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Out of Control Policy Blog Archives: 6.24.12–6.30.12

Four Ways the Internet Changed Poker

Delaware looks ready to become the second state after Nevada to authorize Internet poker as a gambling bill was approved this week by the state senate 14-6 with one senator abstaining. 

In the wake of the Department of Justice's Dec. 23, 2011 memo that for all intents and purposes said there were no federal statutes prohibiting intrastate online wagering on anything save sports, several states. Including Iowa, New Jersey and California, have started moving on legislation that would permit Internet poker, other casino games, and online purchasing of lottery tickets for residents and visitors inside their borders.

Poker players across the country would welcome the chance to play online once more. TheUnlawful Internet Gambling Enforcement Act (UIGEA) of 2006 did not make Internet poker illegal outright, but by prohibiting U.S. banks from conducting transactions with off-shore gaming sites, made it extremely difficult for U.S. players to open or maintain accounts with legitimate sites such as Bovada, Bodog and PartyPoker.

With legislation moving along, most gaming industry analysts see Internet poker becoming a reality in at least one or two states by the end of this year.

While the topic of online gambling is still controversial, poker is just one more place where the Internet has had an impact. Before the World Wide Web, you either had to live in Nevada or New Jersey (even in states that had casino gambling, not every casino had a card room) to play regularly. For most who did play, poker was a friendly diversion within a family or social circle. 

In broadening poker's appeal, the Internet also changed the nature of the game. These changes fully manifested themselves when Chris Moneymaker won the main event of World Series of Poker (WSOP) in 2003. Moneymaker was the first world champion to have qualified for the tournament at on line site. The WSOP was the first major live tournament he played. The bulk of his experience and expertise was acquired through online play.

In honor of developments in Delaware and elsewhere, and keeping in mind that the main event of the 2012 World Series of Poker begins July 7, and because it's Friday afternoon, let's look at four ways the Internet has changed poker significantly from the game your parents knew. For our purposes here, we will keep things in the context of Texas Hold 'Em, today's most popular poker game. 

Math knowledge has become critical to winning

You're last to act and have four to the winning, or "nut," flush (say the Ace and 10 of spades in your hand, with two more spades among the four community cards that have been drawn). There are no pairs showing on the board that would make an opponent a possible full house. You're the last to act. The pot is $100 and it will cost you $50 to call. Do you call, raise or fold?

Since the Internet offers no opportunity to assess a player's body language, a solid grounding in mathematics and probability theory became more important to consistent winning online. This has since carried over to live games. When it comes to gambling, a good bet pays better than the odds of the expected outcome. Since there are 9 spades remaining among the 46 cards you haven't seen, the odds of a making the nut flush "on the river," that is, with the final card drawn, is 46/9 or just slightly more than 5 to 1. That means for you to consistently make money from this decision the pot must be more than 5 times the size of your $50 bet for you to correctly call. In the example above, the right move is to fold.

Good poker players always had a feel for pot odds. But the Internet made the math aspect integral to long-term success at the game. In the past, mediocre players could survive much longer without a grasp of pot odds and the more fluid concept of "implied odds." Today, because of the Internet, you'll find good players are adept at calculating and manipulating pot sizes to drive out drawing hands that could trump treys or a made two-pair. Sharper players not only keep pot odds in mind, but are aware of basic win percentages of any two-card Hold 'Em hand against any random hand. That accounts for the "maniac" play you find in richer no-limit games--players making big bets, even going all-in pre-flop from a late position (that is, they are among the last to act). They may hold a weak hand, but they are nonetheless wagering that it has a 50 percent chance or better of beating the two or three hands behind it. Detailed knowledge of hand percentages, which can determine the correct times as to bet all your chips, is now integral to winning tournaments. Sites like PokerStove.com provide hand-analysis software that help players hone this tactic.

Aggressiveness is Rewarded

Because successful Internet play depends on the application of math in every poker hand, it has yielded a generation of players who are far more aggressive when they have the edge. Today's players who are dealt pocket aces or kings, unless they develop into a monster hand on the flop, are not going to allow six or seven players to stick around through the river just to fuel a big pot. By then, their aces will likely have gone from favorite to underdog. The Internet has taught players to play big pairs, two-pairs and treys early and aggressively, while they still have the lead.

Conversely, today's passive players suffer in several ways. For one, they pay heavily for calling early with marginal hands that can't justify a follow-up call to a raise behind them. Second, once an aggressive player realizes that a passive player won't call a raise, the aggressive player will begin raising with weaker hands, say a suited 8-7, in hopes the passive player, out of fear, will muck a slightly better hand like 6,6 or J,10. Third, when an habitual passive player does call a raise, the aggressive player knows that he is likely has a strong hand and backs off. The passive player doesn't get the full value for his good hand.  

Growth of Fast Tournaments

Until the Internet, multi-day, multi-table tournaments were the rule, a tradition that's kept alive by the WSOP, which features a number of two- and three-day events, culminating in the 10-day main event. The Internet popularized "sit-and-goes"--single table tournaments decided in a few hours, as well as smaller multi-table events in which the blinds and antes rise in 15 or 20-minute intervals compared to an hour or more in traditional formats. For up-and-coming players they can be fun because an inexpensive entry fee can yield several hours of play.  

These "fast" tournaments call for the knowledge of math and the daring (some might say reckless) aggressiveness that the Internet has fostered. In fact, traditional tournament strategies may be of no use in these faster formats. For a long time, Patrick Harrington's three-volumeHarrington on Hold 'Em was the bible for tournament strategy. Newer books, such as Arnold Snyder'sPoker Tournament Formula and Lee Nelson's Kill Phil and Kill Everyone have generated controversy by claiming Harrington's advice and methods won't work in fast tournament formats. Snyder and Nelson advocate new strategies that address factors that arise in these fast games, such as relative chip value, playing position and the way the math of the game changes when play reaches the "bubble," that is, when exiting the tournament means missing the a significant share of the prize money by just one or two places.

The Game Has Expanded

Fifteen years ago, only a handful of casinos had poker rooms. Because of the Internet, now you can find one in every casino. There's also a wider variety of games and tournaments, suited to players of various skill and experience levels. A beginner may be comfortable at the $3-$6 limit game Golden Nugget in downtown Vegas. Someone looking for a challenge may try the $10-$20 no-limit game at the Aria on the Strip.   

The return of Internet poker promises more variety at lower stakes, increasing the popularity of a game of skill already enjoyed by millions of responsible adults. And yes, the changes to the game brought by online players further underlines the level of skill poker requires. Poker is not a game of chance, despite what some legislators insist when citing existing state laws against online wagering. The very fact that playing strategies evolve over time--techniques that won in the past fail to win now--demonstrates this. Poker is much closer to chess or go in this regard. As players master the game, they affect the way it is played.  




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What has "Doomsday" Education Spending in California Wrought: Higher Graduation Rates and Test Scores

After what public school advocates have called a decade of "disinvestment in California public education" and predicted every kind of doomsday scenario for California kids--consider what the moderate spending cuts have wrought--test scores and graduation rates are up.

The Legislative Analyst's Office explains how California K-12 schools have cut spending in the last three years: 

Total expenditures (excluding capital outlay projects) dropped by $3.3 billion between 2007-08 and 2010-11, which equates to a statewide average reduction of $565, or 4.7 percent, per pupil. (While statewide data are not yet available for 2011-12, our survey responses indicate about half of districts made additional reductions to per-pupil expenditures in the current year.) The figure shows the most significant spending change has been to certificated staff salaries-the largest operational expense in district budgets. Certificated salary expenditures have decreased by $2.3 billion, including a $1.4 billion drop between 2008-09 and 2009-10. As discussed below, districts have reduced these costs both by employing fewer teachers and administrators and by having them work fewer days. 

California Graduation Rates UP

The new data is based on a system that tracks students from the time they enter ninth grade, even if they transfer to another public school in California. It's the second year the tracking system was used, which allowed a comparison with 2010 figures. School districts in Los Angeles County racked up a graduation rate of 71.6 percent in 2011, a 1.1 point increase from the prior year. The dropout rate improved from 18.9 percent in 2010 to 15.7 percent in 2011, figures show.Statewide, 76.3 percent of students who started ninth grade in 2007 graduated with their class in 2011, a uptick of 1.5 percent. The dropout rate dipped 2.2 points to 14.4 percent.

"We're heading in the right direction," Tom Torlakson, state superintendent of public instruction, said in a conference call. "We want 85 to 90 percent (graduation rates) in the future." Torlakson noted gains statewide among Hispanic and African-American students, as well as English-learners. The improvements were especially noteworthy, he said, given budget cuts that resulted in larger class sizes, shortened school calendars and limited summer school offerings.

California Student Achievement UP

California's students continue to steadily improve their performance across the board, with a larger proportion than ever scoring proficient or higher on the 2011 Standardized Testing and Reporting (STAR) Program exams in English-language arts, mathematics, science, and history-social science, State Superintendent of Public Instruction Tom Torlakson announced. 

The percentage of students in grades two through eleven scoring at the proficient level and above increased approximately 19 percentage points between 2003 and 2011. The one-year increase in 2011 was 2 percentage points.

Between 2003 and 2011, the increase in the percentage of students in grades two through seven taking the grade-level mathematics CSTs and achieving the proficient level and above reached double digits: grade five, 28 percentage points; grade four, 26 percentage points; grade three, 22 percentage points; grade seven, 20 percentage points; grade six, 19 percentage points; and grade two, 13 percentage points. During the same time period, the increase in the percentage of students achieving the proficient level and above on the CST for Algebra I and Summative High School Mathematics also reached double digits, with an increase of 11 percentage points and 12 percentage points respectively.

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Transportation Bill a Big Disappointment

The House and Senate finally reached agreement on a bill to reauthorize the federal highway and transit program. While state Departments of Transportation (DOTs), transit agencies, and the design/construction people are generally happy-figuring that something is better than nothing-this is actually a pathetic performance.

The underlying reality is that the funding system based on fuel taxes is increasingly broken, but this bill doesn't even attempt to fix it. Instead, it "kicks the can down the road," just as Congress and the White House continue to do with respect to out-of-control entitlement spending.

For more than 55 years, the federal program has been funded by highway users, and state and local governments have grown accustomed to ever-higher amounts of federal transportation money each year. Now that fuel taxes are failing as a user fee, two things needed to happen: (a) downsize the program to fit within projected revenues and (b) begin shifting to a more direct user fee.

Reason's major policy study (by Adrian Moore and me) in 2010 argued that the federal program had evolved into a kind of all-purpose public works program, with 30 percent of all the money that comes from highway users being diverted to non-highway purposes (mostly transit but also recreational trails, sidewalks, bike paths, beautification, and even transportation museums). Leave those things to local governments and refocus the federal program on rebuilding and modernizing things like the Interstate highways, we argued.

And if that kind of change didn't produce enough money for legitimate highway improvements, remove federal obstacles to states using toll finance and public-private partnerships (PPPs) to supplement what they get in the way of federal cash.

What Congress has done is tinker a tiny bit with the bloat in the program, by eliminating one small diversion ("Complete Streets") and no longer mandating that states devote 2 percent of their total funds to things like trails and bike paths. That 2 percent category still exists, but they can now spend it on "boulevards" instead.

Instead of removing federal restrictions on tolling, or at least expanding several promising toll pilot programs, they instead eliminated one of the pilot programs and failed to expand tolling beyond what was already allowed. On PPPs, the House managed to delete three anti-PPP measures that were in the Senate bill, removing that threat. And they did agree to expand the useful Transportation Infrastructure Finance and Innovation Act (TIFIA) program, which has provided gap (loan) funding for a number of PPP toll programs. But without expanded tolling authority, needed efforts like rebuilding and modernizing the aging Interstate system cannot move forward.

And worst of all, they came up with an outrageous gimmick to cover the shortfall in fuel tax funding. To prevent annual highway and transit funding from declining over the next two years, they needed $19 billion for FY2013 and 2014. They plan to dump $19 billion of general fund money into the Highway Trust Fund for this purpose. But budget rules require this to be "paid for" by savings elsewhere. To do this, they are amending the Employee Retirement Income Security (ERISA) Act that governs private-sector pension funds to produce alleged savings of about $20 billion over the next 10 years. One shudders to think what they will come up with after this transportation bill expires in 2 years, and the gap that needs filling is even larger. Analysts from the Competitive Enterprise Institute argue that the "pension smoothing" technique authorized by the bill is "a license to make up numbers for [pension fund] income projections."

From where I sit, about the only saving grace is that this travesty will only last for 2 years. At that point, the non-sustainability of this kind of nonsense should be obvious to everyone, opening the door to serious transportation reform.

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Why California can Only Cut Education and Public Safety

Yep, California faces a $16 billion budget deficit and the only solution Sacramento can come up with is cutting education and public safety and a massive tax increase.  Over the interweb this morning I got this list of real California state government entities.  I have checked it over and it looks legit to me, I couldn't find any on the list I knew to no longer exist. But you can see why the only possible cuts are to vital services, right? There's nothing unnecessary on this list, right?

California Academic Performance Index (API) * California Access for Infants and Mothers * California Acupuncture Board * California Administrative Office of the Courts * California Adoptions Branch * California African American Museum * California Agricultural Export Program * California Agricultural Labor Relations Board * California Agricultural Statistics Service * California Air Resources Board (CARB) * California Allocation Board * California Alternative Energy and Advanced Transportation Financing Authority * California Animal Health and Food Safety Services * California Anti-Terrorism Information Center * California Apprenticeship Council * California Arbitration Certification Program * California Architects Board * California Area VI Developmental Disabilities Board * California Arts Council * California Asian Pacific Islander Legislative Caucus * California Assembly Democratic Caucus * California Assembly Republican Caucus * California Athletic Commission * California Attorney General * California Bay Conservation and Development Commission * California Bay-Delta Authority * California Bay-Delta Office * California Bio Diversity Council * California Board for Geologists and Geophysicists * California Board for Professional Engineers and Land Surveyors * California Board of Accountancy * California Board of Barbering and Cosmetology * California Board of Behavioral Sciences * California Board of Chiropractic Examiners * California Board of Equalization (BOE) * California Board of Forestry and Fire Protection * California Board of Guide Dogs for the Blind * California Board of Occupational Therapy * California Board of Optometry * California Board of Pharmacy * California Board of Podiatric Medicine * California Board of Prison Terms * California Board of Psychology * California Board of Registered Nursing * California Board of Trustees * California Board of Vocational Nursing and Psychiatric Technicians * California Braille and Talking Book Library * California Building Standards Commission * California Bureau for Private Post Secondary and Vocational Education * California Bureau of Automotive Repair * California Bureau of Electronic and Appliance Repair * California Bureau of Home Furnishings and Thermal Insulation * California Bureau of Naturopathic Medi cine * California Bureau of Security and Investigative Services * California Bureau of State Audits * California Business Agency * California Business Investment Services (CalBIS) * California Business Permit Information (CalGOLD) * California Business Portal * California Business, Transportation and Housing Agency * California Cal Grants * California CalJOBS * California Cal-Learn Program * California CalVet Home Loan Program * California Career Resource Network * California Cemetery and Funeral Bureau * California Center for Analytical Chemistry * California Center for Distributed Learning * California Center for Teaching Careers (Teach California) * California Chancellors Office * California Charter Schools * California Children and Families Commission * California Children and Family Services Division * California Citizens Compensation Commission * California Civil Rights Bureau * California Coastal Commission * California Coastal Conservancy * California Code of Regulations * California Collaborative Projects with UC Davis * California Commission for Jobs and Economic Growth * California Commission on Aging * California Commission on Health and Safety and Workers Compensation * California Commission on Judicial Performance * California Commission on State Mandates * California Commission on Status of Women * California Commission on Teacher Credentialing * California Commission on the Status of Women * California Committee on Dental Auxiliaries * California Community Colleges Chancellors Office, Junior Colleges * California Community Colleges Chancellors Office * California Complaint Mediation Program * California Conservation Corps * California Constitution Revision Commission * California Consumer Hotline * California Consumer Information Center * California Consumer Information * California Consumer Services Division * California Consumers and Families Agency * California Contractors State License Board * California Corrections Standard s Authority * California Council for the Humanities * California Council on Criminal Justice * California Council on Developmental Disabilities * California Court Reporters Board * California Courts of Appeal * California Crime and Violence Prevention Center * California Criminal Justice Statistics Center * California Criminalist Institute Forensic Library * California CSGnet Network Management * California Cultural and Historical Endowment * California Cultural Resources Division * California Curriculum and Instructional Leadership Branch * California Data Exchange Center * California Data Management Division * California Debt and Investment Advisory Commission * California Delta Protection Commission * California Democratic Caucus * California Demographic Research Unit * California Dental Auxiliaries * California Department of Aging * California Department of Alcohol and Drug Programs * California Department of Alcoholic Beverage Control Appeals Board * California Departme nt of Alcoholic Beverage Control * California Department of Boating and Waterways (Cal Boating) * California Department of Child Support Services (CDCSS) * California Department of Community Services and Development * California Department of Conservation * California Department of Consumer Affairs * California Department of Corporations * California Department of Corrections and Rehabilitation * California Department of Developmental Services * California Department of Education * California Department of Fair Employment and Housing * California Department of Finance * California Department of Financial Institutions * California Department of Fish and Game * California Department of Food and Agriculture * California Department of Forestry and Fire Protection (CDF) * California Department of General Services * California Department of General Services, Office of State Publishing * California Department of Health Care Services * California Department of Housing and Community Development * California Department of Industrial Relations (DIR) * California Department of Insurance * California Department of Justice Firearms Division * California Department of Justice Opinion Unit * California Department of Justice, Consumer Information, Public Inquiry Unit * California Department of Justice * California Department of Managed Health Care * California Department of Mental Health * California Department of Motor Vehicles (DMV) * California Department of Personnel Administration * California Department of Pesticide Regulation * California Department of Public Health * California Department of Real Estate * California Department of Rehabilitation * California Department of Social Services Adoptions Branch * California Department of Social Services * California Department of Technology Services Training Center (DTSTC) * California Department of Technology Services (DTS) * California Department of Toxic Substances Control * California Department of Transpor tation (Caltrans) * California Department of Veterans Affairs (CalVets) * California Department of Water Resources * California Departmento de Vehiculos Motorizados * California Digital Library * California Disabled Veteran Business Enterprise Certification Program * California Division of Apprenticeship Standards * California Division of Codes and Standards * California Division of Communicable Disease Control * California Division of Engineering * California Division of Environmental and Occupational Disease Control * California Division of Gambling Control * California Division of Housing Policy Development * California Division of Labor Standards Enforcement * California Division of Labor Statistics and Research * California Division of Land and Right of Way * California Division of Land Resource Protection * California Division of Law Enforcement General Library * California Division of Measurement Standards * California Division of Mines and Geology * California Divisi on of Occupational Safety and Health (Cal/OSHA) * California Division of Oil, Gas and Geothermal Resources * California Division of Planning and Local Assistance * California Division of Recycling * California Division of Safety of Dams * California Division of the State Architect * California Division of Tourism * California Division of Workers Compensation Medical Unit * California Division of Workers Compensation * California Economic Assistance, Business and Community Resources * California Economic Strategy Panel * California Education and Training Agency * California Education Audit Appeals Panel * California Educational Facilities Authority * California Elections Division * California Electricity Oversight Board * California Emergency Management Agency * California Emergency Medical Services Authority * California Employment Development Department (EDD) * California Employment Information State Jobs * California Employment Training Panel * California Energy Commission * California Environment and Natural Resources Agency * California Environmental Protection Agency (Cal/EPA) * California Environmental Resources Evaluation System (CERES) * California Executive Office * California Export Laboratory Services * California Exposition and State Fair (Cal Expo) * California Fair Political Practices Commission * California Fairs and Expositions Division * California Film Commission * California Fire and Resource Assessment Program * California Firearms Division * California Fiscal Services * California Fish and Game Commission * California Fisheries Program Branch * California Floodplain Management * California Foster Youth Help * California Franchise Tax Board (FTB) * California Fraud Division * California Gambling Control Commission * California Geographic Information Systems Council (GIS) * California Geological Survey * California Government Claims and Victim Compensation Board * California Governors Committee for Employment of Disabled Pers ons * California Governors Mentoring Partnership * California Governors Office of Emergency Services * California Governors Office of Homeland Security * California Governors Office of Planning and Research * California Governors Office * California Grant and Enterprise Zone Programs HCD Loan * California Health and Human Services Agency * California Health and Safety Agency * California Healthy Families Program * California Hearing Aid Dispensers Bureau * California High-Speed Rail Authority * California Highway Patrol (CHP) * California History and Culture Agency * California Horse Racing Board * California Housing Finance Agency * California Indoor Air Quality Program * California Industrial Development Financing Advisory Commission * California Industrial Welfare Commission * California InFoPeople * California Information Center for the Environment * California Infrastructure and Economic Development Bank (I-Bank) * California Inspection Services * California Institute f or County Government * California Institute for Education Reform * California Integrated Waste Management Board * California Interagency Ecological Program * California Job Service * California Junta Estatal de Personal * California Labor and Employment Agency * California Labor and Workforce Development Agency * California Labor Market Information Division * California Land Use Planning Information Network (LUPIN) * California Lands Commission * California Landscape Architects Technical Committee * California Latino Legislative Caucus * California Law Enforcement Branch * California Law Enforcement General Library * California Law Revision Commission * California Legislative Analyst's Office * California Legislative Black Caucus * California Legislative Counsel * California Legislative Division * California Legislative Information * California Legislative Lesbian, Gay, Bisexual, and Transgender (LGBT) Caucus * California Legislature Internet Caucus * California Library Development Services * California License and Revenue Branch * California Major Risk Medical Insurance Program * California Managed Risk Medical Insurance Board * California Maritime Academy * California Marketing Services * California Measurement Standards * California Medical Assistance Commission * California Medical Care Services * California Military Department * California Mining and Geology Board * California Museum for History, Women, and the Arts * California Museum Resource Center * California National Guard * California Native American Heritage Commission * California Natural Community Conservation Planning Program * California New Motor Vehicle Board * California Nursing Home Administrator Program * California Occupational Safety and Health Appeals Board * California Occupational Safety and Health Standards Board * California Ocean Resources Management Program * California Office of Administrative Hearings * California Office of Administrative Law * California Office of AIDS * California Office of Binational Border Health * California Office of Child Abuse Prevention * California Office of Deaf Access * California Office of Emergency Services (OES) * California Office of Environmental Health Hazard Assessment * California Office of Fiscal Services * California Office of Fleet Administration * California Office of Health Insurance Portability and Accountability Act (HIPAA) Implementation (CalOHI) * California Office of Historic Preservation * California Office of Homeland Security * California Office of Human Resources * California Office of Legal Services * California Office of Legislation * California Office of Lieutenant Governor * California Office of Military and Aerospace Support * California Office of Mine Reclamation * California Office of Natural Resource Education * California Office of Privacy Protection * California Office of Public School Construction * California Office of Real Estate Appraisers * California Office of Risk and Insurance Management * California Office of Services to the Blind * California Office of Spill Prevention and Response * California Office of State Publishing (OSP) * California Office of Statewide Health Planning and Development * California Office of Systems Integration * California Office of the Inspector General * California Office of the Ombudsman * California Office of the Patient Advocate * California Office of the President * California Office of the Secretary for Education * California Office of the State Fire Marshal * California Office of the State Public Defender * California Office of Traffic Safety * California Office of Vital Records * California Online Directory * California Operations Control Office * California Opinion Unit * California Outreach and Technical Assistance Network (OTAN) * California Park and Recreation Commission * California Peace Officer Standards and Training (POST) * California Performance Review (CPR) * California Permit Information for Business (CalGOLD) * California Physical Therapy Board * California Physician Assistant Committee * California Plant Health and Pest Prevention Services * California Policy and Evaluation Division * California Political Reform Division * California Pollution Control Financing Authority * California Polytechnic State University, San Luis Obispo * California Postsecondary Education Commission * California Prevention Services * California Primary Care and Family Health * California Prison Industry Authority * California Procurement Division * California Public Employees Retirement System (CalPERS) * California Public Employment Relations Board (PERB) * California Public Utilities Commission (PUC) * California Real Estate Services Division * California Refugee Programs Branch * California Regional Water Quality Control Boards * California Registered Veterinary Technician Committee * California Registrar of Charitable Trusts * California Republican Caucus * California Research and Development Division * California Research Bureau * California Resources Agency * California Respiratory Care Board * California Rivers Assessment * California Rural Health Policy Council * California Safe Schools * California San Francisco Bay Conservation and Development Commission * California San Gabriel and Lower Los Angeles Rivers and Mountains Conservancy * California San Joaquin River Conservancy * California School to Career * California Science Center * California Scripps Institution of Oceanography * California Secretary of State Business Portal * California Secretary of State * California Seismic Safety Commission * California Self Insurance Plans (SIP) * California Senate Office of Research * California Small Business and Disabled Veteran Business Enterprise Certification Program * California Small Business Development Center Program * California Smart Growth Caucus * California Smog Check Information Center * California Spatial Information Library * California Special Education Division * California Speech-Language Pathology and Audiology Board * California Standardized Testing and Reporting (STAR) * California Standards and Assessment Division * California State Administrative Manual (SAM) * California State Allocation Board * California State and Consumer Services Agency * California State Architect * California State Archives * California State Assembly * California State Association of Counties (CSAC) * California State Board of Education * California State Board of Food and Agriculture *California Office of the Chief Information Officer (OCIO) * California State Children's Trust Fund * California State Compensation Insurance Fund * California State Contracts Register Program * California State Contracts Register * California State Controller * California State Council on Developmental Disabilities (SCDD) * California State Disability Insurance (SDI) * California State Fair (Cal Expo) * California State Jobs Employment Information * California State Lands Commission * California State Legislative Portal * California State Legislature * California State Library Catalog * California State Library Services Bureau * California State Library * California State Lottery * California State Mediation and Conciliation Service * California State Mining and Geology Board * California State Park and Recreation Commission * California State Parks * California State Personnel Board * California State Polytechnic University, Pomona * California State Railroad Museum * California State Science Fair * California State Senate * California State Summer School for Mathematics and Science (COSMOS) * California State Summer School for the Arts * California State Superintendent of Public Instruction * California State Teachers Retirement System (CalSTRS) * California State Treasurer * California State University Center for Distributed Learning * California State University, Bakersfield * California State University, Channel Islands * California State University, Chico * California State University, Dominguez Hills * California State University, East Bay * California State University, Fresno * California State University, Fullerton * California State University, Long Beach * California State University, Los Angeles * California State University, Monterey Bay * California State University, Northridge * California State University, Sacramento * California State University, San Bernardino * California State University, San Marcos * California State University, Stanislaus * California State University (CSU) * California State Water Project Analysis Office * California State Water Project * California State Water Resources Control Board * California Structural Pest Control Board * California Student Aid Commission * California Superintendent of Public Instruction * California Superior Courts * California Tahoe Conservancy * California Task Force on Culturally and Linguistically Competent Physicians and Dentists * California Tax Information Center * California Technology and Administration Branch Finance * California Telecommunications Division * California Telephone Medical Advice Services (TAMS) * California Transportation Commission * California Travel and Transportation Agency * California Unclaimed Property Program * California Unemployment Insurance Appeals Board * California Unemployment Insurance Program * California Uniform Construction Cost Accounting Commission * California Veterans Board * California Veterans Memorial * California Veterinary Medical Board and Registered Veterinary Technician Examining Committee * California Veterinary Medical Board * California Victim Compensation and Government Claims Board * California Volunteers * California Voter Registration * California Water Commission * California Water Environment Association (COWPEA) * California Water Resources Control Board * California Welfare to Work Division * California Wetlands In formation System * California Wildlife and Habitat Data Analysis Branch * California Wildlife Conservation Board * California Wildlife Programs Branch * California Work Opportunity and Responsibility to Kids (CalWORKs) * California Workers Compensation Appeals Board * California Workforce and Labor Development Agency * California Workforce Investment Board * California Youth Authority (CYA) * Central Valley Flood Protection Board * Center for California Studies * Colorado River Board of California * Counting California * Dental Board of California * Health Insurance Plan of California (PacAdvantage) * Humboldt State University * Jobs with the State of California * Judicial Council of California * Learn California * Library of California * Lieutenant Governors Commission for One California * Little Hoover Commission (on California State Government Organization and Economy) * Medical Board of California * Medi-Cal * Osteopathic Medical Board of California * Physical Therapy Board of California * Regents of the University of California * San Diego State University * San Francisco State University * San Jose State University * Santa Monica Mountains Conservancy * State Bar of California * Supreme Court of California * Teach California * University of California * University of California, Berkeley * University of California, Davis * University of California, Hastings College of the Law * University of California, Irvine * University of California, Los Angeles * University of California, Merced * University of California, Riverside * University of California, San Diego * University of California, San Francisco * University of California, Santa Barbara * University of California, Santa Cruz *

California's state motto ought to be "We do everything. Everything."

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The Future of Video? Beggar Thy Competitor

In an investigation into the "Future of Video" this week, the House Communications and Technology Subcommittee heard testimony from a number of representatives from the cable companies, satellite companies, wireless companies, and providers of "over-the-top" programming on demand via the Internet Protocol (IPTV), including Netflix. The question at hand is whether recent plans by cable companies to shift their Internet pricing from the flat-rate "all-you-can-download" model to tiered rates based on amount of use is anti-competitive. Netflix and Hulu, which deliver programming directly to viewers over a broadband Internet connection say pricing tiers discriminate against them because usage-based data consumption applies their programming, while for conventional cable TV pay-per-view, the usage meter, so to speak, is not running. 

My hope is that Congress and any other agencies watching are cautious. Complaints by IPTV providers appear to be just the sort of "regulate my rival" demands that FCC Commissioner Robert McDowell warned about yesterday in a speech in Rome. 

Indeed, IPTV and cable companies compete for on-demand business. And consumers may not be interested in the distinction between their respective business models; all they want is greater choice in video options. Thus far, all groups--cable players, satellite companies and IPTV providers seem to be meeting that goal. Moreover, far from being victimized, IPTV providers are making significant inroads into the on-demand sphere. Cable providers, which in 1992 had a 92 percent share of paid television viewers, now hold only about 57 percent of the market, according to data cited by the Washington Post.

But before making any decrees about how on-demand downloads should count in any data metering scenario, regulators must consider that cable companies and IPTV providers have selected different platforms for programming delivery. Each platform has its own set of costs and trade-offs which are not functionally interchangeable.

Cable TV companies have traditionally separated TV delivery from their Internet service. Cable pay-per-view is accessed and delivered via the set-top box through an interface that can exploit inherent set-top box capabilities. Cable companies can use the set-top box interface to provide advertising, promotions, trailers and other information aimed at encouraging a sale.

IPTV is set up as a broadband application delivered via cable modem. The user interface is generally loaded onto TVs and game consoles per agreement with device manufacturers. But compared to cable box counterparts, these interfaces are simpler and scaled down.  

The nature of the delivery platform changes the cost equation for a company like Netflix. I'll admit some more research can be done here, but the Netflix cost-model is closer to client-server than the transmission-distribution model the cable companies use. Netflix doesn't need to maintain head-ends for satellite signal reception, and fleets of trucks to maintain physical plant.  

From the supply side, programmers see cable companies and over-the-top providers as two different distribution channels. The fee structure Comcast pays Disney, Viacom and Fox for programming is vastly different than what Netflix's. Licensing rules are different. It's one reason cable companies get pay-per-view rights to film releases within a few months of their theatrical release, or TV episodes the night after they air, while companies like Netflix might have to wait a year. For consumers, the trade-off comes in cost. Generally a recent film release costs $5 to $10 for pay-per-view. Netflix offers unlimited viewing for $8 a month. The difference reflects the cost of the respective platforms.  

Finally, IPTV companies also derive benefits from their decision to ride the Internet independent of a relationship with a cable company. As mentioned above, the cable company is responsible for maintaining its facilities, on which IPTV depends for delivery. The ongoing development of cable modems (e.g., the DOCSIS 3.0 specification), funded by the cable industry, makes quality streaming of high-definition IPTV possible.

So that's why these demands for "fairness" from Netflix and other over-the-top provider ring hollow. Congress should see through this "beggar thy competitor" call for a mandate that forces cable companies to price their own pay-per-view in ways that artificially make IPTV more attractive. There's no evidence that cable companies are blocking service or otherwise interfering with consumer access to service. It's difficult to see how bowing to IPTV provider complaints, and essentially forcing the cable companies (and by extension cable company customers) to shoulder the cost of Netflix's business model trade-offs, would be fair to anyone.  

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Where Swing States Stand in Implementing “ObamaCare” Exchanges

This morning the U.S. Supreme court determined the Affordable Care Act (ACA), or “ObamaCare,” to be constitutional in National Federation of Independent Business v. Sebelius. The most widely discussed consequence of this ruling is that the federal government is allowed to require all Americans buy health insurance by 2014. One of the most significant aspects of this ruling for state governments is that the establishment of state-level health insurance exchanges will remain in place. Given other aspects of the ruling in regards to Medicaid, Rep. Phil Gingrey, R-Georgia, argues that more people will opt in to the exchanges to receive subsidized plans instead of receiving Medicaid, according to CNN.

State-level health insurance exchange implementation will come under increased scrutiny over the coming months following the ruling. This is especially true in swing states, which remain a focal point in the ongoing the Presidential campaign, especially because some states fought establishing exchanges until the Supreme Court ruled on the case.

Rather than reinvent the wheel, I’m going to excerpt research on where swing states stand in implementing the exchanges from an excellent Associated Press article published this morning. I determined the 11 swing, or toss up, states from Real Clear Politics’ electoral map. Information about the remaining 39 states is also detailed in the aforementioned Associated Press article.

State Electoral College Votes Number of Uninsured Percentage of Population Uninsured Progress of Implementation
Colorado 9 656,000 13 Colorado lawmakers passed legislation in 2011 to set up health insurance exchanges, and a commission is in the process of implementing them. The exchanges are set to start October 2013.
Florida 29 3,850,000 21 Republican Gov. Rick Scott ordered the state not to accept federal money for implementing the health care law after he took office last year. Florida has rejected or declined to pursue more than $106 million and has returned $4.5 million. The state has its own health insurance exchanges, mainly for small businesses but without an individual mandate. The state has not implemented an exchange that would meet the requirements of the federal law.
Iowa 6 366,000 12 The state does not have a law establishing a health insurance exchange, and Republican Gov. Terry Branstad has said Iowa will create a state-based exchange only if the law is upheld. The Republican House Majority leader says the state has already enacted several pieces of the law, including a website that helps residents find insurance, but the state has yet to comply with other requirements.
Michigan 16 1,270,000 13 The Department of Licensing and Regulatory Affairs has been working to set up a health insurance exchange but has had limited success because House Republicans refuse to let it use $9.8 million in federal planning dollars. Because of looming federal deadlines to have an exchange in place, state officials are planning for a state-run exchange while also talking to federal officials about a possible partnership on a federal exchange where the state handles just some responsibilities, such as customer service.
Missouri 10 835,000 14 Missouri received an initial planning grant but has not implemented a health insurance exchange because of opposition to it by some Republican state senators.
Nevada 6 563,000 21 The Nevada Legislature in 2011 passed a bill implementing the Silver State Health Insurance Exchange and creating a seven-member board to oversee it. Republican Gov. Brian Sandoval opposed the federal health care law as a candidate. He also allowed a private attorney appointed by former Gov. Jim Gibbons to continue representing Nevada in the lawsuit filed by more than two dozen states challenging the law. State officials estimate the Affordable Care Act would cost Nevada $575 million in the first five years as more people become eligible for Medicaid.
New Hampshire 4 134,000 10 New Hampshire currently has laws that echo portions of the Affordable Care Act, such as allowing dependent unmarried residents to remain on their parent's health care insurance until age 26. Last year, state legislators passed laws that said residents cannot be required to obtain health insurance or be fined for not being covered. They also established a state oversight committee that must give its OK before the federal law is implemented. Democratic Gov. John Lynch's office said it has done some work on implementing aspects of the Affordable Care Act, but has put plans on hold until the U.S. Supreme Court makes its ruling.
North Carolina 15 1,570,000 17 Legislation aimed at prohibiting the mandate for individuals to buy health insurance was the first item introduced after Republicans took over control of by North Carolina's General Assembly last year. Lawmakers haven't been able to overcome Democratic Gov. Beverly Perdue's veto of their bill. But work to design health care exchanges has stalled since last summer.
Ohio 18 1,500,000 14 Ohio has not moved to create a health care exchange but is evaluating its options. It received a $1 million federal exchange planning grant in 2010. Republican Gov. John Kasich's administration has taken advantage of some parts of the new law to expand coordinated care and propose changes to Medicaid eligibility. Democrats have unsuccessfully pushed bills in the Legislature to set up a state-run exchange. But Lt. Gov. Mary Taylor, who is also Ohio's insurance director, frequently criticizes the overhaul and says it's premature to plan for an exchange without further clarification from the federal government.
Virginia 13 1,100,000 14 Virginia has expressed its intent to create a health care exchange, but Republican Gov. Bob McDonnell has not acted on recommendations made by a gubernatorial advisory council. Virginia filed its own lawsuit challenging the health care law, but lost in federal appeals court.
Wisconsin 10 526,000 9 Wisconsin has not begun setting up its health insurance exchange. Work on that was put on hold in January by Republican Gov. Scott Walker, who wanted to await the Supreme Court's decision.

Source: Where states stand on implementing health care law, Associated Press, June 28, 2012. http://hosted.ap.org/dynamic/stories/U/US_HEALTH_CARE_STATES_GLANCE.

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COPPA, Facebook, and Users Under 13

My latest commentary at Reason.org is up, revisiting the online age verification and the related controversy over Facebook's suggestion about allowing children under 13 to sign-up, perhaps on a partitioned site created especially for "'tweens." 

As I write in the commentary, The Children Online Privacy Protection Act (COPPA) sets out specific rules and regulations about how websites can gather and use information about children, with the threat of legal penalties behind them. Facebook, for one, finds these rules so cumbersome that, under its terms of service, children under 13 are not permitted to sign up. If it determines that a user is under 13, Facebook will delete the page. Furthermore, if the Federal Trade Commission determines Facebook is not doing enough to enforce its policy, the company may face considerable fines.

The trouble is, there really is no effective way of verifying age online. It doesn't help Facebook that a recent report by a team lead by danah boyd, senior researcher at Microsoft and a research assistant director in the Media, Culture and Communication Department at New York University, estimates that 7.5 million Facebook users are under 13, despite its terms of use. At the same time, it doesn't help the FTC's case that the same research found that 55 percent of parents of 12-year-olds know their children have Facebook accounts and that 70 percent of those kids had assistance from a parent in setting up their page. (Boyd discusses her research in this Surprisingly Free podcast from the Mercatus Center.)

To gain some clarity, let's remember that COPPA is aimed at privacy protection. Its motivations stem from concerns over corporate marketing to children, as well as child predation and cyberbullying, which all rank as parental hot buttons when it comes to their kids' activities online. While the age verification law may have been a response to these concerns, it must also be weighed against the fact that many parents are actively helping their tweens get online. Overall it points to the reality that parents still consider themselves the best and most effective filter for monitoring children's on-line habits.

It's time for lawmakers to admit the ineffectiveness of online age restriction. Social networks are virtual meeting places, just like any real-word public place where kids and adults congregate in groups, be it a shopping mall or public park. By and large, we expect teens and tweens on their own will be safe in these venues, although we do educate them to identify and counteract potential threats. So it must be the case on-line. Arbitrary federal law cannot be a substitute for parental involvement supported by schools, camps and other awareness programs at the local level. 

Read the full piece here.


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What Happened in Stockton?

Last night the Stockton, California City Council voted 6-1 to adopt a spending plan for operating under bankruptcy protection, and to file a motion with the courts to share information from the confidential mediation. With almost 300,000 residents, Stockton is the largest city to file for bankruptcy in U.S. history.

In February 2012 Stockton voted to enter bankrupcty mediation. Policymakers negotiated with the city's creditors for months starting in late March 2012 and ultimately failed to prevent the filing. Negotiations were in compliance with AB 506, a new California law requiring municipalities file for reorganization of debt, and Stockton was the first city to file for use the law since its passage. Negotiations may not have been a waste of time though because they may help the city avoid a string of lawsuits, according to the Los Angeles Times, which is what happened after Vallejo, California’s filing in 2008.

While high profile stories like this signal blood in the water for narrative-hungry national media outlets, think tanks and pundits, there are often layers of complexity. So, what happened in Stockton? And is it happening anywhere else?

The most important takeaway right now is that no, Stockton’s decision to file bankruptcy is not necessarily a harbinger of things to come. The city’s financial situation is unique and does not reflect the financial standing of a significant number of municipalities in the U.S. That being said, there are relevant themes that policymakers and investors should recognize.

California Common Sense issued the definitive report on Stockton's financial situation entitled, "How Stockton Went Bust: A California City's Decade of Policies and the Financial Crisis that Followed." The report details the three most significant factors, which are distinct but interrelated, contributing to Stockton’s bankruptcy.

1. The housing and financial collapses.

The housing bust decimated Stockton’s housing prices, and so went the city’s property tax (and related) revenues. Housing prices plunged from nearly $400,000 in median home prices in 2006, down to $110,000 in 2009 (where median prices were in 2000 before the bubble.) Meanwhile the city has the second highest rate of foreclosures in the country. Revenues from related areas, such as: sales taxes, utility user’s taxes and housing permit fees also plunged.

The city burned through emergency cash funds and took efforts to rein in spending that weren’t enough. For example, they issued a hiring freeze for open positions in May 2008 and cut the general fund by $90 million in the last three years. Despite those efforts they continued to run budget deficits.

2. Excessive optimism and unsustainable compensation promises.

City policymakers appear to have mistaken the real estate bubble for real growth. (The Los Angeles Times reports that state mediation law requires assigning blame in cases of bankruptcy, which will determine whether this was an honest mistake or if there was corruption at play.) This reported optimism led to breakneck pace spending on various redevelopment initiatives. The city sold $129 million in bonds to fund rehabilitating the Philmathean building’s rehabilitation, the downtown marina and waterfront’s development and the Hotel Stockton’s renovation.

California Common Sense found that the city also renegotiated generous compensation for city employees, when employee services compose approximately three fourths of the city’s almost $200 million budget. For example, city employees receive a guaranteed salary increase from 2.5-7%, depending on General Fund revenue growth—even if the General Fund shrinks from the previous year. Meanwhile employee healthcare costs are also rising, growing at a rate of almost 10 percent over the past decade. Other post-employment benefits (OPEB), including pensions, are also rising steadily. The city now faces more than $800 million in unfunded liabilities for pensions and OPEB.

3. An ill-timed bond offering.

In 2007 the city sought to lower it’s pension costs, so policymakers undertook a bond offering to lower interest payments on roughly $125 million of its pension obligation. The proceeds of these pension obligation bonds were given to the California Public Employees’ Retirement System (CalPERS) to manage. California Common Sense found that CalPERS was overexposed to the real estate and stock markets, so it was unable to meet the expected returns. The original pension obligation bond money is now worth under $100 million while the city owes $248 million.

Increased debt payments, combined with multiple years of negative net annual activity, ultimately pushed Stockton over the edge. While bankruptcy will sort out the details of the city’s restructuring, it’s safe to say that employee services (namely police and fire) will be at-risk throughout the process. Public safety represents 80%, or almost $160 million, of the city’s nearly $200 million annual budget. Stay tuned to Reason Foundation’s Out of Control Policy Blog for more on Stockton in the days and weeks ahead.

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Indy Parking Privatization Continues to Deliver Technological Innovation, Consumer Benefits

Indianapolis' 50-year lease of its downtown parking meter operation to a private concessionaire (ParkIndy, a Xerox-led venture) in 2010 is a model example of privatization done well, a public-private partnership that continues to bring dividends for the city and taxpayers. There's more evidence today. According to a ParkIndy press release, the concessionaire will be rolling out hundreds of additional street sensors next week that interface with ParkIndy's wayfinding iPhone/Android app to help guide commuters to open parking spots:

Monday, July 2, will become another noteworthy date in the transformation of the city’s parking system when an additional 811 sensors will be activated to identify vacant parking spaces at meters.

Coupled with 557 already operational sensors, this rollout will bring the total number of parking spaces served by sensors downtown and in Broad Ripple to 1,368. The sensors are embedded in the roadway in each parking space and detect the presence of a car. That information is communicated to motorists to help them more easily find parking.

“This move is another step toward providing Indianapolis the most advanced parking system in the United States,” said Adam Isen, program manager for ParkIndy, the organization modernizing metered parking in Indianapolis.

Motorists can download a free app called ParkerTM for their iPhone or Android device. The app provides real-time information to guide customers to open and available parking spaces. Icons note when more than four spaces are available (plenty of parking available), more than two spaces are available (some parking) or less than two spaces are available (limited parking). ParkerTM updates automatically when a car is parked or leaves a space. An optional voice feature provides an audible queue when available parking is nearby.

The app also provides information about parking space time limits, pricing, and meter paying options, including links to pay by phone using Parkmobile. A “Park Now” button allows the driver to note where his or her car is parked -- and later find guidance back to the car if needed, set reminders, take a picture of a car, and add notes about the location.

So not only were Indianapolis officials able to transfer a non-core government enterprise to a private partner better equipped to operate it, and not only will the city benefit from $300-600 million in enhanced parking revenues over the next five decades, but it has also ensured that commuters will benefit from dramatically enhanced customer convenience via system modernization and technology deployments paid for and installed by the concessionaire. In short, the city and its commuters are getting a vastly better—cutting-edge, in many ways—parking system. Contrast this with the many cities that still have coin-based meters untethered to wayfinding and other technological innovations that make commuting easier and reduce urban traffic congestion.

But this isn't all. I found out two more interesting developments this week from ParkIndy staff.

The first involves the deployment of credit card technology, a boon to parking customers. By the end of 2011, ParkIndy had ensured that all 3,650 metered parking spaces in Indianapolis could be paid by credit card, introducing a mix of credit card accepting technology via new single space meters, pay boxes, and pay by phone options. These days, credit cards are a far more convenient payment option for motorists who don't have or use coins. And customers apparently like the improved convenience. In April 2011, credit cards accounted for 37% of the dollars collected at new meters in Indy. As of last month, however, the percentage of dollars paid by credit card ballooned to 63%. It will be interesting to see if this trend continues, but I would expect it would, given the rapid proliferation of mobile technologies and commuters' growing awareness of ParkIndy's apps and their powerful functionality.

Second, when ParkIndy began installing pay boxes—centrally located meters covering many or all of the spaces within a given block, instead of the one-meter-per-space configuration—in the city last year, they were careful not to remove all of the existing single-space meter poles. In fact, they left more than half of them. Meter poles are very popular among bicyclists who use them to lock their bike to in a pinch. But ParkIndy has gone even further by donating 50 bike racks to INDYCOG, an Indianapolis nonprofit that promotes bicycle use and safety, and installing them this week on existing parking meter poles. Now, even if you're not driving or parking, securing your bike in Indianapolis got even easier because of the parking concession.

I realize it's still early in a 50-year deal, but it's stories like these that reinforce my belief that this privatization seems to be a major win-win-win for the city, the concessionaire and commuters and should serve as a model for other cities seeking to modernize the operations of their parking assets. But don't just take my word for it. For a view from the city's perspective, see my brand new Innovators in Action interview with Michael Huber, Indianapolis' Deputy Mayor for Economic Development, posted earlier today.

For more on Indy's innovative parking concession, see our recent articles here, here, here, here and here.

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Eno Paper Examines Potential Transportation Funding Option

Earlier this month the Eno Center for Transportation released the inaugural William P. Eno paper written by Nicolas Norbage an assistant Transportation Researcher at Texas A&M  University. The paper is available on the Eno website. The paper, “Better Use of Public Dollars: Economic Impact Analysis in Transportation Decision Making” uses a case study approach to examine four states that use Economic Analysis to choose future infrastructure improvements. The in-depth study examines how the federal government and these states have been successful in using more analytical approaches. The study consists of three time periods: Pre-1990, the TEA bills, and the period after SAFETEA-LU passed. 

Several previous federal programs including New Starts and TIFIA have used economic analysis. However the federal program as a whole still lacks quantitative metrics. Most states also lack such metrics. 

By using economic analysis these states have taken one major step forward in developing an analytic transportation policy. Kansas used a TREDIS model to determine economic impact considerations over a 30-year period for regions and the state as a whole. Indiana used cost-benefit analysis and the REMI economic model to inform public information and decision-making at both the corridor and regional level for the next 30 years. Michigan used the MI best travel model and REMI for public information purposes at both the regional and statewide level for 20 years. Finally, North Carolina uses TREDIS software to inform decision-making at the Metropolitan Planning Organization (MPO) and Rural Public Organization (RPO) level for the next 20 years.

The paper makes several policy recommendations. The first is to develop a transparent, standardized economic determination process for existing discretionary programs. The second is to expand discretionary programs. The third is to enable USDOT to guide states in developing a transparent determination process. The final recommendation is to improve state decision-making.

While these goals would improve the process, the trick is in their implementation. My version of a transparent economic process is not Ray LaHood’s version. While he touts the discretionary nature of the TIGER Grants, I see a political patronage system. Norbage accurately documents some of the problems with the TIGER program. Expanding discretionary programs only works if the project has solid metrics. Many policymakers would not favor expansion of the TIGER program. Many state DOT’s may have problems with the third recommendation. Some states will be suspicious of a program where the federal government is the lead agency coordinating decisions. Some states may have better analytical processes than the federal government. Would these states be allowed to keep their processes or become subservient to a federal viewpoint? Finally, how will states improve the decision making process? It could be through suggested metrics; most states would support that approach. It could also be through mandates. Will it require federal resources and will there be firm guidelines for spending those resources? 

Another issue is whether these states accurately represent the country as a whole. Indiana, Kansas, and North Carolina lack large metro areas with more than 3,000,000 people. Michigan, which has been particularly hard hit by economic challenges over the past ten years, is desperate to find a sustainable funding source and approach decision making differently from other big states. In states such as California, Georgia, and New York with one or more large population centers, arguments occur between urban and rural constituents concerning the best method for dispersing transportation monies throughout the state. Divvying up funds between Indianapolis and other smaller Indiana cities may not be as challenging as divvying up money in California between L.A., S.F., S.D. and the rural areas. 

There have been numerous studies suggesting how to develop a better quantitative approach towards transportation. This study raises excellent points and examines four of the most innovative state DOTs in the country. These DOTs provide good templates for other states. Policymakers now need to take the next steps in determining whether these results are transferrable to other state DOTs, how to overcome politics in implementing these recommendations, and the details in any metrics process. 

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Yes, Anyone Can Be a Reporter

In his syndicated column yesterday, Leonard Pitts, Jr. bemoaned the decision by the New Orleans Times-Picayune to cut back its print edition to three days a week, and attacked the sentiment, most recently expressed by former Alaska Gov. Sarah Palin, who might herself been quoting Matt Drudge, that the Internet allows "every citizen to be a reporter and take on the powers that be."

Pitts immediately attacks the comment on the basis of its source, Palin. Then he wanders further from the point by conjuring the truly unpleasant conditions under which reporters, Picayune staffers no doubt among them, labored to ensure news got out in the weeks following Hurricane Katrina's devastation of the Gulf Coast.

One night I had the distinct honor of sleeping in an RV in the parking lot of the Sun Herald in Gulfport, Miss., part of an army of journalists who had descended on the beleaguered city to help its reporters get this story told. The locals wore donated clothes and subsisted on snack food. They worked from a broken building in a broken city where the rotten egg smell of natural gas lingered in the air and homes had been reduced to debris fields, to produce their paper. Shattered, cut off from the rest of the world, people in the Biloxi-Gulfport region received those jerry-rigged newspapers, those bulletins from the outside world, the way a starving man receives food.

Yet nothing in this rather self-important prose tells us what's so irreplaceable about printed newspapers as a platform for news delivery. Instead, we get a straw man.

Palin's sin-and she is hardly alone in this-is to consider professional reporters easily replaceable by so-called citizen journalists like Drudge. Granted, bloggers occasionally originate news. Still, I can't envision Matt Drudge standing his ground in a flooded city to report and inform.

One can say the same thing about Bill Maher, Keith Olbermann or Wolf Blitzer. Yet, come the next disaster, there's no reason not to expect the same dedication from a handful of individuals who are driven to place themselves in the middle of an adverse, if not outright dangerous, event and document what is happening. Only this time they have the cheap video cameras, battery operated laptops and cellphones with wireless Internet connections. The news will get out.

What Pitts actually is lamenting is the end of the monopoly of institutional media. Big media won't go away, and will certainly carve out a large space on the Internet, but it's losing the ability to define news and confer legitimacy on a newsgathering enterprise. Pitts equates the loss of newspapers with the loss of skilled reporting. This fallacy needs to be called out because it fuels the contention , voiced by FCC Chairman Julius Genachowski, Sen. John Kerry, and former Connecticut Gov. Jodi Rell, among other political leaders, that the government should prop up failing newspapers so they can compete against Internet news outlets. To his credit, Pitts never goes this far, but his arguments contain an unspoken invitation for others to do so.

At the end of his column Pitts says he doubts that "citizen journalists" have the credibility, knowledge or training of their newspaper or broadcast counterparts. Here, it helps to remember that we journalists did not truly join the professional class until the 1970s. Carl Bernstein, one-half of the reporting team that inspired a generation of j-school recruits, didn't finish college. Peter Jennings, perhaps the best Middle East TV correspondent of his time, was a high school drop-out. What they did have, was that unique talent to sniff out news and follow a story where it led them.

My first boss at my first salaried reporting job, as old school a newspaper editor you would find, would give job applicants a convoluted press release to rewrite. The aim was not to test copy editing, speed, grammar or style, but to see if his prospective staffer could pull out the actual lead. More than anything, he valued and appreciated a reporter's nose for news. To him this was the innate journalistic talent; everything else could be taught.

Newspaper companies don't define news or reporters. News is timely, topical, compelling and significant. A reporter is anyone who can mine a topic-from something sweeping as global economy trends to as parochial as local city government-and communicate information that meets this criteria. And, yes, anyone can be one. 


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"There's Always Next Year" for a Sound California Budget

As a long-suffering Chicago Cubs fan, one thing came to mind as I pondered the latest state budget that California legislators are in the process of finalizing: there's always next year. Each year Cubs fans get their hopes up that this will be the year that they break the Billy Goat Curse and end their long World Series drought, now up to 104 years. Alas, each year hopes are dashed (oftentimes early in the season) and fans are left to hope that next year things will be different.

It is much the same with the California budget. Every year taxpayers hope that this will be the year legislators and the governor will get their act together, act like adults, and address the fundamental, long-term problems that plague the state's budgeting process in an open and honest manner. And, just like Cubs fans, they are always disappointed as policymakers ignore the important issues, money is wasted on failed or useless pet programs, and the accounting gimmicks and overoptimistic revenue projections quickly unravel to reveal a substantial deficit (which is usually followed more proposals to increase taxes).

This is the subject of my most recent commentary. Below is an excerpt of that column.

While the usual special interests will bemoan supposedly severe budget cuts, as with the struggling European governments, claims of austerity are illusory. The budget passed on June 15 calls for $92.1 billion in (General Fund) spending, an increase of more than 6 percent over the current budget. This would be the biggest budget since the recession, eclipsed only by the 2006-07 and 2007-08 fiscal years at the height of the financial and housing bubbles.

The budget also estimates that General Fund revenues next year will total $94.4 billion, more than 10 percent higher than the $86.8 billion received this year. Keep in mind that the new budget bill assumes passage of Gov. Brown's tax increase proposal in the November election, and the resulting $8.5 billion in additional tax revenue. In other words, without the tax increase, revenues would be about $87 billion, basically the same as this past year. This is hardly a crisis—unless you continually spend more money than you have.

[. . .]

Yet, what has been the reaction of the legislature and the governor? They are planning to waste more money by spending over $2.8 billion this year (and untold tens of billions in future years) on a high-speed rail boondoggle that everyone and their mothers, from both sides of the political aisle, have criticized for its lack of feasibility, ridiculously optimistic assumptions, and poor management. In addition, the legislature has opted to punt on even the modest public pension reforms offered by Gov. Brown when the Senate refused to approve putting Brown's 12-point pension plan before voters on the November 2012 ballot. According to the Stanford Institute for Economic Policy Research, CalPERS faces an unfunded liability of $170 billion, while CalSTRS has a $104 billion deficit. Local governments are looking at an additional $136 billion in unfunded liabilities. Moreover, according to the State Controller's Office, unfunded health-care benefits for retired state employees are an additional $62 billion.

Yet the legislature continues to put its head in the sand and hope the problem will go away. Perhaps it is expecting to tax the state to prosperity, despite the fact that this never has worked in the past and never will work. Even Democratic State Treasurer Bill Lockyer, who has indicated his support for Brown's tax increase, is growing wary of the increasing tax burden being placed on the state's richest and most productive residents. Addressing the effects of additional tax increases, particularly on the wealthy, Lockyer noted: "The potential for out-of-state migration is substantial enough that we have to be very sensitive about those rates."

At least California residents have a power that Cubs fans do not: they can change the players and even the rules of the game. If lawmakers do not start taking their responsibility to produce an honest and responsible budget more seriously, they may find that the taxpayers will make more and more of those decisions for them.

See the full article here.

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Atlanta Needs a Second Airport

Houston recently approved a major airport expansion for Hobby Airport that will give travelers more choices. Meanwhile Gwinnett County just rejected a plan that would've given the Atlanta area a second airport. My column in the Atlanta Journal Constitution examines why Gwinnett madea mistake and why Atlanta needs another airport:


Atlanta residents, by contrast, remain stuck with a monopoly airport, situated on the far south side of a sprawling metro area of 4.5 million people that is plagued by some of the nation’s worst traffic congestion.

Many metro Atlanta air travelers, especially those in the northern suburbs, would welcome the opportunity to have a second airport, even one that serves mostly short- and medium-haul routes to cities in the region.

This prospect was recently available in Gwinnett County. New York-based Propeller Investments offered to buy Briscoe Field and upgrade it to attract scheduled airline service in planes as large as 737s.

As usually happens when airport expansion is proposed, some airport neighbors organized to lobby the county Board of Commissioners to turn down the proposal. Unfortunately for Atlanta’s travelers, that’s exactly what county commissioners did.

Just as happened in Houston, the area’s dominant airline — in this case, Delta — opposed the proposal. The Atlanta Journal-Constitution reported on May 23, “Delta, which is reluctant to split its operations between Hartsfield-Jackson International Airport and Briscoe, has quietly lobbied against the plan.”

Had the airport expansion been approved, Propeller Investments would have added a 10-gate terminal and improved the main runway to handle 737s. With Hartsfield-Jackson served by nearly all major U.S. airlines (and many non-U.S. carriers), would any airlines have sought to provide flights at Briscoe?

Yes. Three aggressive low-cost carriers do not yet offer service in Atlanta: Allegiant, JetBlue and Virgin America. In addition, Delta basically admitted that if the Briscoe plan had gone forward, it would have “reluctantly” added service there, too.

Kinton Aviation Consulting has pointed out that when secondary airports near Boston offered viable alternatives to capacity-constrained Logan Airport, “economic development increase[d] across the whole region.” And, “… the greater Boston area saw more destinations served with direct flights, competitive pricing, and an ease in congestion. We believe the same thing would happen in Atlanta.”

Eleven large U.S. metro areas have populations in excess of 4 million; only two of them lack competing airports today: Atlanta (4.5 million) and Philadelphia (5.4 million). Cities similar in size to Atlanta that have two or more airports include: Boston (4.2 million residents), Houston (4.9 million), and Washington, D.C. (4.6 million).

The failure to expand Briscoe Field is a major setback to the region’s growth.

Full column here.


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Sandy Springs Continues to Prove that Privatization Works

Yesterday's New York Times profiled the city government of Sandy Springs, Georgia, which incorporated nearly seven years ago under a model where the vast majority of non-safety services are provided through public-private partnerships (PPPs) with private sector service providers. Here's a snippet from the beginning:

If your image of a city hall involves a venerable building, some Roman pillars and lots of public employees, the version offered by this Atlanta suburb of 94,000 residents is a bit of a shocker.

The entire operation is housed in a generic, one-story industrial park, along with a restaurant and a gym. And though the place has a large staff, none are on the public payroll. O.K., seven are, including the city manager. But unless you chance into one of them, the people you meet here work for private companies through a variety of contracts.

Applying for a business license? Speak to a woman with Severn Trent, a multinational company based in Coventry, England. Want to build a new deck on your house? Chat with an employee of Collaborative Consulting, based in Burlington, Mass. Need a word with people who oversee trash collection? That would be the URS Corporation, based in San Francisco. […]

With public employee unions under attack in states like Wisconsin, and with cities across the country looking to trim budgets, behold a town built almost entirely on a series of public-private partnerships — a system that leaders around here refer to, simply, as “the model.”

Cities have dabbled for years with privatization, but few have taken the idea as far as Sandy Springs. Since the day it incorporated, Dec. 1, 2005, it has handed off to private enterprise just about every service that can be evaluated through metrics and inked into a contract.

To grasp how unusual this is, consider what Sandy Springs does not have. It does not have a fleet of vehicles for road repair, or a yard where the fleet is parked. It does not have long-term debt. It has no pension obligations. It does not have a city hall, for that matter, if your idea of a city hall is a building owned by the city. Sandy Springs rents.

Overall, the NYT gave the topic a fair treatment, IMO, as they noted the biggest takeaways from Sandy Springs' bold contract experiment:

  • Because it started from scratch and avoided the defined benefit pension quicksand from the beginning, the city has no long term liabilities, neither debt nor unfunded liabilities for pensions and retiree health benefits (unlike many of their peers).
  • Services are greatly improved from the beginning level, and citizens (over 90% of whom voted for the original incorporation) generally remain very pleased with their lean-but-not-so-mean government.
  • Despite claims that Sandy Springs "abandoned" Fulton County, the city still sends nearly $200 million in annual property tax revenue to the County today. What Sandy Springs was really after with incorporation was more local control over their own destiny, particularly with regard to service delivery and land use decision making.

There were a few spots in the article where more context might have been useful, however. First, the article noted that, "The town does have a conventional police force and fire department, in part because the insurance premiums for a private company providing those services were deemed prohibitively high." However, it's my understanding that a far bigger factor was the provision in Georgia's state constitution requiring cities to use public employees for police and fire services. In Sandy Springs' case, the new city started by contracting those services out to Fulton County, until the city later created its own (public sector) police force. So when the NYT notes that Sandy Springs has less than 10 city employees on its payroll, they are referring to the non-public-safety side of operations.

Also, the article suggests that other cities would have a difficult time replicating the "Sandy Springs model," but for the wrong reason. The article suggests that its wealth gives Sandy Springs an advantage over other cities, but I don't follow the logic. Sandy Springs is staying lean and mean through smart contracting, which is something that cities of all levels of affluence can task their professionals with undertaking if they are so motivated. The real reason that it would be hard for "traditional" cities to adopt the Sandy Springs model is simply because it's hard to unwind government bureaucracies once they're started and special interests—including public employee unions that aim for self-preservation—have become entrenched. These are things that help to calcify governments, which Sandy Springs was able to avoid by starting from a blank sheet of paper (and by not getting caught in pension, benefits and debt traps).

Sandy Springs continues to demonstrate how far PPPs can go in government. Private contractors provide nearly all of the non-safety services and systems that citizens interact with on a daily basis, and citizens in Sandy Springs have been well-served and appear to be pleased overall with their local government. For "traditional" cities, the takeaway should be: there are FAR more opportunities to explore PPPs than are currently being considered. Some cities get bogged down in piecemeal political battles over outsourcing one or two services—solid waste, vehicle fleet maintenance, library operations, etc.—when Sandy Springs demonstrates that cities can be thinking much bigger, on the scale of entire departments, agencies, programs, etc. My recent interview with Carrollton, Texas City Manager Leonard Martin offers a perspective on what it takes to create a culture of competition in city government from a "traditional" city perspective, with many themes discussed that are relevant to the Sandy Springs/contracting discussion.

For more on Sandy Springs, see founding father Oliver Porter's 2009 Reason.org article telling the story of incorporating Sandy Springs and establishing the public-private partnership service delivery model, as well as offering thoughts on lessons applicable to other cities. Porter starts the article with a thought experiment:

Imagine starting a new city of over 90,000 people with only two employees. We did it. Imagine improved employee attitude, less cost, more responsive government, decreased long-term liabilities and happier citizens. We did it.

Read the whole thing here for an insider's take on how the Sandy Springs story went down and why it matters to other cities. And my colleagues at Reason.tv produced a video on the Sandy Springs story in 2010, available below:

Reason Foundation has been covering Sandy Springs since before its incorporation, so there's plenty more. Our Annual Privatization Report has included an annual update on Sandy Springs and its contract city emulators in Georgia for several years now. The most recent two are available here and here, and older archives are available here.

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New York City's Sheridan Expressway Vital

My friends at Streetsblog are displeased that the Bloomberg administration has decided not to tear down the Sheridan Expressway. 

According to Streetsblog:

At a meeting with South Bronx community groups on May 10, city officials unexpectedly announced that they would no longer consider the teardown option, according to advocates who attended.

Advocates today demanded that the city put the teardown option back on the table. “The city’s study so far falls extremely short of the purpose of this grant and it cannot prematurely remove options from the table before completing the comprehensive analysis,” said Jessica Clemente, executive director of We Stay/Nos Quedamos. “Reconsidering the option to remove the Sheridan Expressway will help the city ensure that the Hunts Point market — and local economy — continues to thrive and South Bronx residents can enjoy a safer, more vibrant community.”

The Department of City Planning has not responded to Streetsblog’s inquiries about the reasons behind its decision, why other factors besides traffic were apparently not considered, and whether the Hunts Point market negotiations influenced the city’s rejection of the teardown. 

U.S. Representative Jose Serrano who helped land a $1.5 million federal TIGER grant to study removing the highway was also displeased. 

“It destroys their dreams,” he said, referring to members of the community who worked for more than a decade on the project. “It destroys the study. It destroys any semblance of doing it right by immediately taking this option off the table.”

Before project supporters take their picket signs to city hall, let’s examine the facts. 

The Sheridan Expressway is not the most attractive highway in the nation. The 1.25 mile road connects the Bruckner and Cross Bronx Expressways. Was this the best place to build a highway? Could other alternative roads have handled the traffic? Did Robert Moses who built the highway conduct cost-benefit analysis. No, probably and definitely no. Similar to many urban expressways across the country, the highway was built through a minority neighborhood with little political influence. Constructing highways through urban neighborhoods is not good transportation policy. 

However, New York has this existing highway network. Before we tear down an existing highway, we need to consider its use. There are more negatives than positives involved in tearing down the Sheridan. The New York City DOT explained its decision on the same day that Streetsblog published its article:

Analysis for the study showed that complete removal of the Sheridan would result in significant impacts. Namely:

Trucks would be re-routed onto local streets, where schools and many other activities are occurring, throughout the day; 

New routes for trucks, such as East Tremont, already have significant traffic congestion during the morning rush hour;

Trucks would need additional time for trips to the Hunts Point Markets; and

Cars being re-routed to the Bronx River Parkway and other parallel routes, and causing significant backup where the Parkway meets the Bruckner Boulevard, particularly during the morning rush hour.

Taken together, these impacts amount to a fatal flaw for the removal scenario, and it has been removed for further consideration. The two remaining scenarios, to retain and to modify the Expressway, will continue to undergo further analysis. The study will be completed in early 2013.”

It sounds like a logical analysis to me. Streetsblog’s claims might have more credibility if New York City had never torn down an expressway. When the Westside Expressway south of 57th street was decaying, local residents successfully prevented the city from rehabilitating or replacing the highway. While the parks that replaced the highway are certainly more beautiful than the concrete lanes, the lack of an expressway makes getting into Midtown Manhattan considerably more challenging, especially for freight traffic. 

And freight transportation is important. Low freight costs keep consumer prices low. Everything from tomatoes to coats to brooms arrives by truck. The U.S. has built a successful economy in part by having some of the lowest transportation costs in the world. One reason New York City prices are so high is that transport costs are high. While the 1.25 mile expressway may have less traffic than other highways, it is needed during rush-hours so other area roads do not become even more congested. 

Streetsblog has other complaints. According to the website the New York Department of Transportation fails to use analysis of the surrounding area and the options proposed during the community visioning process. NYCDOT also neglected to conduct a comprehensive cost-benefit analysis of different options. 

It appears that the city department of transportation did both. The surrounding area has a large amount of industrial land use. While some of the adjacent land is residential, the area has far more commercial and industrial land than other areas of the city. It is crucial to maintain good freight routes somewhere. Second, it is a very unusual cost-benefit analysis that recommends tearing down a highway and replacing it with a mixed-use development and parks. Mixed-use developments only generate tax dollars if they succeed. And many times they do not. While parks are more attractive, highways generate far more commerce. 

This is not the first time a government has proposed demolishing the Sheridan. In 2010 the state DOT also recommended against a teardown. Project supporter shrieks and Rep. Serrano’s connections with President Obama helped the project get a second look.

And even if the ill-advised teardown were to proceed, I doubt that a mixed-use development is the best solution for this area. Jobs created by the project need to provide a skills match to residents living in the area. Many successful mixed-use developments including the flagship Atlantic Station in Atlanta failed to provide this match. Existing residents are typically unable to afford to live in new mixed-use developments because of the high home prices. A successful mixed-use development may also use eminent domain to tear down existing housing and raise other home prices to the extent that current residents can no longer afford to live in the area. I fail to see how either of these scenarios help area residents at all. The project seems designed to displace existing residents with higher disposable income individuals.

The Sheridan Expressway is a classic example of who has the power? Is it the few connected civic leaders who live in the immediate area or New York City residents as a whole? Area leaders do not see a large personal gain from the highway. They see an ugly stretch of highway that they believe should be a mixed-use development and a park. City residents as a whole benefit from the expressway, the lower cost of transportation and reduced congestion in other areas of the city. Whether a small area or the city as a whole should win the power struggle should be based on metrics not the strength of lobbying by outside interest groups. I am not sure that was the case with the Westside Expressway Teardown. But in this case it appears that both NYSDOT and NYCDOT made the right decision.

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