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In Rhode Island, Nothing’s Certain but Death and Taxes

Well, the policies of the State of Rhode Island aren’t getting you to shop, earn, or do business as much as the government expected, but at least you’re dying!

According to an Office of Revenue Analysis report, sales and use taxes came in 0.9% lower than expected, personal income taxes came in 0.6% short, and business corporations taxes missed their estimate by a whopping 12.1%.  That’s $35 million you didn’t produce for your lords in Providence.

The good news is that you’re drinking, dying, and letting the state keep your unclaimed property more than expected, which more than made up the difference ($47 million).  But if that doesn’t sound like a healthy or sustainable way for a government to pay its bills, well, it isn’t.

Comparing the 2016 fiscal year to the year before, of the three sources of tax revenue that would indicate real economic health, only the sales tax went up.  (Patrick Anderson has the income tax wrong in today’s Providence Journal.)  Income taxes were down $10 million (0.8%); business corporation taxes were down $13 million (8.8%); and sales and use taxes were up only $8 million (0.9%).  The net change of all three was a decrease of $15 million.

If it weren’t for dying Rhode Islanders, the state government would have seen its revenue go down from one year to the next, and more than analysts had expected.  That doesn’t bode well for the deficits that the state estimates growing into the future.  The Providence Journal headline, “Rhode Island ends fiscal year with more money than expected,” does us a civic disservice.  We need to acknowledge that the current strategy of our state is not working so that we can change it.

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The 2016 Rhode Island General Assembly Freedom Index

It is a result of the failed status quo of increased government intervention in our personal and business lives that the Ocean State ranks so poorly on so many national indexes. It is not acceptable that we rank 50th with the worst business climate in the nation, 48th on the national Family Prosperity Index, and 47th on the Center’s Jobs & Opportunity Index. It is up to voters to review all the data, and decide whether or not to hold lawmakers accountable for their voting records this November. This trend is exemplified by continued deeply negative overall General Assembly scores on our 2016 Freedom Index.

Loaded with information that will be useful to voters this fall, the Freedom Index is part of our larger transparency initiative. The index examines legislators’ votes in terms of their likely effect on the freedom in the Ocean State.

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Social Services & Negotiating How Much to Take from Others

Sometimes it’s helpful to put stories in chronological order, rather than news-report order, as with this one, from today’s Providence Journal, concerning panhandling and homelessness in Providence:

Complaints about vagrancy, open drug-dealing and drinking exploded after Mayor Jorge O. Elorza decided months ago to stop enforcing ordinances against aggressive panhandling and loitering.

And now the news is that we’ve got Democrat Joseph Paolino getting the heartless 1% treatment because he’s only looking to get $100,000 from the Downtown Improvement District for social workers, along with jobs for two panhandlers, a free apartment for use of a homeless shelter, and up to $5 million in state taxpayer money, in combination with a whole new ordinance that would be even broader than the ones the mayor isn’t enforcing (stopping all transactions through a car window).  The activists protesting Paolino’s PR event have a more comprehensive list:

Less enforcement of minor criminal offenses against people who are poor; more jobs for panhandlers; funding for 150 housing vouchers; drug and alcohol treatment; and amenities such as a day center, public bathrooms and free food distribution. They want the Rhode Island Public Transportation Authority bus terminal to remain.

The core of this proposal is to double down on the policy approach that created the controversy (non-enforcement) and to add into the mix amenities that will draw even more vagrants, dealers, and loiterers to the area.  The protesters chanted, “Whose city? Our city!,” and they sure want it to be evident in the public square each and every day.

In short, the only solutions on the table, apparently, involve a negotiation over how much taxpayers have to pay for how much additional imposition.  Both parts of the plan are sure to exacerbate the underlying problem: namely, a domineering government that strangles the private sector and creates incentives not to work or bring behavior within a tolerable range.

We need another approach that doesn’t treat people as categories or as social-workers’ statistics, but as free individuals (from independent families) who can determine their own destinies in a community of mutual respect and charity.  The longer we deny this necessary change of perspective, the more the government plaque will build up in society’s arteries, making it more and more difficult to clear them.

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And Now on to the General Election and More Debt

With the general election now the next big event (if the primaries in Rhode Island can even be said to be a big event), I took a look at the bonds that will be on the November ballot.  In total, we’ve got $227.5 million (nearly a quarter-billion dollars) in new debt that Rhode Islanders will likely approve, not including the tens of millions more that municipalities are surely seeking.

That’s crazy.  Government bonds are one area of democratic action that make me mildly sympathetic to progressive inclinations to limit the franchise to those with some basic knowledge.  They’re also a reason I wonder if progressives might be incorrect to assume a more-educated electorate would tend in their direction.  What might voters do differently if they understood that debt isn’t just free money to spend on feel-good projects?

Making matters worse, these bonds aren’t just desperate attempts to gain money to build things for which the state should have budgeted with regular revenue; some of them are clearly policy issues.  How many voters, I wonder, would really want to supply the state government with borrowed money to buy up even more property in the state?

Would voters really fall for these schemes if they took the time to consider just how much of it will (or at least can) become subsidies for private businesses — from the URI “innovation campuses” to help private businesses use public-university research to come up with new products and services for a profit to the government purchase and discounted resale of farmland to improvement of ports that benefit a limited number of businesses at public expense?  All of these things benefit narrow groups at the expense of everybody else.

Even more concerning is that, when you add them all together, the picture becomes one not of a few included groups siphoning off public resources, but a comprehensive system that ultimately excludes those who don’t receive some sort of public aid.  If you’re an ordinary Rhode Islander who wants to know who those excluded parties are, take a look at your latest selfie.

Apparently every hyper-informed person in every ideological group believes that the public would agree with his or her beliefs if only people were better educated, but I can’t help but think that my ideological group is correct in that belief.  As the saying goes, everybody’s conservative when it comes to the things he or she knows best.  I simply don’t believe that people who’d been shown the corrupt, incestuous connections building into a web that ensnares our freedom and opportunity would continue to support such things… or the politicians and organizations who work so hard to make them a reality.

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Warwick and RI Can’t Be Generous While Shrinking

The Warwick school department is considering closing up to three schools, and predictably, people aren’t happy about it:

So far, the city has fielded complaints of traffic jams, unfinished construction projects and overcrowding at Warwick’s high schools.

And in an excellent civics lesson, democracy is producing candidates implying they’ll make all the problems go away if elected:

School committee candidate Dean Johnson said he lives nearby and sees the problems every day.

“Nothing but traffic,” he said. “It was 15 minutes from Benny’s to Pilgrim – it was absolutely ridiculous.”

Fellow school committee candidate Nathan Cornell is just 18 years old and said he still has friends in high school.

“At the first day, I called them and say, ‘how was school for you,’” he said. “And they told me it was crowded, especially the lunchrooms.”

Rhode Islanders want to run things as if the state is economically healthy and growing.  It’s not.  When I looked at Warwick’s population in 2012, it had dropped nearly 4% from the 2000 Census to the 2010 Census.  This May, I wondered how the school department could be considering any raises at all (let alone the 10% per year the teachers union reportedly wanted) with a smaller, less-working population with shrunken house values, and what justification there could be when the under-performing district had seen its enrollment drop 34% since the 2000-2001 school year.

Look, if you want neighborhood schools, you need the population and the enrollment to support them.  If you want small class sizes, you need to control the costs of teachers.  Rhode Islanders can’t keep up the economy-strangling approach to government and the union-gorging approach to employees and expect to maintain the quality of life they’ve enjoyed.  It is not paradoxical to observe that when you let government take more money from you and your neighbors and to limit your freedoms, you wind up getting less from government.

What will it take to make Rhode Islanders realize this?  Or more precisely, what will it take to make Rhode Islanders realize this and then change things rather than simply move away?

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Inching Progress on JOI (Jobs & Opportunity Index) Is Not Enough

There has only been one way of doing things in Rhode Island for far too long. We have seen the results in our state’s failed rankings. Yet, the insiders and elitists love to point to the rising employment figure to justify their status quo ideas. For this reason the Center has developed the Jobs & Opportunity Index (JOI). If our elected leaders are to craft and advance legislation that removes barriers to the creation of meaningful work and that provides broader economic opportunities for all Rhode Island families, it is important that lawmakers are provided with a deeper measure of economic well-being.

While on the July Jobs & Opportunity Index Rhode Island edged past New York to claim the rank of 47th out of 50 states in the nation, this slow progress is not enough. Rhode Island families deserve more than these bottom results.

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How Much to Lure High-Tech Company into Low-Tech Building?

When I hear that Internet innovator PayPal is considering a move into the Providence Superman Building — which has been vacant for so long, if I recall correctly, in part because it lacks capacity for the technology of modern companies — I can’t help but wonder what the dollar amounts will be.  Here are Ted Nesi and Dan McGowan:

Matt Sheaff, a spokesman for the R.I. Commerce Corporation, declined Wednesday to comment specifically on whether PayPal is looking at the building but confirmed that state officials remain in active discussions with the company about potentially expanding into Rhode Island. …

One sticking point on a PayPal-Superman deal could be cost. [Owner David] Sweetser has repeatedly argued the building needs significant renovations that cannot be funded without government assistance.

Oh, and don’t forget: “Any transaction would also likely require a break on Providence property taxes, which are among the highest in the country for commercial real estate.”

So Rhode Island’s economic development strategy is to create an environment in which businesses have difficulty operating and “iconic” old buildings can’t find non-government investment to bring them up to date.  Then the governor goes out looking for big companies that would represent, as the article puts it, “a major coup” and promises to give them money taken from the  residents and businesses who are still able to manage to survive in the state, somehow.

This approach may do wonders for political insiders and corporate big-wigs looking for crony relationships.  For the rest of us — particularly those of us struggling to get ahead in the world — not so much.

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Don’t Like Tax Competition? Be the Shelter.

This was pretty much my response upon hearing that the European Union wants Ireland to charge Apple more taxes, as Kevin Williamson articulates it:

We could decry overseas tax shelters for the next decade or two, and change absolutely nothing, or we could — here’s a crazy idea — be the tax shelter. You know what Ireland, Norway, and Sweden all have in common? Within living memory, all were desperately poor. That’s why there are more Irish Americans than Irish nationals, more Norwegian Americans than Norwegians, and more Swedish Americans than Swedes. Hunger will make you get on a boat. Sweden grew wealthy under a form of laissez-faire capitalism strikingly different from the EU norm today, with lower taxes and a smaller public sector than its European counterparts. Norway did much the same thing, helped along by a great deal of oil (which can be both a blessing and a curse). Ireland eventually got sick of being poor and followed a similar program.

As Williamson goes on to suggest, our tax system is shot through with deliberate loopholes and special deals; we should just make it low across the board.  If that requires some reduction in government spending, even better.

I’ve written before that the approach government in Rhode Island takes to economic development proves one thing conclusively:  Progressives are interested in economic development only insofar as it does not interfere with government’s heavy hand.  The want the economy to grow as much as it possibly can… with heavy regulations, taxes, and government spending remaining intact.  That is, those other things come first; they’re prior to the wealth and well-being of residents.

(The same goes for education, by the way.  Labor unions and indoctrination take priority over the prospects of actual students.)

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Frias Calls on Speaker to Ban 38 Studios-Type Moral Obligation Bonds

The following was just blasted out via e-mail.

MR. SPEAKER, TAKE THE PLEDGE: NO REPEAT OF 38 STUDIOS

Cranston, RI – Last week, Rhode Island reached a settlement with Wells Fargo Securities and Barclays for approximately $26 million, but taxpayers are still expected to pay millions for the 38 Studios moral obligation bonds. The former Economic Development Corporation issued moral obligation bonds as a result of 2010 legislation supported by Nicholas Mattiello when he was House Majority Leader. Recently, in a commentary, Scott MacKay, of Rhode Island Public Radio, asked “Why Won’t Pols Who Gave Us 38 Studios Pledge No More Moral Obligation Bonds?”

Steven Frias, Republican candidate for Rep. District 15, commented: “I have been campaigning for two months on a platform calling for the end of moral obligations in order to prevent a repeat of 38 Studios.

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Check out Your Legislator on the “38 Studios Legislator Scorecard”

The public is outraged that there has been zero accountability on the 38 Studios issue. The insiders have failed to provide any transparency by releasing the 38 Studios documents. The Center is now offering our own version of transparency by publishing a new scorecard that tracks and grades the voting records of lawmakers on the 38 Studios affair. Many people consider it extremely hypocritical for any lawmaker who rated an F or D on this scorecard for their past record to now jump on the band-wagon by calling for the Attorney General or Governor to release the documents.

Despite the johnny-come-lately calls from many lawmakers for the release of documents from the government’s 38 Studios Investigation, 81 of the 113 sitting General Assembly lawmakers graded an “F” on their related voting records. On the scorecard, we documented and scored legislative votes on 15 related bills, amendments, and budgets since 2010 related to the 38 Studios disaster. There have been many missed opportunities for transparency. Why do they feel they have to protect the political machine?

As we approach the November elections, we’re providing voters with the voting records of their elected officials so they can decide whether or not to hold them accountable. It is up to you to choose if you want to change the Ocean State. Overall, of the 178 lawmakers, 132 graded an F, 10 a D, 8 a C, 6 a B, and 14 an A. You can see the full scorecard by clicking here now.

Rhode Islanders have had enough of the insider machine. It is time to make a complete turnaround. We must adopt an open and transparent public policy culture that can make our state a place where our families can be prosperous. The 38 Studios disaster is the perfect example of everything wrong with the way our state is being run. You do not have to tolerate the cronyism and elitist attitude any longer. Don’t be on the sidelines. The rigged system in the Ocean State has kept too many people out of the process. Now is the time for you to speak out and demand that the status quo changes.

[Mike Stenhouse is the CEO of the RI Center for Freedom and Prosperity.]

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A Culture Of Silence In The Ocean State

In America, we must all remain free to voice our opinions without fear of state-sponsored persecution. It is reprehensible for any political elitists to collude to prosecute those who disagree with them on policy. For this reason, the Center is assisting a national nonprofit organization in a lawsuit demanding that the Rhode Island Office of the Attorney General release documents they have refused to make public. We believe that General Kilmartin, and his fellow enemies of debate, are seeking to maintain a cloak of invisibility over the national AG group’s attempt to crush dissent by those who disagree with their radical climate change agenda.

In June, the Center published an energy report that demonstrated how oppressive state renewable energy mandates, as part of the national climate change agenda, will cost taxpayers and ratepayers hundreds of millions of dollars. These mandates will cause job losses in the thousands, and artificially raise local electricity rates. It is research and advocacy such as this that Kilmartin and his AG group are seeking to muzzle and potentially prosecute as criminal. No matter where you stand in the climate change debate, citizens must have the right to speak freely.

This culture of silence in the Ocean State is chilling. Why do so many elected officials and prominent people want you to be quiet? The rigged system protects the corrupt insiders. As we saw in the recent 38 Studios political whitewash, the machine will do what it takes to keep you from knowing the truth. Rhode Islanders want a government that works for everyone not just the chosen few. Things do not have to be this way in our state. We can have an open state government that serves the real needs of our families, and protects our freedom to achieve our dreams.

Elected officials saying things are getting better in Rhode Island is not enough, they must take action. We need action. Unless the Ocean State adopts the proven free market reforms that can transform our state, we will continue to see the negative trends continue. You can change the status quo. You must not allow anyone to silence you. By speaking out on the issues that affect your family, you can make a powerful statement to the insiders that you have had enough. Now is the time to be bold, and have our public policy culture make a complete turnaround.

[Mike Stenhouse is the CEO of the Rhode Island Center for Freedom and Prosperity.]

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Bike Paths, Lights, Sustainability – RhodeWorks Tolls Turn into Huge Bait-And-Switch

Am I going crazy? (Don’t answer that!) Didn’t Governor Gina Raimondo sell us on her unnecessary and highly destructive RhodeWorks toll plan by saying that the money would go to repair our very unsafe (oh so unsafe; most unsafe in this quadrant of the galaxy) bridges? But look at this RhodeWorks Quarterly Report!

Bike paths, lights, guardrails, road re-paving, something called “I-95 Sustainability” – RhodeWorks is being spent on all kinds of projects, not just bridge repair. Remarkably, there is even a RIDOT sign that CONFIRMS money from the RhodeWorks/Toll Project is being spent on a bike path!

What the heck??? Tolls were supposed to go to our unsafe bridges! Where did all of these other projects come from?

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Belling the Taxpayer Cat

In Aesop’s fable about the council of mice, a colony of murines gets together to figure out what to do about the household cat, which is obviously an impediment to their comfort and happiness.  A young mouse suggests that they place a bell around the feline’s neck, and then they will always have warning as it approaches.  The council agrees that it is a brilliant idea until an old mouse hobbles forward and asks who is going to bell the cat.

We can safely assume that Aesop did not have public-sector pensions in mind when he wrote his fable some two-and-a-half millennia ago, but the moral of the tale clearly applies to the situation that George Will describes in Illinois and across the country:

Illinois is a leading indicator of increasing national childishness — an unwillingness to will the means for the ends that it wills. Nationally, state and local governments’ pensions have somewhere between $1 trillion and $4 trillion in unfunded pension liabilities, depending on, among other things, assumptions about returns on pension funds’ investments. The Wall Street Journal reports that in 2001, the 20-year median return was 12.3 percent, and every percentage-point decline in returns increases liabilities by 12 percent. Last year, the largest fund, California Public Employees’ Retirement System, which assumes 7.5 percent returns, instead gained 0.6 percent. This, in the sixth year of the recovery from the 2008–09 crisis, was the worst performance since then — and another recession will surely happen.

Nationally, neither party is eager to talk about the rickety structure of the entitlement state, although the Democratic platform promises to make matters worse. Although scheduled Social Security benefits vastly exceed the value of worker and employer contributions plus interest, the platform, a case study in reactionary liberalism, opposes even raising the retirement age. This, even though benefits are available at 62, three years younger than when the system was created in 1935, when life expectancy at 65 was 12.5 years. Today, it is 19.3 years for men and 21.6 for women. If in 1935 Congress had indexed the age of Social Security eligibility to life expectancy, the age today would be 72.

The council of big-government mice has concluded that the brilliant solution for maintaining the support of powerful labor unions and for gathering the votes of the older citizens who are most inclined to head to the polls and the poor who not only may be driven to the polls, but also make for compelling guilt-trip propaganda, is simply to proclaim payments to them.  So far, they’ve gotten away with pretending that these unsustainable systems will continue to work indefinitely, but they do not wish to acknowledge fiscal reality, much less bell the American people with more taxes.

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ME vs. RI: A State Works by Making Work Work

In The Daily Signal, Rachel Sheffield highlights some states that have taken the lead in reconnecting welfare programs (notably SNAP, or “food stamps”), with the inclusion of New England’s own Maine:

The decline in food stamp rolls between March and April of this year follows the re-establishment of work requirements in a number of states. On Jan. 1, 22 states had to reinstate the federal work requirement for areas of the state or the entire state because their waivers expired.

Some states did not wait until their waiver to end, however. Instead, they took a proactive approach to ensure that able-bodied adults were encouraged toward work.

Maine, one of the most proactive states in reinstating work requirements for food stamps, saw its caseload of able-bodied adults without dependents decrease by 80 percent within just a few months after re-establishing the work requirement.

Readers who’ve paid attention to the RI Center for Freedom & Prosperity’s Jobs & Opportunity Index (JOI) won’t find Maine’s inclusion surprising.  From 2012 to the latest report, Maine has climbed from 32nd in the country on the index (for which SNAP enrollment is one of 13 indicators), and second-to-last in New England, to 17th in the country, which is second best in New England.  Overall, Maine’s SNAP enrollment dropped 24% over that period (60,441 people), compared with a 5% (8,592 people) reduction in Rhode Island.

Starting with the year of Maine’s SNAP policy change (2014), Mainers have benefited from a 16% reduction in state and local taxes, while Rhode Islanders have endured a 10% increase, according to U.S. Census data.

These differences are starting to make a real difference to the people of the respective states.  Per the underlying data for JOI, the first six months of this year have brought Maine a nine-times-larger increase in employment, compared with Rhode Island, while jobs in the state have increased there, while decreasing here.  Personal income in Maine is up 2.36%, compared with only 1.85% in Rhode Island.

Whether these comparisons — like comparisons with states that have implemented right-to-work policies — will show an expanding disparity between a state that is making positive, small-government, free-market reforms and one that is not, those of us who live in Rhode Island should begin demanding that we no longer be the control group for these tests of economic policy.

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In Rhode Island, the Government Is Taking Away Our JOI

The RI Center for Freedom & Prosperity today released its Jobs & Opportunity Index (JOI) report covering the month of June, and even with nine of the 13 underlying datapoints being updated, Rhode Island couldn’t budget out of 48th place.  Indeed, if more states than two trailed the Ocean State, we probably would have sunk a bit.

For this post, though, I’ll focus on a finding from within the calculations of the index.  The following charts show the ratio of personal income to local, state, and federal taxes for Rhode Island, New England, and the United States, first from 2005 to the latest-available month and then zooming in with a starting point of 2012.

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The first takeaway from these charts, of course, is how much more Rhode Island takes from its people in taxes.  The Rhode Islanders’ income is around 10 times the total tax take.  For our region and our nation, however, the average is more like 13.5 times.  In the Ocean State, in other words, personal income is about 26% lower than it would be to support the same tax burden in the average state.  From the other direction, the state simply taxes its people too much given their income.

The second takeaway is that Rhode Island moves to increase its tax take as quickly or more quickly than people increase their income.  There’s no reason the government at any level must grow to reflect the income of the people.  Government provides a limited set of services, and they aren’t entirely income dependent.  Indeed, the wealthier a society is, the less it should need or want government to do.

After the income-to-tax ratio grew steadily from 2007/2008 to 2012, it dropped nationwide.  In the first six months of this year, anyway, the United States and, even more, New England have seen an uptick, while Rhode Island remains mired at its 10x.

We hear a great deal about fixing Rhode Island’s economy by giving money to government that it can give away to favored private interests.  The charts above illustrate one reason many of us believe that is exactly the wrong approach.

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​How Does the Governor Reconcile Her Support for Lower Electric Costs with Her Push for Renewable Energy?

All eyes on Philadelpha and the Democrat convention, of course. Thanks to Wikileaks, by the way, for furnishing an interesting Rhode Island connection for us all to speculate on.

Meanwhile, it’s important not to totally lose sight of stuff going on back in Rhode Island. The debate about a natural-gas powered electric plant proposed for Burrillville, for example, moved into the arena of the PUC this week.

The hearings are set to run Monday, Tuesday and Wednesday and will differ markedly from the public hearings that have been held so far on the application, which gave Burrillville residents and others the opportunity to air their opinions and concerns about the power plant but didn’t allow for any back and forth.

On Thursday, Governor Raimondo called into the WHJJ Morning News with Ron St. Pierre to defend her support of the plant. (Podcast.) In doing so, she said

Well, I support natural gas because I support lower energy costs and lower electricity costs for Rhode Island.

That’s a pretty categorical statement. Yet only seven months ago, the Governor signed an Executive Order

… committing state agencies to get 100 percent of its power from renewable sources by 2025

Further, in February,

A bipartisan group of 17 governors, including Governor Raimondo, have signed a pact agreeing to work together to build modern, sophisticated transmission grids and to advance clean energy and transportation technologies. Called the Governors Accord for New Energy, the agreement includes commitments to diversify energy generation and expand clean energy sources

All of these actions by Governor Raimondo are a big problem for everyone’s electric bill and a huge conflict with what she said on WHJJ. Because the dirty little not-so-secret about renewable energy is that it is far more expensive than conventional energy. Further and worse, as an important new report by the Rhode Island Center for Freedom and Prosperity demonstrates, the state’s continued pursuit of renewable energy would come at a high cost to ratepayers and taxpayers while providing an extremely poor return on greenhouse gases abated BY THE EPA’S OWN STANDARDS. In fact, the cost of renewable energy to Rhode Islanders could be as much as five times higher than the EPA recommends.

The Governor seems to want to manage her stance on energy in silos. “I’ll support the gas powered energy plant and say that I support lower electric rates and that will cover me with a lot of Rhode Islanders. Meanwhile, I’ll aggressively push renewable energy mandates onto ratepayers and taxpayers and that will satisfy the environmentalists.”

But it does not work that way, on any level. Firstly, the walls of the silos are not opaque. So everyone, whether inside a silo or outside of it, can see what she is doing in all of them. Far more importantly, the effect of her actions in one silo do not remain contained therein: what she does in one – the renewable energy silo, in this case – will most definitely have the effect – higher electric rates – that she claims to deplore as she’s standing in another.

Her words, to phrase it more plainly, do not match her actions. And that’s a real problem for the ratepayers (let’s remember, this category includes businesses) of a state that has some of the highest electric rates in the country. They very much need her actions – a wholesale repeal, not an expansion, of very expensive renewable energy mandates – to match her words when they open their electric bills every month.

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When the High-Tax Advocates Feel Free to Speak Their Minds

If the Town Council follows through with the Budget Committee’s threat to end trash pickup in Tiverton (or charge extra for it), it will be because elected officials and their supporters want to teach taxpayers not to attempt to control their taxes.  But the real lesson will be that we must be more careful about whom we elect to office.

At the May 21 financial town referendum (FTR), 1,224 voters out of 2,210 approved Budget #2, for a 0.9% tax increase, resulting in zero increase in the property tax rate.  That made supporters of a much-bigger tax increase angry; here are some examples of things that they wrote on the Facebook page of the local activist group Tiverton 1st:

  • May 21. Budget Committee member Deborah Scanlon Janick: “Make sure you all personally thank Justin Katz when you lose the services you are used to.” (Somebody even printed up business cards at this time, telling people to call my cell phone and complain.)
  • May 22. Former Town Council Vice President Joanne Arruda: “First thing… snow plowing… I know this is awful, but those people who put in this budget out there and had their minions vote for it will have to be affected.”
  • May 22. Tiverton 1st organizer Mike Silvia: “… in this town, the uninformed and greedy followers who outnumber the community-minded aren’t smart enough to know they’re being played.”
  • May 26: Tiverton 1st activist, school department employee, and school committee candidate Linda Larsen: “Unfortunately, [voters] won’t care until they feel pain. … It won’t make a difference unless it becomes personal.”
  • May 26: Tiverton 1st organizer Kelly Anne Levesque: “I would like to see trash pickup removed which will require you to schlep your maroon bags to the dump or hire a private company.”
  • June 7: Deborah Scanlon Janick: “The residents of Tiverton will pay the price for voting for Budget 2 or for not voting at all.”

Continue reading on Tiverton Fact Check.

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OPEB: Another Hole and a Proof of Problem

This Patrick Anderson article about Rhode Island’s liability for other post-employment benefits (OPEB) for employees shouldn’t slip by without notice for two reasons.  First, OPEB is another drain on the budget, which already limps along from year to year in structural deficit:

Rhode Island needs to contribute $60.7 million toward non-pension retiree benefits, primarily health insurance, in the budget year starting in July 2017, the state’s actuary said Friday.

That FY2018 contribution was approved Friday by the Other Post Employment Benefit Board, the panel that oversees health insurance liabilities for retired state employees, teachers, judges and state police officers.

Perhaps more significant, though, is the teachable moment arising from the math involved:

The OPEB trust fund assumes a 5-percent annual investment rate of return and made 9.2 percent in 2014, then 7.8 percent in 2015, the report said.

Why should the OPEB trust fund assume a 5% return when the pension fund assumes 7.5%?  To be more clear-eyed than cynical, the reason seems likely to be that 5% is more realistic (although still at least one percentage point too high for an assumption that’s supposed to be a sure thing), but the state’s politicians and other insiders simply couldn’t withstand the reality of a more responsible investment plan.

Then-Treasurer Gina Raimondo kicked off her pension reform initiative with the “crisis” created by lowering the return assumption by just half a percentage point.  Lowering it another 2.5 percentage points (let alone 3.5) would make it absolutely plain that the state government has been hoodwinking the public (and its employees) and faces either a huge tax increase, a huge benefit reduction, or a huge elimination of other services.

We shouldn’t delude ourselves.  The bill is coming due, and the longer we allow the state government to put off acknowledging it and addressing it, the more painful it’s going to be.  Unfortunately, the people whose elected or appointed jobs are to keep the state running smoothly are almost certain to let the irresponsibility drag on in the hopes of either a miracle or a path to quietly impose higher taxes on us, either through our state taxes or our federal taxes.

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The Pension Disaster Will Be Addressed

Springboarding from the woes of California’s public-sector pension problems, The American Interest suggests that it might be too late to avoid some sort of crisis with such pensions across the country:

This long-running failure of governance may be irreversible. All that’s left for state governments to do now is reform pension systems for new employees, phasing out defined-benefit systems for 401(k)-style plans, and, where possible, trim benefits or raise contribution requirements for current workers. In the meantime, federal policymakers should start thinking about a reform-for-relief framework that will enable states and localities to honor their obligations to retirees while getting their finances back under control for the long haul.

We should consider it evidence of the extent of the problem that the generally wise American Interest falls back to the irresponsible cop-out that the federal government ought to step in and make the problem go away — as if the feds aren’t already headed toward dozens of trillions of dollars in debt absorbing every other bad policy decision made throughout the country over the past century.  That is, pensioners relying on the writer’s solution would have to hope that none of the other myriad problems and looming crises comes to a head and absorbs the nation’s very last tolerance for debt before the pension problem.  (My wager is that the multiple crises will cascade into one uber crisis.)

If the idea of the government takething away the pensions that it gavethed is inconceivable, peruse the ruling issued this week by Rhode Island Superior Court Judge Sarah Taft-Carter (internal citations removed):

It was clear that to avert disaster the City had to act. (p. 11)…

Notwithstanding a finding of substantial impairment, a contract modification remains constitutionally valid if the City produces sufficient credible evidence that the modification was done to further a significant and legitimate public purpose and if doing so was reasonable and necessary. (p. 30)…

… the Court is satisfied that the City has produced sufficient credible evidence through the testimony of Mayor Fung, Mr. Strom, and Mr. Sherman that the Great Recession, the decline in state aid, and RIRSA’s requirements created an unprecedented fiscal emergency neither created nor anticipated by the City. (p. 34)

Taft-Carter affirmed that cities cannot be expected to raise taxes indefinitely, and unless I missed it, she didn’t so much as speculate that the state could be forced to intervene.  The same will prove true up the scale, all the way to our giant national blob of debt.  At the state level, one could imagine a judge considering something like my argument about the flight of the “productive class” as evidence that higher taxes would accelerate a death spiral already underway.

For those who think the same couldn’t happen at the federal level, one can only suggest that they not take the risk of finding out.

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Support for Families More Effective than Government Co-parenting

Grover Whitehurst of Brookings has made an attempt to compare research findings concerning the effects of different programs on the test scores of young students, and the findings conflict with the progressive preference for increasingly moving responsibility away from people and toward government:

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Whitehurst suggests:

The results illustrated in the graph suggest that family support in the form of putting more money in the pockets of low-income parents produces substantially larger gains in children’s school achievement per dollar of expenditure than a year of preschool, participation in Head Start, or class size reduction in the early grades. The finding that family financial support enhances academic achievement in the form of test scores is consistent with other research on the impact of the EITC showing impacts on later outcomes such as college enrollment.

The most important takeaway from this is that it reinforces conservatives’ contention that government should not seek to displace parents, relieving them of responsibility for raising their children.  Government policy should seek to strengthen families.

Of course, the fact that this would tend to reduce the influence of government and (therefore) progressives leads me to expect Whitehurst’s research not to have a significant effect on progressive policies.  Indeed, in his subsequent discussion, Whitehurst endeavors to speculate that imposing restrictions on families’ use of the funding would be even more effective than simply improving their financial standing. However, if giving parents money is so much more effective than public funding of pre-school programs, one might question Whitehurst’s belief that letting the public funding stop in the parents’ accounts for a moment would be better than both approaches.

Note, too, the limits of Whitehurst’s consideration.  The first and irreducible assumption is that government must do something to bring about specific social outcomes.  If supporting families through broad welfare that is largely free of strings is so much more effective than building government programs, one might expect even greater rewards from getting government out of the way of families.  Let people act in the economy without the weight of high taxes and oppressive regulations; allow communities and states to determine their own economic and social policies; allow the society, broadly, to follow cultural traditions that have proven, over time, to be the healthiest for human society (such as the traditional institution of marriage).

Unfortunately, it’s much more difficult to test for and make charts of the effects of progressive redistribution on the whole society.  Researchers can’t know (to simplify) that taking EITC money out of the economy wound up hurting other families, resulting in worse test scores.  Still, taking in all of the evidence, the weight of it suggests that leaving people free is not only the most moral approach, respecting civil rights, but is also likely to prove to be the most effective system by any standard apart from the wealth and power of government.

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National Popular Vote and the Company State

Yesterday, Dan Yorke had Providence College Political Science Professor Joseph Cammarano on his 630AM/99.7FM WPRO show, discussing a variety of topics.  When I first tuned in, a caller was growing angry that the professor wouldn’t say for whom he intended to vote, and over the next hour or so of sporadic listening, I came to see how Cammarano might have inspired that response.  His bias came through, most notably in his drive for equivalence with Republicans whenever a caller brought up Democrats’ malfeasance.

One question that came out of nowhere was the professor’s opinion of the electoral college, and he clearly supports the efforts of states, including Rhode Island, to work around the Constitution with the national-popular vote movement.  In not so many words, he that it makes no sense — given our increasingly national culture — to have a system in which we think of states as states, regardless of their population.  That is, he thinks it’s obvious that states don’t have an equal standing of themselves, as political entities, necessitating that the votes of people in low-population states are weighted to give them greater balance against the national votes of people in high-population states.

When this topic came up a few years ago, I mainly thought of it in terms of politics and the calculation for Rhode Island.  After all, Democrats tend to do better in urban areas, so the General Assembly’s signing on to the national popular vote compact was a partisan act, not a representative one (as in advocating for the people whom one actually represents).  The reason Rhode Island gets no attention in national politics isn’t that we’re small; it’s that we’re one-sided.  Republicans have no chance, and Democrats don’t have to work for our electoral votes.  But the reality is that the national popular vote scheme would cut Rhode Islanders’ electoral sway in half.  Why would our representatives agree to do that?

Cammarano’s short statement was the first time I’ve considered this question since stumbling upon the idea of the “company state.”  I’ve been noting that certain cities and the whole state of Rhode Island are moving toward a civic business model in which government becomes the major industry, with incentive to import or create new clients for its services as justification for taking money away from other people in order to finance them.  As Rhode Island has long been learning, the flaw in this model is that the payers can simply leave, and the state is under constant risk that, due to recession or otherwise, people in other states will push back on the federal government’s subsidization of the scheme.

The electoral college, in other words, is one protection against having this “company state” model become truly national, such that municipal and state governments that rely on the compulsory transfer of wealth will be able to reach any wealth from sea to shining sea.

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The Status Quo’s Boasts – And Rhode Islanders’ Complacency?

Rhode Island has the worst business climate in the nation. It ranks 48th on both the Family Prosperity Index of the American Conservative Union and the Jobs and Opportunity Index of our Rhode Island Center for Freedom & Prosperity. It has virtually zero population growth, and it has suffered the ignominy of dozens of other near-bottom rankings. Despite all this, our Rhode Island political class appears content not to rock the boat. The question remains why are they satisfied with being in the bottom of the pack?

When we hear boasts that there were no broad-based tax increases in the recently passed state budget, we hear an attitude of complacency that is typical of the political elite, whose main goal is to perpetuate the status quo, as opposed to making the hard decisions that will improve the quality of lives of its residents. The irony, of course, is that our political leaders seem to genuinely believe that they have made major positive reforms. Maybe, relatively speaking, they just don’t understand what major reform looks like.

If Rhode Island’s complacency continues – both by our political class and by voters who re-elect it year after year – we will soon see Rhode Island lose one of its two congressional seats and shamefully slip to last place when it comes to renewing hope and opportunity for our families. Rhode Island needs to dare to disrupt the status quo and boldly evolve itself into a regional outlier so that we can become a magnet – on our own – for businesses, jobs and families.

In this wild and unpredictable year of national politics, the big question is whether or not the tsunami of public discontent will reach our Ocean State shores and compel voters to send a necessary jolt to our political class. Rhode Island politicians will not have the chance to change their act until next year. However, voters can lead the way by acting this year to deliver a clear message at November’s ballot box. I encourage you to continue to speak out against the status quo public policy culture in Rhode Island. Your voice is powerful, and things can change.

[Mike Stenhouse is the CEO of the Rhode Island Center for Freedom and Prosperity.]

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Katz’s Kitchen Sink: But Bountiful Parody Song

As the fiscal year comes to a close for the State of Rhode Island and most municipalities in June, it’s ever more clear that civic life in Rhode Island revolves around government budgets.  For insiders, town, city, and state budgets represent their hopes and dreams — often their livelihoods.  For everybody else, though, they can be a time of dread, as the impossibility of real change is affirmed, cherished programs are threatened (if you’re on that side of the ledger), or more money is confiscated from your bank account (if you’re on the other side of the ledger).

Herewith, a parody song to the tune of “But Beautiful,” inaugurating a somewhat regular new video series, “Katz’s Kitchen Sink,” which will feature whatever sort of content I think might be useful to throw at the problems of the Ocean State — songs, short skits, commentary, or whatever.

Download an mp3 file of this song.

But Bountiful

A budget’s taxes, or it’s pay
Handouts are credits or giveaways
We’re investing, or we save
But bountiful

Bountiful, our industry’s bureaucracies we run
It’s a budget you have no choice but to fund

A budget appropriates, or it steals
Votes are traded in backroom deals
Nobody’s sure just what’s real
But bountiful

And I’m thinking if I had chips, I’d cash them in for gold
And take them to a more bountiful abode

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The Minimum Debt Load of Rhode Island: $16 Billion

Just for fun (come on, you know you do it, too), I thought I’d go through the audits for the State of Rhode Island and the cities and towns contained therein to total up the amount of debt.  The exercise wasn’t intended to be comprehensive, so I just grabbed, as well as I was able, the long-term debt or liabilities from each government’s statement of net position (including the current portion for long-term liabilities).  The numbers therefore capture pensions, other post employment benefits (OPEB), bonded debt, and other ways in which a town, city, or state can owe somebody money.

The numbers therefore are extremely conservative.  The incentive, for governments, is to minimize the amount of money that it looks like they’re spending, and truly cutting through the methods for answering that incentive would be a very significant project.  One notes on the audits, for example, that some portion of pension debt is calculated as a “deferred outflow” rather than a liability, and so would not be included; in Cranston, for example, the deferred outflow for pensions is $36.6 million, while the liability is listed as $1.5 million.  (There is typically a deferred inflow, too, but even subtracting in from out tends to produce a greater liability; $1.8 million in Cranston.) Remember, too, that the calculations that government auditors use to figure pension and OPEB liabilities can underestimate a more-realistic assessment of liability by four or five times.  Oh, and none of this includes other government units that might not fall under these specific audits, such as fire and water districts.

Consequently, the $16 billion total that this method produces is pretty much the absolute minimum that governments in Rhode Island have saddled residents with.  Using the latest U.S. Census data provided by the state Dept. of Labor and Training, this comes out to $15,180 for every person in the state, or 27.3% of the total annual income of Rhode Islanders.

If you want to darken your financial picture, for some reason, add that amount to the $154,000 or so each of us owes for the federal debt.  Then factor in entitlement programs like Social Security and Medicare… and don’t forget to adjust everything up for accounting gimmicks and understatements, as with pensions.

In short, the $16 billion of acknowledged debt in Rhode Island is just the tiniest tip of an iceberg of hopeless proportions.  Don’t fall for the distractions, either: The bill is going to come due, and somebody is going to get shafted.

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RI Foundation’s Sneak-Attack on Free-Speech

Should Rhode Islanders silently accept the corrupt political climate that has failed so many of us? Or should we, as free citizens in our uniquely American democracy, be encouraged to freely speak-out and engage in a battle of ideas so as to help make our state a safer and more prosperous place to live, to raise a family, and to build a career?

It is the Center’s primary mission to stimulate such rigorous public debate about important policy issues. However, the most powerful and wealthy nonprofit organization in our state is asking you to shut up.

As part of its own 100th year celebration, the Rhode Island Foundation this week published and promoted a video, which, in essence, encourages people to remain silent and to accept that the political elite know best about what’s in your and my best interests.

In what initially seems to be a video for kids, it is shameful that the Foundation hides its adult message behind children. With the frequent backdrop of our State House, it is obvious that the video is intended to be political. Under the pretense of “be nice or be quiet”, the Foundation is clear in its message that is directed to all of us – that we should just “stop complaining”.

Stop complaining about Rhode Island’s 48th place ranking on the national Family Prosperity Index?
Stop complaining that so many of our neighbors cannot find or have given up looking for meaningful work?
Stop complaining about the political corruption that continues to embarrass our state?
Stop complaining about the lack of bold and decisive action to do anything significant about it?

I don’t think so.

It is also despicable that the Foundation forces these children to read text that has to be bleeped.