For Whom Is Government Doing Well?

Yesterday, Rhode Island’s Director of Revenue Analysis Paul Dion tweeted a story that Rhode Island is one of only six states doing well by three measures highlighted by the S&P ratings agency:

So which states are prepared [for another recession]? S&P uses three measures to determine a state’s progress in its fiscal recovery: 1) whether or not general fund or operating fund balances are equal to or greater than the state forecast for the end of the 2014 fiscal year, 2) whether rainy day fund balances have been restored to at least their 2008 level, and 3) whether a state is funding its actuarially recommended pension contribution.

Based on those standards, six states are in the positive for all three categories: Indiana, Michigan, Rhode Island, South Carolina, Utah and Wisconsin.

I suggested that it’s not exactly a new story that the state government is making itself secure while the population languishes, to which Dion responded that “if state government does well your narrative is shot to hell.”

My reply is that the more important question is what does Rhode Island state government do well?  Whom does it serve?

The S&P report is narrow in scope, essentially giving an indication of what investors should be considering when looking for bonds.  I’d argue it’s too short sighted.  Sure Rhode Island’s government might be ready to weather another recession (assuming the state ever really exited the last one), but what about its people?

Sure, the state government’s rainy day fund may be at its 2008 level, but its labor force is down around 20,000 people.  The number of Rhode Islanders who say that they’re employed is down almost 30,000.  Where’s their rainy day fund?  Are they ready for another recession?

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