Budgeting in a Crisis Tells Taxpayers a Lot

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When an unexpected crisis hits, it’s very important to watch the things that the people in charge prioritize.  In Tiverton, the Town Council is worried that the town won’t get the minimum payment of gambling revenue from the state:

The problem is this. Under Rhode Island General Law 42-61.2-7(g)(2), the state guarantees Tiverton at least $3 million in gambling revenue from the Twin River casino. The way the statute is written, we didn’t get the minimum payment the very first year, because the casino opened a few months into the fiscal year and was therefore not open “all of such state fiscal year.” The law repeats “all of such state fiscal year” for every year after that, stressing that “if in any state fiscal year either video-lottery games or table games are no longer offered at a facility in the town of Tiverton… then the state shall not be obligated” to pay the minimum.

Before our state faced the unusual threat of a pandemic, that language seemed intended to ensure that, just like the first partial year, the town would not get the minimum payment for a partial year of gambling if the casino were ever shut down for good — if games “are no longer offered at the facility in the town of Tiverton. Now, town officials are worried that the state will insist a couple months of COVID-19 closure means the games were not “offered” for the whole year and, they say, we’ve built the minimum payment into our budget.

The revealing part is that the council members, particularly Council President Patricia Hilton and John Edwards (the Fifth) are taking the opportunity to say “I told you so” about not using the casino money for regular operations.

But that only makes sense if the town uses it for things it wouldn’t otherwise have to buy.  Whether it’s going to capital expenses or operations, if the money is paying for things that have to be paid for, then it’s just part of the revenue.

Implicitly, what government officials who think this way are saying is that all new revenue should go on the government books, without offsetting taxes, so that government can keep as much money as possible.  These particular politicians are proving that this is their view because while all this is going on, they are ignoring the fact that the town is sitting on $4.5 million, which is about $3 million more than our charter requires in the reserves.  This is money the town taxed its residents but did not spend, and the fact that it is growing shows that, no, we didn’t build all of the casino revenue into the budget.

The question they should answer is this: If holding millions in reserve isn’t meant to provide a cushion during an emergency, what is it for?  The answer seems to be that it is to ensure that government is the last part of society to feel the effects of problems.  That’s backwards.



  • Lou

    Not one of your better efforts, Justin. Your strawman argument presuming you know the council members position regarding the use of reserves is weak. That information is not contained in the article you reference. Your characterization of their quotes from the article is also misleading “all new revenue should go on the government books, without offsetting taxes”. No, no one said or implied that. I think you may be showing an extremist bias assuming it’s an all or nothing proposition.

    • Justin Katz

      It’s an opinion piece with words like “implicitly.” This is my conclusion from what these officials have said over years. The Newport Daily News article linked in the Tiverton Fact Check essay has the treasurer claiming that all casino money is in the general fund. In a narrow sense, this is true, but most people will read that to mean we’re relying on 100% of it to pay our bills. That isn’t true.

      But again, it isn’t misleading to say, “This is how I interpret this statement, and here is why.” Others can disagree, but I’m not coming to these conclusions based on a single article.

      • Lou

        “…but most people will read that to mean we’re relying on 100% of it to pay our bills. That isn’t true.”

        You don’t believe the Treasurer is being truthful?

        • Justin Katz

          I wouldn’t say that, but I’ve watched enough conversations make their way into news articles to know how this goes, and how hard it is to be sure what is intentional and what is just a game of telephone. So, the treasure says all of the casino money goes into the general fund. This is absolutely true, inasmuch as almost ALL non-school money goes into the general fund. That’s why it’s “general.”

          However, the underlying question of the article is how much of the casino money is built into the regular operating budget, and I think most readers will think the quote from the treasurer is the answer to that question. Taken that way, it is false.

          • Lou

            So if I can take the same liberties that you have. You supported using the casino revenue as “tax relief” in the general fund. You campaigned to use the casino revenue as “tax relief” in the general fund. But when the Treasurer reminds the public that casino revenue was used as “tax relief” in the general fund you take exception?

          • Justin Katz

            The treasurer didn’t say casino revenue was used as tax relief, at least as quoted in the article. She said it was in the general fund, which is different, as I explained above.

            I did support and continue to support using the casino revenue for tax relief. As I specifically wrote in the essay, this morning, we might as well let taxpayers enjoy the reduction for as long as the casino money is available.

            But it isn’t the case that it all went to tax relief. Some of it did, but some of it was absorbed into new expenses for the school and town, and some of it, as I’ve explained, is just sitting on the town’s books.

          • Lou

            “let taxpayers enjoy the reduction for as long as the casino money is available.” ??? The point is the casino money might not be available. Isn’t that why the story was written?

            Your observation “This is money the town taxed its residents but did not spend, and the fact that it is growing shows that, no, we didn’t build all of the casino revenue into the budget.” doesn’t really add up. There are other municipal sources of revenue other than taxing residents (casino revenue being one of them). Further, none of the reserves represent FY20 casino revenue if the year hasn’t closed out yet.

          • Justin Katz

            I think we might be starting to lose the thread, here.

            Yes, the point of the article was that the money might not be available this year. You referred to my support for using the casino money for tax relief and suggested that I’m taking exception that the treasurer said it was used for tax relief. Referring to enjoying the reduction was me saying that, yes, that is what I support.

            Yes, there are many ways local governments collect money, but taxing people is the fundamental one. Indeed, when the town calculates its tax rate, it accounts for every other source of revenue and then taxes residents for what remains. Thus, when there is unspent money at the year, it is money that was taxed and did not need to be.

          • Lou

            “when there is unspent money at the year, it is money that was taxed and did not need to be.”

            So to carry that thought to its conclusion you are opposed to municipalities having reserves and/or fund balances because “it is money that was taxed and did not need to be.”

          • Justin Katz

            I support a reserve fund with delineated rules for how it can be used. Tiverton has that, and it is funded, but there is $3 million just sitting on its books that isn’t protected by any rule.

            Be that as it may, one of the points I’m making in the article is that the money is there and we’re in the midst of an emergency. Prioritizing the reserve fund over relief during this time is excessive and indicates skewed priorities among elected officials.

  • John

    RI State Government – forced into bankruptcy. My prediction.

  • John

    I typed my opinion just to have it deleted. Typical RI

    • Justin Katz

      Nothing deleted. The system just holds some comments for approval, and I hadn’t seen that it needed to be done.

  • John

    I welcome the federal audit that will expose interesting things.