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One Piece of the Health Care Solution Puzzle

From time to time people who are inclined to support heavy government involvement in healthcare will ask me what the alternative is.  My answer has been a system that disengages health insurance from employment, drives down the cost of insurance, and creates incentive for people to make prudent decisions and spend wisely.

Basically, the law would end existing incentives to route health insurance through places of employment and ease mandates to make high-deductible plans that really are insurance, rather than health management programs, more feasible.  With that done, opening up the insurance market across state lines would be no problem.  To compete and to manage their own costs, insurers might throw in things like a free check-up every year, but the idea would be that the purpose of their service is to manage risk, like car insurance, not to negotiate every detail of a person’s medical consumption.

To fill in the gap, everybody would get health savings accounts into which anybody concerned could put money — the people themselves, their employers, the government (for low-income people), and charities.  It would be tax free and would be an asset that could (maybe) be spent in retirement or at least passed down.

I bring this up because a bill for Achieving a Better Life Experience (ABLE) accounts passed both chambers of the Rhode Island General Assembly, this session.  Basically, it would create accounts for blind and disabled Rhode Islanders that the state would manage and into which any supporters could put money.  As designed, the system probably has more government involvement than needed, but the concept seemed familiar.

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Legislation in the “Know Not What They Do” Category

Sometimes I think I ought to be entitled to some sort of hazard pay for my work reading the legislation that passes through Rhode Island’s General Assembly.  (Naturally, it would be a matter for me to negotiate with my employer, not to try to put into another awful piece of legislation.)

Take S0134, which Governor Raimondo signed into law last Friday.  On first read, it looks like an attempt to require government agencies that handle people’s private information to have security programs in place and processes to notify people in the case of a breach, and that’s a good intention.  The problem is that, in the operative section, the law refers to “a municipal agency, state agency or person.”

“A person,” in the legislation, includes “any individual, sole proprietorship, partnership, association, corporation, or joint venture, business or legal entity, trust, estate, cooperative or other commercial entity.”  And “personal information” includes social security number, driver’s license (or other RI ID card) number, account numbers with their PINs or passwords, medical or health insurance information, or even email addresses with passwords “that would permit access to an individual’s personal, medical, insurance or financial account.”

It’s easy to see the reasonable intention, here, but the language is frighteningly broad.  Suppose I… I don’t know… start a small Web site and give contributors email addresses with the URL.  Since it’s just a small, cooperative project, I don’t have any written policies or anything like that — we’re just a few folks trying to make a difference in our community.

It’s conceivable that one of the contributors might use the email to set up some sort of financial account, whether intended to be related to the site or not.  It’s also conceivable that a hacker might someday crawl some file, somewhere, and get the person’s email info and use it to gain access to the financial account.

Do I need to figure out what “a risk-based information security program” is and implement it?  Or maybe it’s worse than that, and the law ultimately will require every Rhode Islander to buy such software for computers with family information.

I could be taking the law too literally.  It would probably be necessary for the scenarios that I’ve described to actually occur for some unlucky people, and however the legalities played out for them, the law would very possibly be changed to be more specific.

Be that as it may, as the government grants itself more and more authority to regulate every personal interaction in our society, one can see how it becomes more and more difficult to do anything without a team of lawyers.  The impulse to make the world a safely padded playroom may be admirable, but it simultaneously turns us all into children who can’t be expected to address the concept of “risk” by ourselves and makes it impossible for us to innovate and thrive in a way that moves society forward and reduces income disparities.

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U.S.A. Now the U.S.S.A.

The United States of America is no more.  Our experiment with representative democracy in a constitutional and federalist republic is finished, and it failed.  We are now the United States of Social Acceptance.

You are not free.  Everything you do must be explicitly or implicitly be approved by the government.  We’ve gone from the idea that the laws of the land draw narrow boundaries for government to the reality that laws and regulations draw the increasingly restrictive boundaries of what you are permitted to do.

The examples are everywhere proving that those who dominate our government see themselves as an authority over every personal interaction in the country.  One I spotted over the weekend while reading legislation from the General Assembly’s last week, and that was featured in the Providence Journal on Sunday, gives the government authority to judge whether employers are making reasonable accommodations for pregnant employees (and those who recently gave birth).  In the Senate, the bill is S0276 from Hannah Gallo (D, Cranston); in the House, it’s H5674 from Shelby Maldonado (D, Central Falls).

As it happens, I agree — as I’m sure most of us do — that an employer should make accommodations for such employees unless doing so causes “undue hardship.”  In such decisions, I agree that some of the relevant factors are “the nature and cost of the accommodation,” “the overall financial resources of the employer,” “the overall size of the business,” and “the effect on expenses and resources or the impact otherwise of such accommodation upon the operation of the employer.”

But in most cases, both the employee and the employer are adults.  It shouldn’t be up to me to decide whether the inconveniences to the employee outweigh the business needs of the employer, and it shouldn’t be up to the government, whether legislators, judges, or bureaucrats.

In the progressive mindset that dominates in Rhode Island and, increasingly, at the federal level, we are not adults.  We’re children who need some superauthority over our lives to whom we can run when we’re not happy with each other.  Whining ten-year-olds run to their parents when they think their peers have done something that isn’t “fair.”  Adults shouldn’t require the same condescension.

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Charters in Public-Private Limbo

I’m in the minority among my ideological peers, on this, but my thinking on charter schools has changed quite a bit in recent years.

Many conservatives, I believe, see them as a sly way to insert wedges into public education’s cracks in order to bring about wider-scale reform of the system.  If we create this alternate system of schools, literally entered with the luck of the draw, that is free of the restrictions that (for some reason) we continue to tolerate in district schools, then parents will demand that district schools be made free of the restrictions, too.

To advance this stratagem, we’ve been willing to overlook basic descriptive facts about charters that would normally concern us a great deal.  In order to work around the damage that the democratic nature of our government has wrought in education (thanks, largely, to the self-interested activism of teacher unions), we’re creating institutions over which the public has less control.  On the one hand, charter advocates insist that they are “public schools of choice,” so they should fall within the range of inside-government benefits, but on the other hand, they are demanding that the people paying the bills should not have immediate, democratic control over them.

In any other context, conservatives would recoil against that just as surely as they ought to recoil against crony capitalist deals giving connected insiders taxpayer cash for their private business dealings.  Principle should not be something to be weighed against practicality.  Rather, we should hold to our principles because they produce the outcome that we desire; it is in determining our goals that we should weigh morality and practicality.

My concern, in treading off our principled path, is that we’re more likely to get lost than to return to our firm ground.  Instead of breaking the rigid grip of special interests on public schools, charters will kill off private schools — at least all of them that are accessible to anybody who’s less than rich.  Then special interests will successfully tighten the vice, making government education a true monopoly rather than the near-monopoly that it currently is.

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New Childcare Union Info (More Money than Stated)

Childcare subsidy data from the state Executive Office of Health and Human Services (EOHHS) suggests that the numbers from the House Speaker’s office that I posted were too low.  The difference is that the legislative source included only childcare subsidies paid through the Department of Human Services (DHS), but the total should also include subsidies paid through the Dept. of Children, Youth, and Families (DCYF).

Including both departments, the baseline number for the upcoming fiscal year (FY16) is actually $63.2 million, making the $2.15 increase in the rates paid to private providers an overall 3.4% increase.  The FY15 total was $54.5 million, making the total increase from one year to the next $10.85 million, or 19.9%, raise included.

No agents of the state government will share details of the contract negotiated with the SEIU, but if the range of possible dues is 1.5% to 2.0%, then the total that the state will pay to the labor union in the upcoming fiscal year will be between $980,250 and $1.32 million.

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Post Script on House Budget Night

Ted Nesi has consulted with the State House librarian and learned that there were unanimous budget votes in 2008 and 1999.  As a first impression, that means the House wasn’t due for another one for a couple of years, but it also suggests that shock at the unanimity might have been a little overblown.  As somebody who tweeted that the vote was “an outrageous indicator of a very sick representative democracy,” I’d make two points.

First, I wouldn’t be at all shy about suggesting that Rhode Island’s representative democracy has been very sick for much longer than the period back to 1999.

Second, the final unanimous vote was mainly significant as the sharp edge of the entire evening.  Looking at the journal from the House budget night in 2008 for contrast, a few things stand out.  For one, the House didn’t wrap up until almost midnight, so it wasn’t the same quick session.

More importantly, there was some contentious drama.  On a quick skim, it looks like two floor amendments actually passed by surprise, leading to reconsideration votes to change the outcome.  That isn’t exactly the festival of harmony we witnessed last night.  From the perspective of the electorate, at least it seemed like the system was working… somewhat.

So what about the tax cuts?  Surely around $45 million in FY16 cuts, largely for businesses and Social Security recipients, is a positive development in line with what small-government conservatives have long recommended?

Yes, but expenditures from general revenue (i.e., local money) are expected to go up by $108 million versus last year’s enacted budget.  From an economic standpoint, the question is whether the revenue sources that are making up for the tax cuts provide a bigger boost than the drag created by taking money out elsewhere.  The governor’s budget schedule, for example, shows a $125 million increase in each of the personal income tax and the state sales tax; that’s money out of the economy, some of which will be going to hand-picked segments.

To put specifics on the argument, during FY16, the Social Security tax cut is expected to cost the state $9.3 million in revenue, which we could say is largely paid for with a new $6.9 million in taxes on small tourism businesses.  Maybe this is an economically productive and morally sound transfer of wealth, but we never hear that argument.

On their own, each change might be positive, but at the end of the day, they fit into the mix in the same way special-interest handouts do.  The lack of real contention in the budget debate is an indication that all of the interests that have a voice are now bought off.

What should the rest of us do?

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Follow-Up on Childcare Subsidy Increase

Last week, Rhode Islanders learned of a $2.15 million increase in state childcare subsidy rates for providers.  Although details of the first-ever agreement with the Service Employees International Union (SEIU), which now represents the private, independent providers, have still not been released, the House Speaker’s office has provided The Current a few additional budgetary numbers.

The $2.15 million is being added to base spending of $58.9 million, or a 3.65% increase, overall, bringing the total to $61.1 million.  If these provisions of the budget pass as currently written, it will represent a $7.45 million bump in spending for these payments over the current fiscal year, or a 13.90% increase.

Despite requests to multiple government agencies, the state has still not released any details of the agreement, including dues.  Child Care Union Info, with which the RI Center for Freedom & Prosperity has worked in the past, reports a wide variety of dues from other states, although some of the contracts have been terminated.  At the higher end are states in which the union’s dues are calculated as a percentage of subsidies, sometimes with a maximum.

In Michigan and Massachusetts (which is SEIU), the rate is 1.5%.  In Washington (also SEIU), it’s 2%.  Either rate would put the SEIU’s take in Rhode Island around $1 million, or about half of the total raise that the budget would grant.  (Given Rhode Island’s small size, the union would be likely to seek dues at the higher end.)

As I stated in a release just put out by the Center, the governor and General Assembly could have increased payment rates without the involvement of a union, if needy families are having difficult finding childcare providers.  As yet, there has been no claim of such difficulty.  In 2013, the law was changed (in a way that is likely unconstitutional) to give independent childcare providers more leverage, and now the Speaker of the House tells Providence Journal reporter Katherine Gregg that he believes they “deserve to be paid a fair and equitable wage.”

Clearly, these providers have advocates at the State House, and those advocates could have provided the same raises at a lower cost to taxpayers by cutting out the SEIU.  However, between 2004 and 2014, the SEIU gave $30,333 to Rhode Island politicians, according to the Board of Election’s campaign finance Web site.  This makes the interaction win-win-win for everybody except those who have to pay the bills.

UPDATE (2:57 p.m., 6/17/15):

See here for updated numbers.

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Indications of Government Homogeny

The two stories at the top of today’s Providence Journal give a sense of the problems when government is characterized by a homogeneity of party and governing philosophy.  For example, the House plans to waive rules that put the governor’s raises for upper staff squarely in the middle of the budget process:

Current law gives the governor a small window of time, in March of each year, to propose and then justify at a public hearing any proposed raises for cabinet members.  

The Department of Administration then has until the last day in April to refer the proposed new salaries to the General Assembly. The raises go into effect 30 days later unless rejected by the House and Senate.  

Raimondo asked lawmakers to do away with that provision in the budget that she proposed to lawmakers in March. The General Assembly’s Democratic leaders didn’t go that far.

Instead, the budget will give leadership a deadline of late August to drag everybody back to the State House to undo the raises.  We can gather that the governor would have to be pretty unreasonable to spark that level of reaction.

The second story has to do with the House Republicans’ alternative approach to funding roads and bridges.  Obviously, the GOP’s proposed amendment to the budget is political theater, but that’s indicative of the problem.  Both the governor and the Speaker of the House can be utterly dismissive of the plan because there is no chance of its happening.

Rhode Island’s governing system leaves little opportunity for surprises (other than revelations of corruption, naturally), so the participants can come to consensus in back rooms among partisan friends without any real need to negotiate a minimization of risk.  If there’s a chance, even a small one, that the minority party can orchestrate a surprise, it isn’t as obviously political theater, which would be a healthier state of affairs for both sides, not to mention the people of Rhode Island.

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Another Union Win in Rhode Island (SEIU Childcare Edition)

Yesterday, I noted that legislation in the budget currently under consideration in the Rhode Island House would not, in fact, provide more money to support all-day kindergarten.  Rather, it would give districts the portion of extra state aid that they would have received if their kindergarteners counted as full students in the funding formula even if they don’t have all-day kindergarten in the upcoming school year.

The original version of that legislation would have accelerated the funding formula phase-in to give switching districts the full state aid for all-day kindergarten.  If the General Assembly were to put that language back in, it would come at a cost of about $2.8 million.

Put that on the scale next to the fact that the General Assembly’s budget provides an extra $2.15 million for an increase in payments to state-subsidized childcare workers whom the Service Employees International Union (SEIU) successfully (and controversially) unionized after the General Assembly opened the door for it.  So, rather than helping to provide full-day classes for over 2,000 Rhode Island children, the General Assembly has chosen to give a boost to the cost of a service already being provided by 540 adults.

That’s not really the trade-off, though.

Because this would be the first contract that includes union dues, the actual providers (many low-income, themselves) won’t see all of that extra money.  We don’t know how much the SEIU’s dues will be, because as the Providence Journal article on the budget provision points out, the budget itself is the first indication anybody in the public has that a contract agreement has been reached, but we can put together some rough estimates.

In similar contracts across the country, dues tend to be flat fees of $25 to $35 per month or percentages ranging from 1.3% to 2%.  By the flat fee method, figuring 540 providers, the union dues would cost $162,000 to $226,800.  Going with percentages, the annual dues would be $719,550 to $1,107,000.

In other words, half or more increased cost of providing this service could be going directly to a labor union.

That, of course, depends on providers’ deciding to stay with the union.  Based on the U.S. Supreme Court’s Harris v. Quinn decision last year, it appears that childcare providers cannot be forced to join the union.  No doubt, the SEIU will tell providers that the big increase was entirely its doing, and cutting the union out of the loop would mean no future increases.  In that light, the portion of the $2.15 million that does not go to dues could be seen as some extra sweetener to make the union medicine go down.

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A Budget for Special Interests

The budget that appears poised for passage through the General Assembly and Governor Raimondo’s office fills me more with dread than hope.  In recent years, state budgets have moved us incrementally in a worse direction.  The combined effort of Raimondo and House Speaker Nicholas Mattiello seems almost like a reordering of things in the favor of special interests, with substantial risks for the future, like a wrecking ball held high somewhere in the dark.

Consider the programs that directly offload risk from private development companies and create union jobs.  A sample from Patrick Anderson’s Providence Journal article:

The other large tax break Raimondo proposes is a “tax-increment financing” program that would allow new state tax revenue created by big development projects to be funneled back into paying for the project or infrastructure surrounding the project.

Most commonly attached to local property taxes, a state TIF could involve a range of state revenue, including income tax, sales tax and hotel tax. For example, a developer proposing a neuroscience building that includes a hotel and shops could pay off a bond using a portion of the new state taxes it generates.

What a contorted concept.  When does a developer get his or her hands on tax revenue to pay off his or her own debt?  Never.  These would be non-voter-authorized bonds taken out with future tax revenue as security.  Whether tax revenue actually goes up or not, the money must be paid.

Maybe most frustrating, though, is that the call of the obvious is finally starting to permeate the discussion, but our supposedly fiscally responsible leaders are refusing to hear it.  Here’s a line about the Superman Building’s limbo:

… if demand for downtown Providence real estate were stronger and companies were clamoring for Financial District offices, someone, if not the current owner, would come to the rescue.

And here’s a word from an economist:

“Providence seems to have a surplus of empty buildings already, so providing incentives for more is not going to make this better,” said Brown University economics professor Matthew Turner. “If they are vacant because it takes hundreds of thousands of dollars in legal fees and two years at City Council to get approved, then the government should be simplifying the permitting process. If the answer is that no one wants to occupy them, you will end up with more empty buildings.”

The fatal problem that appears destined to destroy Rhode Island and undermine the United States is that simply making things better and easier for everybody does not create enough opportunity for political favors and self-dealing.

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Falling into the Pension “Contract” Trap

One concern with the pension reform “settlement” that hasn’t gotten as much attention as it deserves is the effect it will have on the General Assembly’s ability to revisit the reform (the shelf life of which, I’m putting at about five more years).  Testimony, published on the RI Taxpayers site, from William J. Murphy, before the RI Senate Finance Committee, raises that concern in a bigger way than vague apprehensions would suggest:

Approval of the pension settlement currently under consideration by this committee would produce the disastrous unintended consequence of transforming state pension benefits from their currently advantageous legal status as legislative policies subject to revision by the General Assembly as it judges necessary to best serve the public interest into binding contractual obligations which cannot be changed lawfully by the legislature, even for this vital purpose,  through the exercise of its ordinary legislative powers.

Granting passage to the pension settlement legislation negotiated during the union pension lawsuit mediation process would produce this devastating result by introducing the element of “agreement of the parties” into the “circumstances of its adoption,” thereby satisfying the first and most important test of contract existence the courts apply when deciding whether government pension laws create contract rights.

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Civil Disobedience Against the Many Ways to Dictate Rules

Elizabeth Price Foley quotes the following from a Wall Street Journal column by Daniel Henniger:

Barack Obama, channeling decades of theory, says constantly that the traditional system has failed. He said it in his 2011 Osawatomie, Kan., speech: “It doesn’t work. It has never worked.” He has attacked Congress repeatedly as a failed institution, teeing it up for mass revulsion just as he did the 1%.

With Congress rendered moribund, the new branch of the American political system is the federal enforcement bureaucracy. The Department of Health and Human Services’ auto-revisions of the Affordable Care Act are the most famous expressions of the new governing philosophy. But historians of the new system will cite the Education Department’s Office for Civil Rights’ 2011 “Dear Colleague” letter on sexual harassment as the watershed event.

I’m currently going through all of the legislation on the table in the General Assembly, and two observations stand out (as usual):

  1. Our elected officials really do believe that it is their role to micromanage life in this state.
  2. As bad as that is, worse still is the latitude that they are increasingly giving to appointed bureaucrats to do the same.

An example that I’ve heard from multiple directions, lately, is the still-new mandate that all seventh grade students (public or private school) must be vaccinated against human papillomavirus (HPV) — a sexually transmitted disease.  This isn’t like the flu or chickenpox, which students can catch and spread simply by attending school.  The Dept. of Health has crossed into a new territory of rationale, assuming the authority to instruct parents to put a drug in their children based on studies of long-term health risks, rather than immediate danger.

The bureaucracy has done so with the permission of extremely broad legislation, which states that students are required to show proof that they have “been immunized against any diseases that may from time to time be prescribed by regulation of the director of health.”  There is a religious exemption form, but that only mitigates the reality that freedom has been flipped.  Instead of the government attempting to persuade parents to make a particular decision, they’re requiring parents to actively notify the government of their decision in the other direction.

Charles Murray’s notion that Americans need to begin a regimen of deliberate civil disobedience against the bureaucracy seems wiser by the day.  There doesn’t appear to be anything about filling out the exemption form that precludes a parent from actually going forward with the vaccine, so it should become a matter of course among parents, and we should all look for other ways to thumb our nose at people who think they have authority over us, but shouldn’t.

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Education’s Future Resting on Charters in the Crossfire in Rhode Island

Advocates for charter schools in Rhode Island have begun emphasizing that they are “public schools of choice.”  The careful balancing act in that phrase proves that such schools are treading across difficult terrain.

On one side, traditional public school districts are complaining that charter schools take much more money per student than the district schools save by handing the children off. Charter schools also have fewer of the burdens that apply pressure to school budgets, like state mandates and pension costs, they say.

On the other side, private schools and affiliated organizations are pointing out that charters can skim their clientele. Families that would have gone straight to the private route try their luck with the charter school lottery, first, and with every new “public school of choice” that opens, a private school of choice finds it more difficult to stay open.

The immediate question for Ocean State charter schools is whether they can survive the crossfire over the next few years.  In the longer term, the question for residents of the state is whether a charters-only approach to school choice will actually reduce choice while draining funds.

Continue reading on WatchDog.org.

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The General Assembly as Rhode Island’s Uber Administrator (“Cooperating” with Labor)

Add this one to the growing list of recent examples of the state government, and specifically the General Assembly, stepping in to push municipal governments and fire districts to set policy in favor of labor unions:

Senate Majority Leader Dominick J. Ruggerio introduced legislation Thursday for the state to do what the city has failed to do — create a tax-stabilization agreement to limit commercial property taxes that private developers would pay for new construction on the now vacant Route 195 land in the capital city.

“This stagnation cannot continue as it has become an obstacle to job creation and development in Providence,” Ruggerio said in a statement.

Ruggerio, you may recall, makes big bucks as an administrator of a branch of the laborers’ union.  According to his group’s 990 form, Ruggerio received $154,161 in salary plus another $40,491 in “other compensation.”  Proving that irony is no hindrance to corruption, the name of Ruggerio’s group is the New England Laborers Labor-Management Cooperation Trust.

For businesses and for municipalities, cooperation means you act in the unions’ interests, or the unions will go over your head and change state law in inappropriate ways that undermine a system that is supposed to be a representative democracy.

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Press Conference & Request By Concerned Citizen, Bill Murphy, to Testify about Unfairness of Pension Settlement

[The following was received via e-mail this afternoon.]

Concerned Citizen Seeks to Testify about Unfairness of Pension Settlement to Taxpayers at Court Hearing Tuesday, Schedules Press Conference to Explain Request to the Public

Concerned citizen Dr. William J. Murphy will hold a press conference in front of the Frank Licht Judicial Complex at 250 Benefit Street in Providence at 4:30 PM on Tuesday, May 26, 2015 to explain to the public the reasons for his request to testify about the unfairness of the pension settlement to taxpayers at the ongoing fairness hearings in Superior Court. Dr. Murphy will deliver a statement emphasizing that the terms of the settlement itself as well as the impropriety of the court-supervised secret negotiation process that produced it have significantly harmed the financial welfare of taxpayers, violated the political rights of citizens, and severely damaged the public interest.

(EAST PROVIDENCE, RI – May 25, 2015) – Dr. William J. Murphy, a concerned resident of East Providence, has petitioned the Rhode Island Superior Court to testify at the ongoing pension settlement fairness hearing Tuesday. He held a press conference at Superior Court in Providence on Tuesday to issue a statement explaining the reasons for his request.

Dr. Murphy opened his remarks by saying that, “The pension settlement is grossly unfair to good citizens of Rhode Island because it adds over $290 million to the unfunded pension debt that the state’s already overburdened taxpayers cannot afford. Even more troubling, the terms of the settlement itself as well as everything about the nature of the process itself fail to demonstrate appropriate sensitivity to the economic hardships this increased tax burden would impose on elderly citizens living on fixed incomes as well as low-income younger taxpayers and their families who remain deprived of adequate economic opportunities in part because of the unaffordable state pension system, the high rates of taxation imposed to feed it, and the resulting negative consequences for the Ocean State’s economic competitiveness.

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James Cournoyer: Please Allow Municipalities to Have the Flexibility of a Three Platoon Firefighting System

[James Cournoyer sent the following e-mail to members of the General Assembly. It is published here with permission. Additional background on this subject is available here.]

Dear members of the General Assembly,

Please reject House Bill H-5473 and Senate Bill S-0533, which seeks to make fire-fighter Platoon Structures / Shift Schedules subject to Collective Bargaining, and therefore potentially subject to the decisions of unelected and unaccountable arbitrators.

These bills serve only to further erode essential Management Rights and the ability of municipalities to exercise home rule.

Employees are already afforded an abundance of work-place and employment protections via the myriad of state and federal labor laws and regulations that currently exist.

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When the Students’ and the Teachers’ Interests Differ

This paragraph out of a 2010 Julia Steiny column has come to mind periodically ever since, but I somehow never got around to posting about it.  It makes an important point that is too easily forgotten as the state argues over standardized testing, teacher evaluations, charter schools, school choice, and even property taxes:

When Marcia [Reback, President of the RI Federation of Teachers] had had enough, she outted the elephant in the room. The interests of the teachers and kids are not the same, but were sometimes in direct conflict with one another. And when their interests diverge, she said, “I represent the teachers.” And shrugged. Who could argue with that?

Think about that.  Here we have a wealthy and powerful union organization, funded with money forcibly taken from taxpayers and frequently used to help elect politicians and modify laws in order to tilt negotiations and the entire educational landscape in its favor, whose mission is, at least in part, to advocate in opposition to the needs of school children.

Reback’s statement has come to mind for two reasons, this week.  The first is that the school choice legislation on which I’ve been working is being heard by the RI Senate Education Committee, today.  The second is that the 0.9% budget that I put in for Tiverton won, and the local school department has been threatening not to go forward with all-day kindergarten in the upcoming school year if it didn’t get its full budget request (even though doing so is a no-brainer).

In both cases, we’ll get some indication whose interests elected officials put first.

That’s a critical question at the local level.  Sure, most cities and towns probably have it written down, somewhere, that school committees are supposed to put the children first, but the incentives undermine that mandate.  Many school committees are stacked with teachers, whether retired or active in other communities, and many others were elected with the help of teachers unions and their activist allies.  Even if they weren’t, the nature of their position creates incentive to balance the demands of the teachers with the needs of the students and their families, not to advocate for the latter.

It’s an imbalanced system that can’t do otherwise than harm children.

 

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First Hearing for Bright Today, Tomorrow

The legislation on which the RI Center for Freedom & Prosperity has been working that would implement the education savings account (ESA) variety of school choice in Rhode Island is scheduled for a hearing tomorrow.  It’s the second bill on the agenda of the Senate Education Committee, scheduled for room 313 at the rise of the chamber — somewhere around 4:30 p.m., give or take.

The bill in question is S0607.  Here is information about the idea.  And here is the membership list for the committee.

Legislation to grant freedom from government monopolies on this scale are a challenge in Rhode Island under any circumstances, but the public is going to have to show growing interest in the possibility for it to have any chance.

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Robbing productive class Peter to pay college graduates Paul

Is the departure of recent college graduates keeping Rhode Island at the back of the pack economically? Progressives in the state’s legislature apparently think it would be beneficial to have taxpayers subsidize student loans. A look at student debt data suggests that would be a major burden on a population that’s already heavily taxed–and that the idea may, in fact, backfire.

The debate has been raging almost since the turn of the millennium: With Rhode Island’s population waning, who’s leaving?  The first assumption was that the rich were fleeing the high taxes, which inspired policies meant to keep them — like an alternative flat tax and a phase-out of the capital gains tax.

Progressives objected that the evidence did not show flight of the rich, and as it turned out, they were right.  The departing demographic was the “productive class” — families in that highly motivated period of their lives when they’re exchanging their time, sweat, and talents for a trip up the rungs to the middle class.

To make that group stay, though, politicians can’t cut taxes in exchange for the campaign support like do for the wealthy.  And the productive class doesn’t use direct government handouts, so the government can’t make them stay by handing out entitlements.  They need less regulations so they can work and innovate, and they need to be able to keep the money that they’ve earned, rather than having it taxed away.

If we look at who is sponsoring two relevant pieces of legislation on the subject, it becomes clear that Rhode Island progressives have decided to try and bribe recent college graduates into staying in the state. Based on the rationale described in the bills, they hope a younger crowd will be like their older brothers and sisters in helping the economy to grow.

Continue reading on WatchDog.org.

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On HealthSource RI on State of the State

4-9-2015 HealthSource-RI: Cost, Performance, Future Funding from John Carlevale on Vimeo.

The key points come at the end, when I suggest that Rhode Islanders should see if their representatives and senators are on some of these bills for socialized medicine and never, ever vote for them again.  It’s frightening that people who want to do these things to us could get into office.

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Getting Economic Development Wrong

Readers may get the impression of a broken record with this post.  Before I go on, perhaps I should explain to the younger folks that records were large black vinyl discs, of about 10 or 12 inches, that would spin on a table called a “record player,” with a needle following grooves in the plastic and thereby transmitted prerecorded audio.  If the record were scratched, the needle would skip across grooves and the listener would often hear the same phrase repeated over and over again.

Anyway, repetition is obligatory in Rhode Island, these days, because the people we’ve elected to public office have the completely incorrect view of economic development.  Here’s Governor Gina Raimondo’s Commerce Czar Stefan Pryor responding to the House Finance Committee’s concern that the governor intends to give him a great deal of money and discretion:

… Pryor bluntly told the committee that the corporation cannot grow the state’s economy without the programs proposed in the governor’s budget. He described a conversation he had with the corporation’s executive staff before he formally assumed his new role earlier this year. Pryor said he asked the staff how Rhode Island would attempt to compete with a company that arrived in the state with a list of project terms provided by another nearby state, such as New York.

“This is not a fictionalization. This is the actual answer I got back: We cannot — on any point,” Pryor said. 

“That’s a problem. We must ensure the appropriate level of accountability and the necessary level of flexibility to carry out this work. But the primary problem that we have is we can’t even counter. We can’t help our businesses in Rhode Island grow.”

Simply put, it should not be the role of government to take money away from the people who live in the state in order to outbid other states’ bribes to lure the economic actors whom government prefers to the state.  Rather, the government’s role should be to ensure that Rhode Islanders have the space — in stability, security, and infrastructure — to make their state a place that attracts the sorts of economic actors whom they prefer.

Politicians sometimes say that Rhode Islanders are Rhode Island’s greatest asset, but they don’t really mean it.  If they did, they’d let Rhode Islanders maximize their own efforts toward building their lives and shaping their state.

The technocratic, Raimondian method of economic development is akin to confiscating money from the music industry in order to subsidize companies that make enhanced record players when they should be leaving the money in the economy and trimming regulations in order to allow Rhode Islanders to develop cassettes, compact discs, and mp3 players.

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Following Up on EITC

While looking into Rhode Island’s earned income tax credit (EITC) benefit for lower-income workers, I asked Director of Revenue Analysis Paul Dion to clarify something in the revenue expenditure report that his office maintains.  The answer might put Governor Raimondo’s proposal to increase the EITC in a new light.

Under current law, recipients of the EITC can receive 10% of the federal version of the benefit, and 100% of it is refundable, meaning that even if the credit is greater than their actual tax liability, they get the money back as a refund.  (I have confirmed, by the way, that beneficiaries do actually have to have some taxable income.)

The estimates for the cost of the program that I cited from the report were based on the law as it was before the General Assembly changed it last year.  Before, beneficiaries could get 25% of the federal EITC, but they would only receive 15% of a resulting refund.

That change slipped through without much notice, though, because budget documents paired it with a reduction of property tax relief for elderly and disabled residents.  The two changes together actually had a taxpayer savings of $3.9 million.  I, for one, had thought that meant the EITC change turned out to be a reduction, so both parts of the package were cuts.

According to Dion, that was not the case.  The EITC change actually increased the cost of the program by $4,293,291.  Roughly speaking, then, the cost of the program, in 2015, is more like $16 million, rather than $12.2 million, with an average benefit of $167 per year.

For the next budget year, Raimondo’s benefit increase would bring the total program up to $19.1 million, about a 70% increase over two years, bringing the total average benefit to around $192 per year.  The following year would bring the program’s cost up to $22 million or so, because the budget increases it by the same increment in the second year, essentially doubling the cost from its 2014 base.

Can Rhode Island really afford to continue ratcheting up its degree of income redistribution?  Add in other burdens on the economy, like the continually growing minimum wage, and it’s little wonder that our labor force is shrinking and employment struggling.

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Regulatory Humility as an Illustration for Civic Principles in RI and IN

Federal Trade Commissioner Maureen Ohlhausen believes in “regulatory humility,” and policy makers on the state level would be wise to hear her out. The concept is one that seems like common sense, but examples in government and politics more generally suggest that humility is less attractive in practice.

With reference to economic theories by the likes of Friedrich Hayek that are, she says, not exactly in dispute these days, Ohlhausen explained at a recent American Enterprise Institute event that regulators should be aware of their limits.  Especially in an era of technological lunges, regulators can’t know everything about the industries that they regulate–let alone other industries that innovation might bring into competition–while facing an unknowable future.

A skim of the legislation proposed in any state will likely show a less-than-humble approach to regulating (although some will be worse than others).

Continue reading on WatchDog.org.