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Possible Budgeting Illusions from Raimondo

Shortly after Governor Gina Raimondo gave her presentation on Rhode Island’s economy and its budget implications, somebody asked me what I expected in her budget.  Here’s a succinct summary of the presentation from the Cranston Herald editorial board:

Neither cuts nor tax increases, the presentation asserts, will solve the problem. The sales tax would need to be raised from its current 7 percent to 8.8 percent in fiscal 2017 to close the projected budget gap. Meanwhile, the $255.6 million shortfall foreseen for that year significantly exceeds the total budgets of 21 combined state agencies.

The governor’s presentation proposes instead a shifting of resources to focus on job growth, creating a “virtuous cycle” in which those investments in education, infrastructure and property tax relief expand employment opportunities and thus grow the state’s revenue base.

My expectation is that Raimondo will follow the playbook from pension reform, with these steps:

  1. Declare a dire problem, consisting of a short-term emergency and long-term doom.
  2. Propose some technocratic solution that will supposedly fix the long-term problem once and for all.
  3. Make sure that there are enough gimmicks in the solution to defuse the short-term emergency and expect attention to have drifted by the time it falls apart.

The short-term emergency, in this case, is a balanced budget for the  next fiscal year, starting this July, and the long-term doom is the unyielding projected deficits resulting, in large part, from Rhode Island’s continuing economic decline.  The expectation, then, is that Raimondo’s budget will include some sort of new revenue stream, perhaps justified by its use toward some economic development scheme, mixed with budget reductions of the “waste and fraud” variety.  Whether the elusive waste-and-fraud savings could be realized is actually immaterial, inasmuch as the budget would be balanced on paper, and adjustments could be made when the budget is reviewed in November and fixed sometime during the fiscal year, when the eyes of those few who pay attention are mainly focused on the next year’s budget.

That’s what I told the person who asked me.  It was notable, therefore, to see this in yesterday’s Providence Journal:

House Speaker Nicholas Mattiello on Tuesday disclosed that Gov. Gina Raimondo had asked him if she could include “$40 million to $50 million’’ in Medicaid cuts, as a “placeholder” in her first budget proposal, without spelling out how and where she intended to reduce spending in the $2.7 billion government subsidized health-care program.

Mattiello said the governor told him, “in very general terms that there would be some kind of a placeholder and a request for a task force to figure out the cuts.’’

Evaluating Tax Incentive Programs: Matching Practice or Kill Order?

When one reads that Rhode Island is engaged in something that might be seen as a “public policy best practice,” cynicism is usually the appropriate response. Such is the case with a Pew Charitable Trusts brief that cites Rhode Island as one of a handful of states implementing good-government reviews of economic development tax incentives.

Ten states and Washington, D.C., according to Pew, have taken steps to ensure “that tax incentives are evaluated regularly and rigorously.”

The legislation in question is a 2013 bill originating in the Rhode Island Senate, number S0734, which evaluates tax incentives and other government activities. The first section of the bill tasks the still-new Office of Management and Budget with “a comprehensive review and inventory of all reports filed by the executive office and agencies of the state with the general assembly.”

So rigorously have Rhode Island’s policymakers been reviewing all of the reports that state government pays itself to create for them that they now require a report on all of the reports that they receive.

Continue reading on Watchdog.org.

Exempting Retirement and Social Security Income

Rhode Island needs to cut all sorts of taxes on everybody.  However, it’s important for policy makers and the general public to ask questions about particular proposals.  What’s the goal of a particular cut; who benefits; where’s the money going to come from?

Conservatives have periodically asked me about the proposal that House Speaker Nicholas Mattiello (D, Cranston) and Senate President Teresa Paiva Weed (D, Newport) are publicly considering — to exempt retirement and Social Security income from taxes.  Although it may be popular to promise senior citizens things, the questions still apply.  Regarding the goal of the policy, Providence Journal reporters Katherine Gregg and Linda Borg offer this summary:

Neither idea is new. But this year, the Democratic leaders of the House and Senate are both talking about how they can keep retirees — and their retirement income — in Rhode Island.

Given limit political ability to cut taxes, does this reform target the group (1) that’s most notably leaving Rhode Island and (2) that Rhode Island needs most to stay?  I wouldn’t say so.  The state has long shed many young, single, college educated residents.  The largest losses by family type have been married families with children.  Once again, our biggest and most important losses are from the “productive class” — people who are interested in using the local economy to change their time and talents into money.  That’s what really grows an economy.

It helps that cause a little to let relatively idle people keep and spend more of their cash, particularly if it keeps them in the state, but it’s indirect and subject to bleeding.  A retiree’s tax-cut-funded vacation in another state helps young working families in Rhode Island not at all.  A retired couple that keeps its Rhode Island house, instead of moving, keeps a younger family from buying that house.

On the question of how the General Assembly would make up for the reduced revenue, it’s encouraging to see Mattiello talking about cuts in spending, but we should believe that when we see it.  The state legislature has a habit of finding ways of shifting burdens around, rather than actually limiting the size of government.

During Hard Times, Crack Down on Workers?

Here’s a pretty good example of how Rhode Island politicians and the special interests who govern them look at their neighbors’ plight.  The legislation is Senate bill 2410, sponsored by Hanna Gallo (D, Cranston, West Warwick), Erin Lynch (D, Cranston, Warwick), and Dominick Ruggerio (D, North Providence, Providence), and House bill 7391, sponsored by John Edwards (D, Portsmouth, Tiverton), Donald Lally (D, Narragansett, South Kingstown), Christopher Blazejewski (D, Providence), and Katherine Kazarian (D, East Providence).

Basically, the legislation — which Governor Chafee signed into law (naturally) — triples the fine for a first offense violating the chapter of Rhode Island law dealing with the licensing of plumbers, from a painful $500 to a potentially devastating $1,500.  Second and subsequent offenses more than doubled, from $950 to $2,000.  There may be a variety of violations that could spark the fines, but mainly, they have to do with performing unlicensed plumbing or disregarding plumbing regulations.

That’s right: After years of Rhode Island’s being thousands shy of its peak employment, after months of its having the worst unemployment rate in the country, during an era of low or non-existent economic growth and taxpayer flight, the Rhode Island General Assembly finds it important to tighten the screws on one of the better-paying blue-collar occupations.

In the upcoming election, voters should consider that the only legislators who don’t think a time of economic agony is ripe for cracking down on people trying to make ends meet were Rep. Michael Chippendale (R, Coventry, Foster, Glocester), Rep. Doreen Costa (R, Exeter, North Kingstown), Rep. Karen MacBeth (D, Cumberland), Rep. Michael Marcello (D, Cranston, Scituate), Rep. Patricia Morgan (R, Coventry, Warwick, West Warwick), and Joseph Trill (R, Warwick).  Not a single senator voted against the bill.

Here are the “yea” votes in the Senate:

YEAS- 33: The Honorable President Paiva Weed and Senators Algiere, Archambault, Bates, Conley, Cool Rumsey, Cote, Crowley, Doyle, Felag, Gallo, Goldin, Goodwin, Hodgson, Jabour, Kettle, Lombardi, Lynch, McCaffrey, Metts, Miller, Nesselbush, O’Neill, Ottiano, Pearson, Picard, Pichardo, Raptakis, Ruggerio, Satchell, Sheehan, Sosnowski, Walaska.

And in the House:

YEAS – 66: The Honorable Speaker Mattiello and Representatives Abney, Ackerman, Ajello, Almeida, Amore, Azzinaro, Bennett, Blazejewski, Canario, Carnevale, Casey, Cimini, Coderre, Corvese, Costantino, Craven, DeSimone, Diaz, Dickinson, Edwards, Fellela, Ferri, Finn, Gallison, Giarrusso, Guthrie, Handy, Hearn, Hull, Johnston, Kazarian, Keable, Kennedy, Lally, Lima, Lombardi, Malik, Marshall, Martin, McLaughlin, McNamara, Melo, Messier, Morin, Newberry, Nunes, O’Brien, O’Grady, O’Neill, Palangio, Palumbo, Phillips, Ruggiero, San Bento, Serpa, Shekarchi, Silva, Slater, Tanzi, Tomasso, Ucci, Valencia, Walsh, Williams, Winfield.

SCOTUS Implication: RI Can’t Force Child Care Providers to Join or Pay Union

The Supreme Court’s ruling in Harris v. Quinn, today, should reverse efforts in Rhode Island to force independent child care providers whose clients receive state subsidies to join a union or to pay “free rider” fees for a union’s negotiating services.

By way of review, last year, the General Assembly passed, and Governor Chafee signed, legislation to allow independent child care providers who have clients receiving subsidies through the state’s Child Care Assistance Program (CCAP) to join a labor union.  The legislation also required providers who didn’t want to join the union to pay a “service charge” for “negotiation and administration of the written contract” that could amount to as much as full dues.  It’s a gray area, but presumably, the state can’t pay parents different subsidies depending on whether or not their providers are in the union.

(In the House, the first five sponsors of the bill were Slater, Diaz, Almeida, Blazejewski, and Handy; in the Senate, they were Goodwin, Jabour, Pichardo, Crowley, and Ruggerio.)

The RI Center for Freedom & Prosperity became deeply involved in pushing back against the suspiciously tilted elections that unionized the providers under the SEIU.  The Current-Anchor  also paid the election some attention, including incidents of state police threatening to arrest private citizens who wanted to observe the proceedings.

According to the governor’s office, negotiations with the SEIU are currently underway, but members of the public (who will be paying the bill) will have no window into them until the deal is done.

The Harris ruling, written by Justice Samuel Alito, pertains to personal assistants for disabled recipients of state aid in Illinois, often their parents or other relatives.  However, the reasoning is the same — mainly that the providers are not full state employees, that their immediate clients are not the state, but the families that they serve, and that the negotiable aspects of their relationship with the state are severely limited.

It is therefore almost certain that a lawsuit by any child care providers who do not want to pay the SEIU “service charges” out of their pay checks will prevail.  It’s always been questionable whether the union could do much for the providers, other than to siphon away money intended to help families pay for child care, but now providers will likely receive any benefits without paying any costs.

For that reason, the Center is calling on the executive branch, in Rhode Island, to halt the proceedings and the legislature to repeal the law.  As the press release states, the Center is also considering the possibility of requesting a stay on any action that would commit taxpayers to unconstitutional costs.

The General Assembly’s Distorted View of Its Own Role

Even before I’ve managed to work through every bill that made its way through the General Assembly, this session, I’d have to say that legislators did grievous harm to the value of diplomas from Rhode Island public schools.  At a minimum, the General Assembly undermined even a pitiful baseline for what the piece of paper proves and catered to the teachers’ unions to limit administrators’ (already meager) leverage in trying to get them to work harder and perform better.  There’s really no question, at this point, that the brief ray of work-through-the-system education reform has effectively been blocked out.

That’s a shame, and a tragedy for students who have no choice but to go through government-branded schools in the state.

Salt in the wound is the expressed reasoning of Speaker of the House Nicholas Mattiello (D, Cranston):

“I became frustrated with the waiver process,” he said. “It produced inequitable results. Depending on where you lived, some communities were more liberal than others.” …

“That’s what government is supposed to do,” he said. “In a unique way, it’s supposed to serve the most humble members of our community.”

Notice that it’s Rhode Islanders, specifically students, whom the speaker sees as “humble”; it’s certainly not the legislature, whose members apparently have the massive competence to micromanage an education system serving over 100,000 children during its six-month, part-time adventure in telling other people how they must live.

Giving communities the ability to set different expectations is exactly the way to ensure that our government is representative.  If one town wants to ensure that its diplomas are known far and wide to be proof of a mastery of knowledge and ability to learn, then families that prioritize such things will move there.  If a city wants schools that amount to thirteen-year courses in building self-esteem, then it will produce the predictable results.

The General Assembly is not an appeals board for people dissatisfied with their communities to seek a solution that applies to the entire state.  Local opposition is one of the few areas of accountability that government-branded schools actually face.

If members of the General Assembly really want to empower families to find the best opportunities for their own children, they should allow parents and guardians to choose where to direct the funds that the system sets aside for their children.  It shouldn’t only be wealthier Rhode Islanders who are able to save their children from an unaccountable system that is set up mainly to preserve the high-paying jobs of teachers and the political power of unions.

Five Minutes to Prove There Are No Rules in the House

Seeing all the House budget-night fun on my Twitter feed, I tuned in on Capitol TV for a few minutes.  That was all it took for me to see Majority Leader John DeSimone (D, Providence) kinda sorta make a motion to rule an amendment by Michael Chippendale (R, Coventry, Foster, Glocester) out of order.  (I say “kinda sorta” because he never made a motion.  He just mumbled some stuff as if he were clarifying the amendment and then asked what the ruling of the speaker was.)

Speaker Nicholas Mattiello (D, Cranston) proceeded to discuss the matter off microphone and then declared that Chippendale’s amendment was indeed out of order, because for some reason, he thought that changing the gas tax rate for a year had no business in an article labeled “Relating to Revenues.”  Instead, DeSimone had said the amendment should have been made to Article 21, which would raise the gas tax next year for the purpose of the transportation fund and the Sakonnet River Bridge tolls.  By contrast, Chippendale’s proposal was to switch out the 38 Studios bond fund for some gas tax relief… obviously not related to the transportation fund or the toll in any way.

Chippendale challenged the ruling, but a near unanimous chamber agreed that an amendment relating to revenue was not germane to an article relating to revenue.

Does anybody really need any more proof that the entire budget process — the entire legislative process — is a sham?  Either the other reps were not willing to go against the speaker or (maybe more likely) they all are painfully aware of how useless amendments are and figured the ruling was an easy way to end the phony show of representative democracy a little earlier than usual.

Ethics Jurisdiction Over Legislature Paired With a Legislative Role in Selecting Ethics Commission Members

A constitutional amendment to place state legislators under the jurisdiction of the Ethics Commission is scheduled to come before the Senate Judiciary committee this afternoon, and Katherine Gregg wrote this morning in the Projo that Senate President Teresa Paiva-Weed expects it to be voted on today.

According to the Projo story, the final version of the bill has not yet been unveiled. The version officially pending in the Senate offers a compromise to the legislature’s Ethics Commission skeptics* who are worried about ceding too much authority to an outside body; four members of the commission will be appointed by the Governor from lists created by General Assembly members…

Ethics commission composition. — The ethics commission shall be composed of nine (9) members appointed by the governor; provided, that the president of the senate, the minority leader of the senate, the speaker of the house of representatives, the majority leader of the house of representatives, and the minority leader of the house of representatives shall each submit to the governor a list of names of at least five (5) individuals from which the governor shall appoint one individual from each of the lists so submitted, and four (4) individuals without regard to the lists submitted by the legislative leaders. The terms of service for the appointed members shall be as provided by law.

Two factors that likely account for the sudden re-appearance of ethics legislation at this time are…

  1. Rhode Island legislators in search of some kind of good-government achievement to talk about on the 2014 campaign trail, in the wake of the GA’s likely capitulation to Wall Street and the 38 Studios bondholders, and…
  2. The possibility of a standalone bill on this subject dampening public support for constitutional convention, by taking off of the table one of the most visible issues that can unite the people of Rhode Island versus the governing class.

(*However, I doubt that the new appointment process will do much to convince Ethics Commission skeptics amongst this blog’s contributors).

John Loughlin: Exactly What the Oversight Committee Needs to Subpoena to Secure Direct Evidence that Leadership Lied To The House To Pass 38 Studios

This is a long but important post about 38 Studios.

It names names, and dates, and should be very helpful to the Oversight Committee which is investigating 38 Studios. It contains questions and comments that would be of zero interest to law enforcement BUT should be of interest to all state lawmakers and anyone who cares that the vote of their State Rep was actually stolen.

As far as the RI House is concerned, the smoking gun is May 25, 2010.

The 38 Studios Bond Payment: Expecting a Penalty is Reasonable; Expecting Punishment is Not

Are worries about punishment by the ratings agencies and the bond market worries about individual decisions in a legitimate marketplace, or worries about collusion? If the answer to this question is based upon a fear that investors may decide amongst themselves to turn down money-making opportunities, to impose a boycott or to fix prices above a certain interest rate in order to make Rhode Island an “example”, then the answer is headed towards an allegation of illegal activity.

Those who have expressed concerned about “punishment” should be absolutely clear with the public about the mechanisms by which they expect individual, profit-seeking bond holders to leave money on the table, in order to make an example of Rhode Island, because it will never be cost-efficient, or moral, or in the best interests of the people of this state to accept either illegal collusion or leaders who would tolerate it.