #3).

BSBJ Response: Chancery courts are specified in order to prevent lawsuits for damages. Chancery courts would have the power to enforce the law to adequately fund public schools. A court ruling would simply require the legislature to follow the law and the Constitution.

Under current law, venue for a lawsuit against the State of Mississippi is in Jackson, the state capital, which is in Hinds County. The legislature could pass legislation establishing chancery court venue where the school district is located. In other words, if the legislature does not want to be sued in a Hinds County Chancery Court, it could change that by statute.

MCPP Analysis of BSBJ Response: BSBJ's statement about whether a lawsuit in chancery court can include damages is not accurate. For example, the state's lawsuit against the tobacco industry was filed in chancery court and most certainly included damages. The current Musgrove lawsuit regarding MAEP, which asks for damages, was filed in chancery court. The amendment is not worded in a way that would "prevent lawsuits for damages," as BSBJ asserts.

It is true that a change of venue could be accomplished by a change in law, but our point is not that the venue is Hinds County per se; venue could be changed to any county, and our point would be the same: one judge, elected by the people in one district, would have the power to set education policy and funding for the entire state.

3. Would There Be Limits on the Judge's Decisions?

MCPP Original Analysis. The amendment places no limits on the Hinds County judge who hears such a lawsuit. The judge could, as the initiative's proponents seem to anticipate, require the legislature to "fully fund" the MAEP formula and to phase-in the increased funding over seven years. However, the judge could also choose to require the legislature to double, or even triple, the MAEP funding. The judge could also decide that high-performing districts are getting enough from the state and order the state to give any "new" money to low-performing districts until they catch up. Furthermore, because the amendment does not limit the judge's reach, and because it gives the judge jurisdiction over a "system" of schools, he or she would have full authority to dictate to the state department of education and local school districts exactly how the money should be spent at the state and local level.

BSBJ Response: Clearly, opponents of the amendment seem to believe that their best option for defeating it is fear-mongering about chancery judges in Hinds County. The powers of these judges are limited and checked by the Constitution itself. Either party in a suit can request that the case be heard by a jury. The bottom line is that a lawsuit would be necessary only if the legislature ignores the law and the Constitution, thwarting the will of Mississippi voters regarding public school funding.

The court's decision would have to be based on the facts presented by each side. The chancery court ruling can be appealed to the Mississippi Supreme Court for a final ruling. This procedure is current law. A chancery court makes the final decision only if there is no appeal, which is highly unlikely, and as stated in #2 above, the legislature can change the lawsuit location to a county other than Hinds.

MCPP Analysis of BSBJ Response: There's no fear-mongering in our analysis. It's simply the truth. BSBJ offers no dispute as to the potential outcomes we listed. We aren't predicting a judge would rule in these ways, but he or she certainly could do so, since there are no limitations on the judge in this amendment. Furthermore, current Hinds County judges might not rule in these ways, but there is nothing to prevent a judge 10 or 20 years from now ruling in a way BSBJ doesn't anticipate right now.

Jury trials can only be requested in chancery court for contested wills, not for cases such as those that would seek to enforce this Constitutional amendment. Furthermore, the Supreme Court is somewhat limited in its power to overrule decisions from a Chancery Court.

4. Would Taxes Increases, or Budget Cuts to Other Agencies, be Necessary?

MCPP Original Analysis. The amendment makes no mention of a phase-in or any other timing. A lawsuit could be filed immediately after the amendment is adopted, and a ruling could come in the first year following its passage, requiring the legislature to adopt whatever budget is dictated by the judge. This would require drastic cuts to all other government agencies, or it would require a tax increase. Our state Constitution prohibits judges from ordering a tax increase at any level of government, but a mandated spending increase could, in effect, require a tax increase if cutting all other programs proved to be politically impossible. It is estimated that all agencies other than the Department of Education would have to be cut about 17 percent, and that's only if the judge orders "full funding" of the current MAEP formula. Those cuts would include IHL, Community Colleges, Medicaid, Corrections, and virtually everything else. If any of those were excluded from the cuts, then other agencies would be cut more deeply.

BSBJ Response: This claim is meant to mislead people about the amendment process. The petition that has been signed by more than 188,000 Mississippians includes a full description of the process. The legislature will continue to have 100% discretion on how it will fully fund our K-12 schools. Under the ballot's financial proposal, any increases in school funding would be wholly dependent upon state revenue increases. In any year when revenue increases, not less than 25 percent of that increase would be devoted to public education. This process would continue, every year the state has revenue increases, until school funding reaches an adequate level. At the current trend of 3 percent annual revenue growth, adequate school funding would be reached in seven years. NO tax increases, NO automatic cuts for other agencies.

MCPP Analysis of BSBJ Response: Our claim is not misleading; it simply recognizes that the Constitutional amendment itself - not what was written on a petition - is the only thing that matters. The "full description" in the petition was simply an idea of the proponents for how the process could work, but this description has no force of law. Even the BSBJ response above refers to it as a "financial proposal," and in the petition filed by the proponents, they called this proposal a "recommendation." The people of Mississippi will not be voting to approve this proposal/recommendation. They will only be voting on the amendment itself.

What is misleading is the Initiative's "title" that will appear on the ballot. It will appear in the form of a question that is supposed to describe the amendment. But 42's title basically asks the equivalent of, "Do you love your mother?" What voters will see is the question, "Should the state be required to provide for the support of an adequate and efficient system of free public schools?" Regardless of the merits of the amendment, this question does not adequately describe its effects.

BSBJ's contention that the legislature would retain "100 percent discretion" is addressed in items 1 & 5.

5. What Would Be Left of the Legislature's Role?

MCPP Original Analysis. The proposed amendment - in three places - deletes the authority of the legislature to determine any aspect of education policy or funding. This is critically important, because state and federal courts generally determine the will of the voters by noticing the words that were deleted by a Constitutional amendment as well as the words that were added. Education would no longer be ruled "by general law" passed by "the legislature" and signed by the governor, and the legislature would no longer be allowed to place "conditions and limitations" on the funding or performance of public schools. In other words, a Hinds County judge, elected by a few, would have more power than the legislature, elected by all the people of the state, to set education policy for Mississippi.

BSBJ Response: This amendment does not delete the authority of the legislature to determine any aspect of education policy or funding. It says nothing about education policy. Similar to what is already in place in many other states, the amendment says only that the state must have an adequate and efficient system of public education for our children. The legislature has the power and authority to determine what is adequate and efficient. Under our checks and balances system of government, if the legislature does not meet its Constitutional mandate, then the citizens of this state have the opportunity to ask a court whether or not the legislature has met its Constitutional mandate.

MCPP Analysis of BSBJ Response: [See our "Analysis of BSBJ Response" on question 1, where we show the words that would be deleted from the Constitution.] Attorney General Jim Hood, in a memorandum supporting his motion to dismiss the Musgrove MAEP lawsuit, noted that Section 201 of the Constitution (which Initiative 42 proposes to amend) "empowers the legislature to establish the 'conditions and limitations' under which public schools operate." If the legislature is deleted from that section of the Constitution, as proposed by Initiative 42, where does it derive any authority over school funding? As we pointed out originally, when words are deleted from the Constitution, courts consider such an action as the intentional will of the voters. In this case, courts are highly likely to determine that the voters sought to remove the legislature's power to set conditions and limitations on how the education bureaucracy spends money.

BSBJ asserts that the amendment "says nothing about education policy." But when the legislature is prohibited from setting "conditions and limitations" on the "system of free public schools" or its funding, the amendment does say something about education policy by dictating who has authority over it.

Analysis of 42A - the Legislative Alternative to Initiative 42

History of the Initiative Process in Mississippi - In 1992, the voters of Mississippi approved an amendment to the state Constitution to give the people of the state the opportunity to amend the Constitution by use of a ballot initiative. Before that amendment was adopted, the only way to change the Constitution was for two-thirds of both houses of the legislature to approve an amendment, and for the people to adopt it in a general election.

Legislative Alternative - The 1992 amendment created a detailed process for putting an initiative on the ballot. That process included an option for the state legislature to propose an alternative to an initiative. Such an alternative would not replace the initiative, but it would be placed alongside the initiative on the ballot, giving voters the option to vote for the initiative or the alternative, or to vote against both.

Initiative 42 will be the sixth initiative to appear on the ballot. 42A will be the first alternative to appear.

Constitutional Amendment Proposed by Alternative 42A

Alternative 42A, like Initiative 42, would amend the current provision (Section 201) of the state Constitution that calls for the legislature to provide for "free public schools." Alternative 42A would make the following changes (proposed additions are underlined, deletions are shown as strike-through):

SECTION 201. The Legislature shall, by general law, provide for the establishment, maintenance and support of an effective system of free public schools upon such conditions and limitations as the Legislature may prescribe.

The Alternative's "title" that will appear on the ballot will be:

"Should the Legislature provide for the establishment and support of effective free public schools without judicial enforcement?"

Changes to Current Constitution

The current Constitutional provision requires the legislature to provide for "free public schools." Alternative 42A would make two changes. First, it would require the legislature to support "an effective system" of such schools. Second, it would remove a phrase that could be considered redundant with regard to legislative authority.

Alternative 42A retains the authority of the legislature to provide for the school system "by general law." Consequently, the legislature could define what constitutes "an effective system" of schools. It is unknown how any court would define that term. Because the legislature retains this "general law" authority (which Initiative 42 would remove), the more specific phrase, "upon such conditions and limitations as the Legislature may prescribe" may be unnecessary. It is unclear why legislators deleted this phrase. They might have simply been attempting to remove a redundancy, or they might have sought to identify something in Initiative 42 to which they could agree, since Initiative 42 also removes this phrase.

Technically, this Alternative focuses on the school "system," not on schools. (Initiative 42 does the same.) Why legislators chose the phrase "effective system" rather than "effective schools" is not clear. Perhaps they were simply using a phrase similar to the one used in Initiative 42. Hopefully, this distinction is truly is a technicality, and the effectiveness of the system would be judged by the effectiveness of the schools, but there is no guarantee of that. For instance, if viewed from a bureaucratic perspective, it is possible for a "system" to be deemed effective even if its components are not. (For example, under the Department of Education's former classification of school achievement - before districts were graded A through F - some districts were labeled "Successful" even though they had no schools in their district classified that highly.) How a court would rule on that is unpredictable.

The unpredictability of how a court would rule - next year or 20 years from now - is one of the reasons for caution in considering any Constitutional amendment.

Similarities and Differences between Initiative 42 and Alternative 42A

Initiative 42 and Alternative 42A both call for support of a "system" of free public schools. Initiative 42 calls for "adequate and efficient" system; Alternative 42A calls for an "effective" one.

The Initiative 42 petition expresses its sponsor's opinion on the definition of "adequate and efficient," where adequate would be defined only by the level of funding, starting with the current funding formula for the Mississippi Adequate Education Program (MAEP), and an efficient education would be "one that will, among other things, enable Mississippi's public school graduates to compete favorably with their counterparts in surrounding states" (emphasis added). It is unknown whether a court would adopt the sponsor's definitions, or whether a current or future court would be bound by such definitions. The phrase "among other things" is dangerously open-ended, allowing the chancery court judge total discretion to define "efficient" however he or she pleased. Because Initiative 42 removes the legislature's authority to provide for schools "by general law," the legislature would not likely have the authority to define those terms.

Alternative 42A has no definition of "effective," but as with most Constitutional provisions, the legislature would have the authority to define that term, because 42A would retain legislative power to define that term in a "general law." Still, this would likely be the subject of much litigation.

Initiative 42 removes all three references to the legislature or its authority in Section 201 of the current Constitution. Alternative 42A removes only one.
Initiative 42 replaces "Legislature" with "State"; it deletes the legislature's authority to provide for schools "by general law"; and it deletes the authority of the legislature to set the "conditions and limitations" for how taxpayers' money is to be spent in the schools. Alternative 42A removes only the "conditions and limitations" clause. Because 42A would retain the legislature's authority to provide for schools "by general law," it is likely that the "conditions and limitations" clause is redundant, since a general law is where "conditions and limitations" may be established.

Initiative 42 would transfer power over schools from the legislature to a chancery court judge in Jackson (or some other location if the legislature were to change the current law on jurisdiction for cases against the state). Alternative 42A retains the power in the legislature elected by voters throughout the state.

After removing the power from the legislature, as described above, Initiative 42 expressly grants the power to "the chancery courts of this state" to enforce this newly revised section of the Constitution. Because our current law specifies that a case against the state must be filed in Hinds County, the practical effect of this provision of Initiative 42 is that a judge in Jackson would determine how much and how taxpayers' money would be spent on public education. Even if the legislature changed the location for filing such cases (which would make little sense), the point would remain the same: a small number of voters in one county would choose, in effect, an education czar to dictate the actions of the legislature - and the state department of education AND the local school districts - because of his or her unfettered power over the school "system." (See our full analysis of Initiative 42 for further explanation.)

Initiative 42 establishes a "fundamental right" to "educational opportunity" for "each child." Alternative 42A does not.

As mentioned above, caution is critical before enacting Constitutional amendments. But an extreme abundance of caution is required when establishing a fundamental right, as it invites the enormous danger of unintended consequences. Initiative 42's sponsors define this as a right "through 12th Grade," with no beginning. This could be interpreted as a right to a government-provided "education" beginning as early as birth. As extreme as that sounds, it is clear from recent court rulings that ideas which were once considered extreme can become Constitutional rights in only a short time. Such a "fundamental right" could be interpreted by some courts to supersede parental rights.

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