When Missouri lawmakers evaluate legislation, they rely on a nonpartisan staff to tell them how much money any particular bill could cost state government.
In many cases, those legislative researchers rely on the expertise of economics professors at the University of Missouri’s Economic & Policy Analysis Research Center, or EPARC.
On bills altering the state’s income tax code — including the high-profile tax cut battles that have raged over the last few years in Missouri — EPARC helps determine the legislation’s price tag.
But the center’s role in that process is beginning to raise eyebrows.
Many of the economists working for EPARC, including its director, have financial ties to organizations with strong ideological leanings — most notably a group founded by conservative megadonor Rex Sinquefield.
That has led some who have historically opposed Sinquefield’s tax-slashing political agenda to wonder whether the information that ends up in the hands of legislators is as objective as it’s advertised.
“The fiscal note is designed to help legislators see the potential impact of their actions,” said Otto Fajen, a lobbyist for the Missouri National Education Association who previously worked for 11 years in the nonpartisan research division of the Missouri Senate.
“If EPARC is going to be a part of that, legislators should be confident that the information is unbiased. When you have a whole web of connections to stakeholders on these issues within EPARC, it’s not so clear you can have the comfort level.”
Joseph Haslag, the center’s director and a professor of economics at MU’s Columbia campus, dismissed suggestions that his organization’s work could be biased.
EPARC relies on a model built solely to calculate how changes in tax law would affect how much Missourians would pay the state. Personal judgment or subjectivity, he said, has no role in the process.
“This is a mechanical exercise that EPARC does,” Haslag said. “I don’t know how any of my judgment could show up in these things at all. There’s never been a personal component to any of these analyses.”
Critics counter that the group’s projections rely on the assumptions that analysts make — in both building the model and interpreting legislation in question.
“Can we have trust and confidence in the analysts’ judgment regarding the data they use and the assumptions they make knowing that outside groups have paid them to work on the same issues they develop fiscal impact estimates for?” asked Brian Schmidt, former executive director of the Missouri Legislature’s Joint Committee on Tax Policy, who now runs his own policy research firm.
EPARC was founded in 1972 by Ed Robb, a former MU economics professor and Republican state representative from Columbia. It uses tax data from the Internal Revenue Service and the Missouri Department of Revenue to create a wide range of data and publications available to the public and state budget planners.
If it is asked to provide data for a fiscal note, Haslag said, the income tax changes envisioned in the proposed legislation are fed into a program that calculates what taxpayers who filed last year would have paid if the new law had been in place.
“It’s the model that generates the fiscal note for the state. There’s nothing that I’m doing,” said Haslag, who has been involved with EPARC for around 10 years. “The model gets updated every year, but it’s the same structure.”
But there is no consensus in the economics profession about what the right model is to make such estimates, said Gerald Epstein, an economics professor at the University of Massachusetts, Amherst.
“Building one of these models is not an objective process,” Epstein said. “If you build the model differently, it’ll produce a different set of results.”
Even EPARC’s critics concede calculating the fiscal impact of legislation is not an exact science. But they quibble with not just the model the organization uses but also the data EPARC chooses to feed into it.
Take for instance the tax cut legislation from two years ago that lawmakers passed but was vetoed by Gov. Jay Nixon. The Missouri Department of Revenue and EPARC provided differing interpretations of a newly defined term, “business income.” As a result, the Department of Revenue estimated the tax cut was more expensive than EPARC.
Ultimately, legislative researchers went with EPARC’s numbers. The director of legislative research did not respond to a request for comment.
For critics, the fear is that outside influence could creep into legislative analysis, robbing lawmakers of the unbiased information they need to fairly judge a policy change.
Much of those concerns center on ties to Sinquefield.
He is by far the largest political donor in Missouri, doling out $37 million in campaign contributions to candidates and committees since 2005. Those deep pockets help fund the push for his pet causes — eliminating the Missouri income tax and reworking the state’s education system.
In addition to his work with EPARC and MU, Haslag has regularly received a salary from the Show-Me Institute, a free-market think tank founded and funded by Sinquefield.
The Show-Me Institute paid Haslag annual salaries of $120,000, $119,500 and $90,000 from 2008 to 2010 and $60,000 in consulting fees in 2012. He also received $30,000 in 2005 from the Sinquefield Charitable Foundation. Other EPARC researchers also have ties to the Show-Me Institute.
EPARC has provided analysis for fiscal notes on numerous tax bills in recent years that were supported by Sinquefield and his constellation of affiliated organizations.
In 2012, Haslag also contracted to do research for the Missouri Petroleum Marketers and Convenience Store Association, which was opposing a higher tax on tobacco products, and Missourians for Equal Credit Opportunity, a political action committee opposing stricter regulations on payday lenders.
Another EPARC research fellow has received $88,500 in grants from the Koch Foundation since 2009. A pair of EPARC staffers have received six-figure grants from the Laura and John Arnold Foundation, a nonprofit founded by a former Enron executive that has drawn controversy in recent years over its funding of research into public pensions.
There’s no information about EPARC in the fiscal notes provided to legislators and the public. To read biographies of EPARC staff and see any affiliations they have or grants they may have received, one must navigate to each economist’s personal MU website.
“These are economists whose reports have kind of an official status,” Epstein said. “There needs to be a lot more disclosure right up front about whom all is involved and what their associations are so people know the context in which these estimates are being made.”
Potential financial conflicts of interest are the “most messy issue in research ethics,” said Kenneth Pimple, who teaches and writes about research ethics at Indiana University’s Poynter Center for the Study of Ethics and American Institutions.
Chemists receive grants from pharmaceutical companies. Agriculture researchers get funding from agribusinesses corporations. Economists often get research grants from organizations that share the economists’ ideological viewpoint.
“It all turns on bias, but most often we can identify apparent conflicts of interest, but we can only guess or surmise as to whether anyone actually is biased, let alone biased by the money,” Pimple said.
Researchers must seek funding from a wide range of groups, especially in recent years with decreasing support from the universities themselves, said Iowa State University economics professor David Swenson.
If EPARC “has reasonable methods for determining the fiscal consequences of proposed legislation that are reviewable and understandable and has a good track record of doing so,” he said, “then I would lean towards having confidence in the technicians that produce that information.”
Haslag said he would never try to hide any affiliations he has with organizations outside the university. And he would never alter his findings to fit the preferences of the entity providing funding for his research.
Funding, he said, does not color his conclusions.
“None of these places pay me enough to throw my professional reputation away,” he said. “I take pride in being an economics professor at the University of Missouri. Why would I sell my professional integrity for a job?”