Scioto Analysis Releases Report on Ohio's Use of Cost-Benefit Analysis

(Columbus, OH) - A best practices cost-benefit analysis has not been conducted on a statewide issue in over a decade according to a study released by Scioto Analysis Monday.

“While we were able to identify 27 studies published from 2012 to 2018 that assessed direct costs and measured outcomes in some way, we were unable to find a single study that monetized direct and indirect costs and benefits measured against a baseline, discounted outcomes, performed sensitivity analysis, and disclosed key assumptions,” said Rob Moore, principal of Scioto Analysis and author of the study.

The study also analyzed Ohio’s state policy analysis infrastructure. The study found that Ohio has fewer R1 research institutions and think tanks per capita than all its neighboring states and less legislative staff per capita than each neighboring state besides Indiana.

“Ohio has the opportunity to bolster its analysis infrastructure by building cost-benefit analysis into institutions such as the Legislative Service Commission and Common Sense Initiative regulatory analysis protocol,” said Moore.

As a first step, Scioto Analysis will be conducting some cost-benefit analyses on state issues later this year.

Early Childhood Education Is a Win-Win

Columbus City Council recently passed an ordinance to authorize the city to spend $1 million on high-quality pre-kindergarten education programs. This represents the newest city investment in quality pre-K in Columbus, an initiative that both Mayor Andrew Ginther and City Council members have championed.

I first started studying early childhood policy last year while working as an analyst for Policy Matters Ohio. Like any good analyst, when tackling the brand new topic I found the best book on the economics of child care I could find — The Child Care Problem: An Economic Analysis — and went to work. Little did I know at the time that author Dr. David Blau is now a professor at Ohio State University.

Blau’s thesis in The Child Care Problem, still as relevant today as when he first wrote it nearly two decades ago, is that good child care is undersupplied in current markets. High-quality child care provides benefits in the form of future earnings, crime reduction and reductions in social spending that are not captured by child care markets without public involvement. Thus, the public sector has reason to subsidize high-quality care and encourage parents to place their children in it.

Child care and pre-kindergarten are two sides of the same coin: They’re both instances of parents putting children in care settings that will impact their life trajectories. High-quality child care settings can pay substantial economic development dividends down the road, while low-quality child care can hinder children’s future earning potential.

In addition to being an economic development tool, child care policy is a tool of poverty alleviation. A year of child care in Ohio can cost more than $10,000, making a child care slot for a low-income family one of the largest single transfers a state or local government provides to poor families. In the long run, economist Timothy Bartik has estimated that high-quality early childhood programs can result in upwards of $25 in increased earnings for low-income families for every $1 of public spending.

Early childhood has become a big part of local, national and state policy conversations, with Mayor Bill de Blasio of New York winning election promising pre-K for the city’s children. States like Florida, Georgia, Oklahoma and West Virginia have implemented universal pre-K programs. And presidential candidate Elizabeth Warren recently proposed national child care reform.

But while these splashy reforms catch headlines, much of the early childhood policy change in the United States is through smaller investments like those passed by Columbus City Council.

High-quality child care is a special program that promotes economic growth while also reducing inequality. This has made it an issue conservative Governor Mike DeWine and progressive Councilmember Elizabeth Brown can agree on. Hopefully this $1 million investment is a sign of future investment to come.

This column originally appeared in Columbus Alive.

Medical Marijuana Comes to Franklin County

Last week, Columbus welcomed medical marijuana to the city. People in Central Ohio dealing with chronic pain, chemotherapy side effects, multiple sclerosis and other ailments can now visit the Terrasana Cannabis Company on Grandview Avenue to have their prescriptions filled.

With medical marijuana now a reality in Central Ohio, local counties, municipalities and school districts will have to respond to the reality of the increased prevalence and acceptance of a previously banned substance. This will lead to adjustments for local government agencies throughout Franklin County.

For instance, according to the Bureau of Labor Statistics, one out of every six people employed in Columbus has a job in government. These governments will have to decide how to treat medicinal marijuana use off the clock, along with the increased chance of employees being high at work. Will some city departments relax standards around drug testing? What will they do for workers who want treatment but who they legitimately don’t want to be intoxicated at work? These are tough questions that government managers will have to answer.

According to the National Academy of Sciences, marijuana is associated with negative health outcomes. For instance, cannabis use is substantially associated with increased risk of motor vehicle accidents. This means local police and sheriff’s departments will likely have to adjust to more cases of driving under the influence on Columbus roads. This could mean new kinds of checkpoints and other enforcement initiatives to prevent mixing marijuana use and driving.

Marijuana use is also substantially associated with lower infant birth weights. This means that Columbus initiatives like CelebrateOne may need to play a part in educating at-risk families of the impacts cannabis use can have on prenatal development and infant health. This would mean public education programs or partnerships with home-visiting programs to bring this information straight to families.

The Alcohol, Drug and Mental Health Board of Franklin County (ADAMH) may have a role in educating the public on the relationship between marijuana use and development of schizophrenia and other psychoses. It also has a part to play in helping prevent problem cannabis use, to which young people, men and smokers are especially susceptible. ADAMH also might need to provide public education on how problem cannabis use develops and how to prevent it.

Lastly, Columbus and other school districts will certainly have to deal with potential for higher rates of marijuana use among both students and employees.

Medical marijuana has the promise to be a new way to help people dealing with serious medical problems. It could even be a substitute for opioid treatment for those dealing with chronic pain. At the same time, it will take adjustments from local policymakers and politicians who want to help people realize these benefits while also acknowledging the issues that come with increased marijuana prevalence.

This column originally appeared in Columbus Alive.

Analyzing Equity

When I was in graduate school, we had two semesters of econometrics, which can be understood as “effectiveness analysis.” We also had two semesters of microeconomics, which can be termed “efficiency analysis.” As for equity? Well, the third pillar of policy analysis often gets shorted in these discussions, treated differently for each policy question it is applied to, receiving a day here or a day there in different classes and providing little standardized guidance for the analyst.

Equity analysis poses some difficult questions for the analyst. What are the relevant social categories to analyze: income brackets? Racial? Gender? Geographic? How should costs and benefits to different groups be weighted? How can we approach problems in ways that ensure objectivity of the analyst while still giving relevant information to policymakers who have legitimate concerns about the distribution of social resources?

While in graduate school, I wrote a paper putting forth a framework for policy analysts interested in doing equity analysis better. This was based on the paucity of equity analysis guidance in standard policy analysis textbooks. Over the past few months, I have been digging into the cost-benefit analysis literature mainly with the goal of understanding efficiency analysis better, but have been pleasantly surprised at the attention the question of equity has received in the literature. Cost-benefit analysis, for all its focus on the goal of economic efficiency, actually has more tools for rigorous equity analysis than policy analysis textbooks do.

Last week I spoke to Dr. Zoe Plakias’s Benefit-Cost Analysis class at Ohio State’s Department of Agricultural, Environmental, and Development Economics on equity analysis in cost-benefit analysis sharing some of these takeaways. In short, I talked about how the analyst has the tools of description of projections, cost-effectiveness analysis, selective sensitivity analysis, and the controversial practice of distributional weighting at her disposal to analyze the equity impacts of a given policy alternative.

Overall, it’s important that policymakers have access to objective, rigorous analysis of the distributional impacts of their policy decisions. This Fall, Scioto Analysis will be beginning a project on the problem of poverty in Ohio to help get at how we can better understand that problem in this state. If you’re interested in talking about that or equity analysis in general, please feel free to get in touch. I am always excited to talk to other people who also believe we can understand equity better.

Rob Moore is the principal for Scioto Analysis. He can be reached at rob@sciotoanalysis.com.

Tax land, not improvements, to spur development

No one likes absentee landlords. A study on economic development of the Hilltop commissioned by the city earlier this year called these landowners a major challenge for the neighborhood. Anyone who has spent time in Columbus’ struggling neighborhoods knows the Hilltop is not the only part of the city dealing with this problem.

Absentee landlords cause problems for neighborhoods because neglected properties drag down property values around them. If one landowner doesn’t maintain their property, the values of all of the neighboring properties go down along with them.

In addition to the market incentives discouraging investment in economically disadvantaged neighborhoods, landowners are also discouraged from investing by property taxation. This is because improvements on their land lead to higher property taxes, leading to lower returns on investment.

The typical way governments combat these barriers to investment is through targeted tax abatements. By relieving developers of this cost on a case-by-case basis, local governments hope to increase investment in targeted neighborhoods.

This isn’t the only way to combat barriers to development, though. An alternative strategy has been in place in Pennsylvania since the mid-1970s: a land-value tax.

Land-value taxes are taxes that are assessed not on the value of the property with improvements, but on the value of the land the improvements are built on. Thus, taxes don’t go up as properties are improved unless those improvements lead to an increase in the value of the land it is built on.

This means landowners have extra incentive to develop their property. In the decades since Harrisburg, Pennsylvania, instituted its land-value tax, the number of vacant properties in the city decreased by 90 percent.

Land value taxes have other advantages over property taxes. For instance, because the supply of land is fixed, a tax on land can’t be passed to renters the same way property taxes are. This makes these taxes especially progressive.

In addition, land-value taxes rise with local public improvements. So if the city builds a new road or park nearby, the value of the land increases and the cost of those improvements can be recaptured by the public sector.

The land-value tax is no new idea. Chinese Philosopher Mencius proposed land taxation as early as 300 B.C. Thomas Paine and Adam Smith both extolled the virtues of land taxation in the late 18th century. Economist Henry George’s Progress and Poverty, which outsold all books in the last decade of the 19th century besides the Bible, was a treatise in support of a land-value tax.

If Columbus City Schools or other local government wanted to move to land-value taxation, though, it would likely require enabling legislation from the state. Republicans and Democrats both have reason to favor a more efficient and equitable system of taxation, but absentee landlords have reason to fight it. It’s a lot easier to sit on land than to make it better.

This column originally appeared in Columbus Alive.

The Car is Still King in Columbus

Have you ever been pulled over by police while walking? I have. Twice. This happened to me in the same neighborhood: Minerva Park. And both times in the past couple of months.

Minerva Park is a suburban enclave in northeast Columbus, nestled between Easton and Westerville. Because Minerva Park is its own municipality, the village has its own police force, separate from Columbus as a whole.

The Minerva Park Police Department has a policy of stopping people who walk in their jurisdiction after certain hours and questioning them for not being in a car. Police officers say that this is a policy in place to catch burglars, which would possibly be effective if burglars never used cars.

This is just one of the ways that Central Ohio stacks the deck against people trying to walk, bike and bus in the Columbus metro area. Nine in 10 commutes in Columbus happen via car. Columbus is so car-centric that neighborhoods like Minerva Park find walking to be probable cause for criminal activity.

Pedestrians are not the only people who have to deal with harassment for their choice of transportation. While biking in January, I was honked at by aggressive drivers not once but twice on one ride from campus to Downtown. One driver yelled, “Use the sidewalks!” (which would be, in fact, illegal) on a road that was marked as a shared bike/car road. Another laid down the horn on me as they tried to merge through a bike lane on Third Street onto 670.

Unfortunately, there are no easy public policy answers to this cultural bias against people who use their feet and/or bicycles to get around. Columbus has done a commendable job of making roads more bike friendly and life easier for pedestrians; the Third and Summit street bike lanes are pretty fantastic, and pedestrian right-of-way crosswalks have proliferated in the city in recent years. COTA has significantly improved the rider experience with ridership-based routes. Despite these improvements, Columbus is still a hard place to do anything but drive.

Finding ways to discourage driving is a piece of the solution. The new Short North parking changes are bound to encourage more biking, walking, busing and ridesharing in the area, which will hopefully help normalize use of alternative transportation. Congestion-reducing streetscaping and creative use of fees can also help.

But overall, the politics of transportation will not be settled in the halls of the City Council. People on bikes, buses, walking and driving will need to learn to respect each other and share space as the city becomes more dense and driving inevitably becomes less prevalent. Until then, please think twice before hitting the horn when you see a bicyclist on the road.

This column originally appeared in Columbus Alive.

Scioto Analysis Releases White Paper on Autonomous Vehicle Miles Traveled Fees

(Columbus, OH) - On Friday, Scioto Analysis released a paper on how states can incorporate vehicle miles traveled fees into the regulatory framework for autonomous vehicle adoption. Included in the paper are options for use of revenue generated with autonomous vehicle fees and an implementation timeline in the illustrative state of Ohio.

“Driving is associated with external costs such as congestion, crashes, emissions, and infrastructure degradation,” said Rob Moore, principal of Scioto Analysis and author of the paper, “the holy grail of automobile cost control is a vehicle miles traveled fee.”

While gasoline taxes have traditionally been used to control the costs of driving, increasing variability in fuel mileage and technological advances in data collection are tilting the scale in favor of vehicle mile traveled fees. The development of the regulatory framework around autonomous vehicles will provide policymakers with a particular opportunity to implement vehicle miles traveled fees.

“Automation gives opportunities for companies to cut costs, but that opportunity is contingent on state enabling legislation,” Moore said, “Fees can be assessed to capture the costs of driving and can be spent on credits for low-income families, worker retraining, or public investments.”

Scioto Analysis is a public policy analysis firm based in Columbus, Ohio that provides policymakers and policy influencers with evidence-based analysis of pressing public problems.

When to Conduct Cost-Benefit Analysis: The Costs and Benefits of Cost-Benefit

In my work doing evidence-based policy analysis and extolling the virtues of cost-benefit analysis, I’ve had people ask me a question from time to time that seems quite esoteric and a little silly, but that any true cost-benefit analyst should care about: what is the return on investment for cost-benefit analysis? In other words, has there ever been a cost-benefit analysis done on cost-benefit analysis?

For the life of me, I have been unable to find a cost-benefit analysis done on cost-benefit studies. Cost-benefit minded policymakers, though, should be interested in finding an estimate of what the value of a cost-benefit analysis is. So let’s go through the exercise of what a cost-benefit analysis of cost-benefit analysis would look like.

First, let’s estimate the cost of a cost-benefit analysis. I am going to err on the more expensive side in order to more conservatively estimate the value of a cost-benefit analysis. According to Glassdoor.com, the average policy analyst in the United States earns a salary of about $68,000. Using a Boston Business Journal article from 2005 and adjusting to 2019 dollars, a high-end estimate of $27,000 for benefits and employment taxes (40% of salary) and an additional $2,300 for office space and equipment brings the total annual cost of a policy analyst to about $97,000. Let’s assume on the conservative side that the policy analyst will complete a cost-benefit analysis every quarter. This means that a cost-benefit analysis will cost, on average, about $24,000.

Now let’s estimate the worst-case scenario. This is a scenario where a policymaker commissions a cost-benefit study and decides to make the same decision she made before the study. Assuming there is no value to the knowledge that the policymaker is right, those $24,000 would go to “waste.” There would be $24,000 in accounting costs and zero dollars in benefits. From an economic perspective, we can use a high estimate for the marginal excess tax burden, again erring on the conservative side. Say the study was financed from income tax dollars and those tax dollars had an especially high drag on economic productivity, say reducing economic activity among those taxed by 43%. This means that the total social cost of a cost-benefit analysis would be about $10,000.

Let’s look at the flip side: an extremely successful cost-benefit analysis. This would mean that a cost-benefit analysis uncovered an especially inefficient program and identified an especially efficient alternative, which the policymaker then reallocated dollars towards. The most extreme example I could construct is pulled from programs listed in the Washington Institute for Public Policy (WSIPP)’s Benefit Cost Database. Let’s say there was a small “Fast Track prevention program” with 16 children participating. This program would have net costs of about $1.5 million to run according to WSIPP analysis (16 children x $91,000 net costs per participant). Say a policy analyst identified the loss and recommended the dollars be shifted to deploy an additional police officer using hot spot strategies ($430,000 in net benefits according to WSIPP) and this recommendation was adopted by the policymaker. This would result in a net benefit change in the policy of a total of $1.9 million.

This would mean the $10,000 economic cost of the study would be totally swamped out by the benefits of this program. As a matter of fact, with this ROI, the next 180 cost-benefit analyses could be “failures,” not showing new results or not leading to policy changes for other reasons, and this study alone would still lead to net benefits for the analysis program as a whole.

Let’s take a more moderate example. Let’s say a department of Juvenile Justice was reallocating funds towards higher-yield programs. What if a cost-benefit analysis found that an adolescent diversion system with services ($2,900 in net benefits per participant according to WSIPP) was having no better impacts than one without services ($9,500 in net benefits per participant according to WSIPP). This means a total of $6,700 of net benefits would be realized for every juvenile moved from the program with services to the program without, which means that if at least two juveniles were moved, the $10,000 cost-benefit analysis would have net benefits.

It’s worth noting here that the marginal cost of the implementation of cost-benefit insights is extremely low. While moving one participant from a services program to a standard program after a cost-benefit analysis would have net costs of $3,800, moving two participants would have net benefits of $2,900, moving three participants would have net benefits of $9,600, and so on.

With these exercises in mind, we can draw four rules for policymakers determining whether cost-benefit analysis is worthwhile in a given situation.

1. Use cost-benefit analysis when policymakers are open to changing their minds. If policymakers have a policy plan in place already and are unwilling to adjust it, a cost-benefit analysis is a waste of money and will not lead to policy change or net benefits.

2. Use cost-benefit analysis when current program effectiveness is suspect or alternatives may yield better returns. Opportunities to substitute low-benefit or negative-benefit programs for high-benefit programs can quickly justify the cost of a study.

3. Conduct cost-benefit analysis on large programs. Even the smallest changes identified by a cost-benefit analysis of a large program will justify the cost of the study. While small programs can justify the cost of a study with large enough changes, if total net program costs or benefits are expected to be only a few thousand dollars or less, cost-benefit analysis may not be a wise use of resources.

4. Conduct a variety of cost-benefit analyses to “diversify your analysis portfolio.” As the Fast Track example above shows, a killer cost-benefit analysis can justify scores of duds. If a policymaker is open to implementing more efficient policy, she should commission a number of analyses of specific, pertinent policy problems and empower staff to act on recommendations that come from these analyses.

Cost-benefit analysis isn’t going to pay off every single time it is carried out. But more cost-benefit analysis applied to a variety of large, previously unstudied programs will lead to better use of limited public resources with the right leaders at the helm. And this is why I’m spending my time on this sort of work, because when cost-benefit analysis is done right, it has the potential to be the most effective public policy intervention of them all.

Rob Moore is the Principal for Scioto Analysis.

Think Outside the Bus

I was at a community meeting last week where I heard someone suggest making the COTA bus system completely free.

While some at the meeting dismissed the idea as “prohibitively expensive,” it is worth noting that currently bus fares only make up one out of every five dollars of operating revenue for the COTA system. Making the system free would cost maybe $25 million, or 2 percent of total state and county funds. Not a negligible expense, but far from impossible.

Fiscal feasibility out of the way, the question then becomes what is the goal of free busing? The public has two main interests in subsidizing buses: transportation efficiency and transportation equity.

From an efficiency standpoint, cars exact costs on the public, as I wrote earlier this month, in the form of congestion, crash damage and injuries, emissions and infrastructure degradation. Subsidizing buses is an indirect way of reducing these costs; a more attractive public transit system will mean less people in cars, which will decrease congestion, crashes, emissions and road maintenance needs.

COTA’s shift from a coverage-focused transit plan to a ridership-focused transit plan represents a nod to this sort of thinking. By increasing frequency on key transit corridors, more people will bus rather than drive.

There are more efficient ways to reduce car usage, though. A per-mile tax on driving (whether through a vehicle miles traveled fee, as a recent Dispatch editorial suggested, or a gas tax, which approximates a per-mile charge) would encourage more walking, biking, busing and telecommuting — all options that reduce the negative impacts of driving.

In general, local governments have few options to assess direct fees on driving, so transit subsidies become a second-best option.

For a more efficient transit system, city and county leaders need to work with the state to find ways to enact vehicle miles traveled fees to bring the private cost of driving in line with the social cost. The recent Short North parking reform is one example of doing just this.

From an equity standpoint, busing subsidies are an indirect way to alleviate poverty. If most people on buses are low-income, a transit subsidy represents a transfer to those who need assistance most.

Unfortunately, this is an ineffective way to target those in poverty. A new bus line does little good for a family that needs child care, quality education, housing or food. The most effective way to help these families is to give them the power to make their own family decisions, and that means giving them cash.

This column originally appeared in Columbus Alive.

Ride-share tax could curb Lyft and Uber excesses

By Rob Moore

Last month, ride-share application Lyft released its annual economic impact report. In this report, Lyft concluded that riders spent an additional $17 million in Columbus due to the availability of its services.

Meanwhile, controversy swirled last month around studies suggesting that ride-sharing apps were decreasing use of public transportation across the country, and that Lyft and Uber were increasing congestion on college campuses.

Typically, the conversation around the impact of Lyft and Uber has split into two camps, mirroring many other public policy debates. In one camp are the people lauding the benefits of the new technology, and in the other are those who focus on its negative consequences.

As most issues go, the truth is somewhere in the middle.

Of course this new technology is creating value, as anyone who has spent 30 minutes waiting for a cab after the bars close on a cold Saturday can attest. Ride sharing also creates a lot of possibility for first mile/last mile solutions, access to medical care and reducing usage of public parking.

On the other hand, ride sharing creates a lot of the same problems that personal cars do. Another car on the road means more congestion. It also means increased emissions, an increased chance of injuries and fatalities due to car crashes and greater wear and tear on public roads.

The congestion problem has particularly reared its ugly head in New York City, where average Manhattan car speeds have slowed to six miles per hour during business hours.

Things in Columbus aren’t likely to get that bad. But more cars on the road still means longer commutes, more pollution, more crashes and faster infrastructure degradation.

Last year, NYC decided to cap the number of Uber and Lyft vehicles in the city to combat congestion. This is not a best practice of congestion alleviation: A survey of 40 prominent economists last year revealed that they overwhelmingly thought capping ride-sharing services would make residents worse off by arbitrarily restricting public use of ride sharing.

Instead, a more effective way to account for the costs of driving not borne by drivers and ride-hailers is via a congestion tax.

Last week, a new per-ride state fee for ride-share services in Manhattan went into effect. The policy is expected to reduce the number of cars on the road while raising revenue for improvements to public transit.

An even more efficient option would be for all cars to be taxed on a per-mile basis. This way, the negative impacts of personal cars are treated the same as the negative impacts of ride-sharing vehicles. Cars that are on the road more would pay more in proportion with the problems they create.

Unfortunately, local governments often have narrowly tailored authorization from the state to collect taxes, so a more limited ride-sharing tax might be easier to justify legally than a broader vehicle tax. On top of this, per-mile pricing presents some obvious logistical issues.

If Columbus wants to reap the benefits of ride-sharing while curbing its excesses, a tax is a better option than a cap.

This column originally appeared in Columbus Alive.