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What If Rhode Islanders Really Had a Say on Budgets, Like Tiverton?

In this video, I wonder what would happen if the people of the Ocean State had a say in the budgeting process. In Tiverton, electors in town have the ability to submit budgets directly to voters. For the third year in a row, a budget that I submitted for the financial town referendum to set Tiverton’s upcoming budget won a strong majority of votes. That makes three years with tax increases under 1%.

By design, Rhode Island politicians at the state level leave the public no time to digest the budget and express their preferences to their representatives, and most of their representatives have no intention of bucking legislative leaders anyway.

Imagine, though, if Rhode Islanders really did have a say, like we do in Tiverton. What do you suppose the result would be?

Watch this new video to learn more now.

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Government-Pushed Pre-K May Be Worse than Neutral

Progressive politicians, like Rhode Island Democrat Governor Gina Raimondo, simply assume that more government support for pre-K is a good thing, and the news media doesn’t help.  In 2014, for example, WPRI reporter Dan McGowan characterized RI’s program as “one of the most successful state-funded pre-K programs in the country,” but all of the benchmarks used to determine “success” are inputs, like teacher degrees, free meals, and number of students per teacher.  “Success” in those terms is basically measured in the cost of the program — as in, “we’re successful at making people give us money and power.”

Lindsey Burke and Salim Furth, of Heritage, have looked at the research and found that government-centered pre-K programs have no measurable academic benefit and may, in fact, do harm academically and, especially, behaviorally.  Sure, it creates new union jobs and encourages more families to organize themselves around government dependency, but that comes at a cost.  Note this, for example, in Quebec:

The program has had a large impact: privately funded child care arrangements have almost disappeared, and Quebec has the highest rate of subsidized child care in Canada, at 58 percent in 2011.

One can’t help but wonder whether that was more the goal than an unfortunate side effect, but other results were surely unintentional:

Regrettably, new research has found that children who became eligible for the program in Quebec were more anxious as children and have committed more crimes as teenagers. The availability of day care clearly worsened children’s non-cognitive “soft” skills.

Why is this?

The effects could be occurring through any (or all) of three channels:

  1. Worse care for children who would have been cared for by a family member if day care were not subsidized;
  2. Worse care for children who would have gone to a less-regulated, non-subsidized day care; and
  3. Spillover impacts on children who are not participating.

So while all of the “success” benchmarks cited to push Rhode Island’s program forward were of the form “we think this must be a good thing,” evidence of actual outcomes is not encouraging.

We can predict, however, how government will respond as its programs harm the economy by withdrawing money that would have been better spent elsewhere and harm students by reshaping their early lives to put them in something resembling the public school system that we already know to be failing in Rhode Island:  Elected and appointed officials will all claim that they need more money and more authority over our lives and must put more private companies out of business in order to fix the intractable problems of our humanity.

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Standing Firm Against Political Abuse

With local progressives’ lashing out and attempting an overt Saul Alinsky ploy to tar me as the cause of lost basic services in Tiverton, I’ve been giving a lot of thought to moral culpability.  A couple of days ago, I suggested that groups that are acting in the interest of their communities position themselves so that good policy benefits them politically, while the hurt-the-taxpayers faction currently in power in my town are pushing bad policy with the expectation that it will be good for them politically.  Objectively, one must admit that raises the questions of intention and blame and who is responsible if standing up for good policy nonetheless has adverse effects for political reasons.

At the moment, Tiverton is awaiting the judgment of its Town Council as to whether it will follow the lead of the town’s Budget Committee and attempt to inflict pain on residents by eliminating the curbside trash pickup to which we’re accustomed as a basic service.  Through founding member Robert Coulter, the Tiverton Taxpayers Association (TTA) has released a statement that cuts right to the questions I just mentioned:

If the Town Council follows through with the Budget Committee’s threat and breaks its contract with Patriot Disposal, maybe voters will “learn the lesson” that angry insiders want to teach them… or maybe instead we’ll remember this stunt when the officials who are supposed to represent voters are up for reelection in less than five months from now. Maybe, too, we’ll decide to take back the new trash fee through additional tax reductions at next year’s FTR. After all, the Budget Committee left over $2 million in alternatives on the table.

The statement is clear that the TTA would prefer a different outcome — one in which the Town Council continues the job that the Budget Committee started and then abandoned, accommodating voters’ will in the way that causes the least amount of disruption.  Still, when the budget season comes back around next year, if taxpayers are paying a new trash fee, they may very well decide that it ought to be an even exchange taken out of the tax bill of the following year.

No doubt the angry radicals in town will respond by attempting (or at least threatening) to kill another of the services that they hold hostage, but that will be, once again, on them, not on voters who pursue the necessary policy of long-term tax relief.  Standing firm against abuse is one of the most fundamentally good policies.

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Sustainable? Some of RI’s Corporate Welfare is Funded by Moral Obligation Bonds!

Brian Bishop points out in today’s GoLocalProv that certain corporate welfare handed out by the state is funded not pay-as-you-go, out of the budget, but by moral obligation bonds.

Even if you think historic tax breaks are a necessary evil, we didn’t budget for the cost of these breaks, we used moral obligation bonds through the Commerce Corporation to pay for them, a harbinger of the tax [breaks] and spend ‘fireworks’ economy. The flash and bang from each growth purchase fades quickly, requiring us to head back to the fireworks factory and buy more and more, when we haven’t even paid for the fireworks that have already gone off and faded.

The corporate welfare in the form of crony-targeted tax breaks that Governor Raimondo, with the approval of the General Assembly, hands out are bad enough. But the state also hands out corporate welfare for which taxpayers must pay interest! (Remember, this was also the funding method of the 38 Studios debacle.)

The cool new thing with progressive politicians is “sustainable”, as in “sustainable development” and “sustainable energy”. But how can (re)development funded at someone else’s (taxpayers) expense via high-interest moral obligation bonds be cast as “sustainable”?

In fact, what state and local taxpayers really need first and foremost is sustainable budgeting! And further to that, we need elected officials in the Rhode Island Executive and Legislative branches who recognize these (corporate welfare and, even worse, corporate welfare charged to someone else’s high interest credit card) for the unsustainable policies that they are and put an end to them.

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ProJo Editorial Correctly Highlights Bad Jobs Report

Spot on editorial by the Providence Journal yesterday about last week’s bad jobs and employment report.

Two points in particular to highlight.

1.) Their call for broad-based improvement to the state’s business climate.

Beyond targeted incentives, Rhode Island needs a better tax and regulatory climate that encourages companies that are here to grow and others to come.

Thank you thank you thank you.

2. And this.

Perhaps what is most alarming about last week’s jobs report is that it’s never really felt as though Rhode Island was out of the woods.

Indeed, a well-founded feeling confirmed by the Rhode Island Center for Freedom and Prosperity’s Jobs and Opportunity Index (JOI): our state has been stuck at forty eight since 2012. This is a situation that will only change when state officials take to heart the call by the ProJo and many others to take a much broader approach to economic development than the handing out of welfare to a very narrow list of corporate cronies and occasional, isolated tax reductions that lack credibility as they are unaccompanied by a reduction in overall spending.

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Please Check Out the Gaspee Business Network Thursday!

On Thursday (June 23, 2016) at 5:30 pm, the Gaspee Business Network will be holding a Partner Information event at the Radisson Hotel, 2081 Post Road, Warwick. If you’re a business owner and you’re not satisfied with the state’s business climate, please consider dropping by to check out the “Incorruptible Voice of Rhode Island Business“.

We will be discussing why the GBN is different from other business networking groups and how you can take part in the most formidable force to fight the hostile business environment so prevalent throughout Rhode Island.

For more information about the GBN, click here. Click here to register for the event. Or just show up!

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With This Year’s Session a Bust, Can RI Try Something Different, Next?

Yesterday, the RI Center for Freedom & Prosperity released its monthly Jobs & Opportunity Index (JOI) report.  By design, the index doesn’t change much month to month, and the multiple data sources cover different periods.  Nonetheless, it was a pretty down month, with employment, labor force, and jobs all down, while Medicaid enrollees were up.  Of the five updated numbers, only SNAP (food stamp) enrollment moved in a positive direction (that is, down).

The key finding of JOI is the longer-term ranking among states, and by that measure, Rhode Island has been stuck at 48th since 2012.  Combine that with the employment stagnation that the recent post in this space pointed out, covering nearly a year, and we’re clearly not in good shape, and we’re clearly not being helped by the approach of Governor Gina Raimondo and the General Assembly.

The problem is that the things that Rhode Island insiders place as their highest priorities — the irreducibles that they will not touch — are not only directly contrary to policies that would encourage economic health, but if politicians are to attempt to do anything at all, the irreducibles require workarounds that exacerbate, rather than alleviate, the problem.  That is, rather than reduce the high taxes, regulations, voluminous give-aways, and labor union stranglehold by which insiders protect their own sinecures, they “invest” our tax dollars in new special interests that are bought off from the start, such as large companies given tax breaks to set up shop, here.

This won’t end well, the only question being whether the Ocean State will continue to bleed out slowly or have a fatal crisis.

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Definitely No Taxpayer “Bridge Financing” – Or Any Other Tax Dollar Involvement – for Superman Building

An editorial in yesterday’s ProJo mentions an interesting and disturbing prospect that I at least had not yet heard about: taxpayer funded “bridge financing” for the Superman Building. (Tolls on “bridges”; now the possibility of “bridge” financing for an empty building. How did bridges suddenly become a new peril for state taxpayers and residents?)

The editorial also identifies the $64 million question that needs to be answered.

It is not the taxpayers’ business to make High Rock whole on a bad investment. But there is public interest in seeing activity there rather than vacancy and slow deterioration. For example, turning the Superman into a classy downtown apartment building with magnificent views of the city and the water would breathe economic life into the downtown, since new residents would dine out, shop and pay taxes.

The question is: How much is this activity worth to the taxpayers?

The latest estimates to rehab the Superman Building are in the $60-100 million range, though this GoLocalProv story from three years ago mentions the even more insane figures of $140 to $145 million.

To answer the ProJo’s question – “How much is this activity worth to the taxpayers?” – there simply is no amount of secondary/related economic activity that could come close to justifying any taxpayer involvement in such an exorbitantly expensive real estate rehabilitation project. Any official who proposes to do so must satisfactorily answer every entirely valid question posed by the Rhode Island Center for Freedom and Prosperity three years ago.

Elected officials would be wise to instead address the conditions that have contributed to the dearth of business tenants that financially imperil this building, and almost certainly others: the state’s business-repulsive tax and regulatory climate. Taxpayers cannot possibly “bridge” the financial chasms, either at 111 Westminster Street in Providence or everywhere else around the state, created by state officials’ continued refusal to do so.

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Vengeance of Progressives Scorned

Faced with another budget year during which voters repeated, “Yes, we’re serious; stop raising taxes,” progressives in Tiverton are lashing out to teach us a lesson.  Unfortunately, they dominate the town’s Budget Committee, so they were able to convince themselves that the best path forward, politically, would be to virtually eliminate the town’s budget for trash pickup.

Oh, they’re claiming that the budget that I submitted (which won with 55% of the vote) forced them to eliminate that service, but as I show in a post on Tiverton Fact Check, that simply isn’t the case.  They had $2.3 million of options from which to find $783,000 without touching trash or paving, and in fact, the Budget Committee itself was 84% of the way to covering the necessary amount before deciding to reverse course and hurt the greatest number of people possible.

That’s what it’s really about.  They’re angry, and as tends to happen with angry people, their solution starts with the impulse to inflict pain.  A number of details that are probably too localized to be of interest to a statewide audience support that interpretation, but here are a few examples:

  • They (sadly including the police chief) are handing out business cards telling people to contact me if they aren’t happy about the pain; that is, the goal is to hurt people so that they’ll blame me.
  • The town administrator said ending trash pickup would save $300,000 at most, but the Budget Committee decided to pretend it would save $500,000; the point, obviously, was to eliminate the service, not actually to find areas of real savings.
  • During the budget debate, they argued against the lower budget on the grounds that 80% of town expenses are unchangeable and under contract, yet trash pickup is under contract until next year…. and they changed it.
  • Their actual hope is that the Town Council will implement a new fee — imposing the tax that voters rejected by changing its name — and actually overspend the budget that the voters and Budget Committee approved.
  • The Budget Committee didn’t even bother to balance the budget, just assuming that the Town Council will find some $150,000 in revenue.

Groups that are acting in the interest of their communities behave very differently.  For one thing, they try to position themselves so that good policy benefits them politically.  What we’re seeing in Tiverton is a group of insiders who think that bad policy will benefit them politically, and the politics are their priority, not their community.  Hopefully, their friends on the Town Council — who will actually have to make the decision for real, not pretend — will see the calculation differently.

If we can learn locally, maybe we can take the lesson to the state level, where bad policy for political benefit pretty much defines Rhode Island government.

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Going to the Heart of Costly Renewable Energy


In this podcast excerpt, I discuss with the Heartland Institute’s Donald Kendal and John Nothdurft the findings of the Rhode Island Center for Freedom and Prosperity’s new report on renewable energy that confirms a very poor cost-benefit return to Rhode Islanders of renewable energy. (Listen to the full podcast of our conversation here.)

Because 98% of Rhode Island’s energy is generated by natural gas, our state already has a comparatively small carbon footprint. Further reducing it to hit purely arbitrary renewable production targets would cost state ratepayers and taxpayers $141–190 million per year in production expenses alone – four to five times the EPA’s recommended cost standard.

Rhode Islanders also cannot afford the cost to the state economy in the form of lower employment levels or in the $670–893 million per year extracted in unnecessarily higher electricity rate payments by private sector businesses and families. When will the status quo learn?

Based on these findings, the Center has strongly recommended that lawmakers reject all proposed new energy mandates and, instead, repeal those that are currently written into law. The EPA’s own cost standard highlighted in the Center renewable energy report demonstrates that state officials can set aside all renewable energy mandates with a clear conscience.

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You Deserve Better Than a Losing Team

Lawmakers must understand that the people of Rhode Island are demanding that we move in a different direction. As the General Assembly session comes to a close, we have seen another year where the insiders ignore the voice of the people and continue to further their own special interest laden agenda. The big spending in the state budget must end, the backroom deals must end, and the public corruption must end if we are ever to see our state become prosperous again. Rhode Island families are being harmed by the lack of opportunity created by the elitists and the failed public policy culture.

What does the average family have to cheer about in this budget? The few provisions that offer minor relief to some are overwhelmingly outweighed by the huge special interest and corporate welfare spending. Things do not have to be this way.

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GE(e), Rhode Island is Losing Jobs

With the latest numbers, Rhode Island’s jobs and opportunity picture has worsened.

Rhode Island lost 3,900 jobs over the last two months — 1,900 in April and 2,000 more in May — a clear signal that the economy is slowing, according to data released Thursday by the Rhode Island Department of Labor and Training.

Other numbers, like the size of the state’s labor force, are also going in the wrong direction, which unfortunately, corresponds to the state’s ranking on JOI, the RI Center for Freedom and Prosperity’s new, broader spectrum reflection of the state’s employment situation. (Be sure to check back on Monday, when the Center will be updating the Jobs and Opportunity Index.)

State officials are quick to point to a national turn down as a contributory factor to the state’s worsening employment numbers. But that only highlights the need for Rhode Island officials to strengthen the business climate here so that we are not so susceptible to undesirable national trends.

On that front, a note to Governor Raimondo and General Assembly leadership: targeted tax breaks and subsidies do NOTHING to improve the state’s business climate as a whole. (Evidence: the one hundred jobs that General Electric will be bringing here, while welcome, have been engulfed by the 2,000 jobs that the state lost in May.) Corporate welfare only adds to the burden of the average guy and other businesses in the state.

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So the ProvPort Non-Profit Operating Company is Just a Front?

One of the poorly (deliberately?) advertised additions to the 2017 budget last night was a $20 million bond proposal which would fund the acquisition by the Port of Providence of certain properties on Allens Avenue. RI Center for Freedom and Prosperity CEO Mike Stenhouse accurately calls the bonds more corporate welfare.

GoLocalProv’s Kate Nagle has an excellent investigative report showing that

ProvPort, the non-profit operator of the Port of Providence seeking a $20 million taxpayer bond, paid management fees to a sister for-profit company of more than $11 million over the three most recently reported years. The $11 million is approximately half on ProvPort’s total revenue. …

The relationship between the non-profit and for-profit raises concerns. The non-profit takes in the money, only has one employee, and transfers millions every year over to a for-profit company.

Probably this arrangement is legal, though it certainly seems like a convenient set up to avoid corporate taxes.

So the proposition by Smith Hill leaders is that we should pay our hard-earned tax dollars to help fund real estate acquisitions for a company that is attempting to DODGE taxes? And, no, it doesn’t mitigate the situation that the state would own the new parcels. The parcels would still benefit ProPort, not to mention the larger point that state government should get smaller, not larger.

Look, I don’t want to have to look at or care about the corporate structure or tax arrangements of a company. But you’re forcing me to by proposing to reach into my wallet on their behalf. Out of all of the bond referenda on the ballot this November, this should be the easiest and fastest “No” of the bunch.

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EPA (Via Its Standards) Says Renewable Energy Offers RI Very Poor Cost-Benefit Return

It is well but perhaps not as widely known as would be desirable for a fully informed discussion on the subject that renewable energy is far more expensive than conventional (fossil fuel) energy sources. Further to this point, the RI Center for Freedom and Prosperity has released a report with the helpfully descriptive title: “Renewable Energy in Rhode Island: Big Cost, Little Difference”. (Link to the full report in PDF here.)

The report points out that by the EPA’s own standards, the cost of Rhode Island abating carbon from its energy supply would far exceed the benefits that would accrue to the state.

Because of this poor cost-benefit “value proposition,” up to five times less than the Environmental Protection Agency (EPA)–suggested standard, Rhode Island should reconsider its existing energy policy approach.

Let’s repeat this very important point and its source. By the measure of the EPA, not exactly a research arm of the vast right-wing conspiracy, it simply is not worth it, in terms of the carbon that would be abated, for Rhode Island to put renewable energy on its grid.

With this information, elected officials – Governor Raimondo and members of the General Assembly – can no longer in good conscience advocate or vote for renewable energy in Rhode Island. In fact, just the opposite, as the Center calls for: renewable energy mandates must be rolled back.

Based on this study’s findings, the Center strongly recommends that lawmakers reject all proposed new energy mandates in 2016 and, instead, repeal those that are currently written into law.

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Another Welcome Fire-and-Brimstone ProJo Editorial

… yup, the hits keep coming. All of this makes a very good case for candidates this November who have 1.) not participated in this “rot” and 2.) has not voted for the status quo (tolls and the 2017 budget, to name two of the biggest items).

Dubious grants that benefited Mr. Gallison (who is under federal investigation) brought into question the whole system of handouts by legislative leaders without proper vetting or any attempt to weigh the state’s overall interests. …

A poll shows three-quarters of Rhode Island voters support the line item veto, as does the governor. Forty-four other states benefit from it. But legislative leaders in this state still stubbornly refuse to put it on the ballot. …

This week, we learned that Rep. John Carnevale, a former police officer who has a tax-free disability pension and is vice chairman of the House Finance Committee, is evidently living outside of his district. When he discovered WPRI-12 cameras filming him, the station reported, “he walked out of sight and returned with his face wrapped in a T-shirt, seemingly to avoid being seen on tape” — a literal cover-up.

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Accounting Issues Persist for John Hope … and, Far Worse, for Government

The impression about financial irregularities at the John Hope Settlement House has been that all of that took place years ago. Well, yes, it did. But now the problem seems to be that the organization cannot demonstrate to HUD’s satisfaction that it has taken sufficient corrective action to prevent a repeat.

[Providence Director of Community Development Brian] Hull said the Department of Community Development was troubled that audits of John Hope’s books showed shortcomings in 15 areas, such as monitoring payroll, tracking cash receipts and payables, loans to employees without a loan policy in place, late debt payments and a lack of documentation in numerous other areas. The city sought guidance from HUD’s New England area office and the agency, which finances the CDBG program, told the city not to give John Hope the grants “at this time.”

“We note that the entity responded to many of the auditor’s concerns but no evidence was provided to support whether the discussed corrective actions were verified or whether the corrective action taken resolved the deficiencies,” New England HUD Director Robert Shumeyko wrote.

In light of that, it was prudent for the city of Providence (at the recommendation of HUD) and the state to pull back on grants to the organization, though apparently the organization can re-apply if it can show it has come in compliance with HUD’s accounting requirements.

The bigger issue here is that, whether it is social programs or corporate welfare or community grants, government has an obligation to keep tabs on the tax dollars it hands out and make sure that they are not abused. (We are stipulating for a moment the worthiness of the expenditure. The John Hope Settlement House is, for example; corporate welfare is not.) While the Gallison scandal has compelled the state and the city of Providence to start checking into grants as with the John Hope Settlement House and others, little is done to prevent waste and abuse in other programs – the aforementioned social programs, for example – where far larger amounts go out the door. It’s simple. If our elected officials lack the resources or inclination to properly oversee the tax dollars they hand out, they need to stop doing so.

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Budgeting as Usual…

With respect to the RI House’s passage of next year’s state budget, this ought to be a warning flag, not a consolation:

“Really it should have been a unanimous vote, but for politics,” added House Speaker Nicholas Mattiello, D-Cranston.

Passage in the Senate – now seen as largely a formality – is expected to happen quickly once the Senate Finance Committee meets Thursday to vote on the House-approved plan. Once approved by the full Senate, it will go to Gov. Gina Raimondo’s desk for her signature.

I really do wonder about the mindset of those who support our current political class.  Most aren’t paying attention, many because they long ago concluded that the game was rigged and would never change.  But there must be some people who support this approach to government — and not just because they’re bought into the corruption.  Although, the list of the supposedly positive changes in the budget (mainly targeted tax handouts) can just as easily be read as a list of new members of the corrupt special-interest alliance to fleece everybody else.

Sorry, retirees.  If you’re excited that the state government is going to throw you a little tax advantage, I don’t see how that’s much different than some local organization that gets a legislative grant or other handout.  Without spending reductions, the taxes you keep are taxes somebody else has to pay, just as we all now have to pay — just because they can make us do so — $200,000 to the Institute for the Study and Practice of Nonviolence.

But to return to the central question: Do those who support the status quo really think things are going fine in Rhode Island?  Or do they really think minor tweaks around business as usual will kick in for the better any day now (even as the march of investigative reports about political scandals continues)?

Or maybe we really are a bought-off society.  When you’re getting something from the corruption, it’s easy to ignore the degree to which it’s harming your neighbors and gradually strangling your state.  After all, that little sumpin sumpin you get from the deal feels like a partial repayment of the cost of the system to you and, at the same time, can hardly be said to hurt those who aren’t cut in much more than they’re already being hurt.

(Note, by the way, that Mattiello’s rhetoric about not putting federal programs on the backs of state taxpayers turned out to be just that when it came to the Office of the Health Insurance Commissioner.)

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Speaker & OHIC: Stopping Some of the State Taxpayer’s Bleeding

As with his pulling of Budget Article 18, another reason to praise Speaker Mattiello this week: he is not seeing why state taxpayers should be forced to step into the breach left by the drying up of federal funds.

The office responsible for protecting consumers from excessive health insurance rate increases stands to lose nearly its entire staff if the House on Wednesday approves a budget amendment passed by the House Finance Committee. The $1.03-million loss in funding for 9 of its 12 full-time staff would leave the Office of the Health Insurance Commissioner (OHIC) with only three employees …

Governor Raimondo’s budget included $1.03 million to replace federal grant funding for the nine staffers when the grant runs out on Sept. 30, but the House Finance Committee last week voted not to replace the funding. “When the money runs out the programs are off,” House Speaker Nicholas A. Mattiello said during a budget briefing last week. “Every time a federal grant expires everybody wants the funding to continue. You have a government that Rhode Island cannot afford.”

If I understand correctly (let me know if I’m wrong here), these FTE’s are in ADDITION TO the staffing of Rhode Island’s (completely useless) ObamaCare exchange, HealthSource RI. Staffing levels of this department have fluctuated somewhat but have generally suffered as the tide of federal ObamaCare funds has receded (as scheduled).

There needs to be some thought before state officials agree to implement a federal program with funds that sunset. State taxpayers simply don’t have the capacity to take on the funding of ever more, new programs.

And if the sitting Governor (in this case, Governor Raimondo) feels that the program should continue with state taxpayers picking up the tab from the lapsed federal funding, he or she should make cuts elsewhere in the budget to find that revenue, not simply heap another burden on state taxpayers.

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Alarming – Budget Article 17 Could Set Up Stream of 38 Studios-Style Failures

Another problem article in the proposed House budget would, remarkably, put state taxpayers in positions of equity in certain, chosen companies. See the language below on page 9:

(b) Notwithstanding anything in this chapter to the contrary, the commerce corporation may make a loan or equity investment as an alternative incentive in lieu of the provision of tax credits so long as the applicant otherwise qualifies for tax credits under this chapter.

This is a bad idea and poses serious dangers to taxpayers if it passes, as Rep Patricia Morgan (R – Coventry, Warwick & West-Warwick) outlines in the following statement just issued.

Rep. Morgan Questions New Commerce Article Which Puts Taxpayers at Risk

STATE HOUSE — Representative Patricia Morgan (R-District 26 Coventry, Warwick, West Warwick) is calling attention to the new provisions in Article 17, which relate to commerce and economic development.

“The new language governing the Commerce Corporation’s program for economic development on the 195 land is troubling. The new law would fundamentally change the original intent of the program and lead the state into areas best left to financial experts. Financial money managers risk private money, the state risks taxpayer money,” stated Representative Morgan.

“Rhode Islanders have made it clear that they do not want tax dollars given to projects that should be left to the private marketplace. In the past, we have granted authority for the Commerce Corporation to issue tax credits which have the goal of growing tax revenue as the company thrives. However, the Commerce Corp. is now asking for the ability to make equity investments. This investment puts taxpayers in the position of being owners of the company.” explained Morgan.

“If the company thrives, the state not only receives the investment, but also a potential profit. However, if it fails, as in 38 Studios, state would lose the entirety of the taxpayer investment. Public money should never supplant private investment in the marketplace. It’s dangerous for taxpayers.”

Other provisions the Article17 also raise a red flag. “In existing statute the Commerce Corporation is authorized to give up to $15 million, capped at 30% of the total cost of the project, to a developer. The new Article allows a developer to split the project into two and accept $15 million for each portion for a total of $30 million. Additionally, the new language allows the Commerce secretary to waive the 30% cap once a year. That takes away taxpayer protections.”

“One major concern is a taxpayer funded subsidy for the Superman building project in Providence. In current law, economic development incentive programs for the 195 land reclamation project, include the Downtown Providence area with the Superman building. The budget article before the General Assembly increases the maximum aggregate tax credits for this program. The program has been increased to $150,000,000. With such a high program cap, the fear is that money will be diverted to fund redevelopment of the Superman building without taxpayer input.” explained Morgan.

“While these changes were presented to the Finance Committee, albeit well after midnight, they have not been thoroughly explained or vetted. The financial impact to Rhode Island must be thoroughly reviewed before any budgetary vote. I, as a House Representative, want to be fully confident this program will not lead taxpayers down another dead-end path of wasted taxpayer money.”

“Ultimately, our state’s leaders need to do more than find creative corporate subsidies. This welfare takes money away from hardworking Rhode Islanders and is funneled to companies of specific choosing. The State should not be in the venture capital business. Instead we need to do the hard work of reforming our economic climate; reducing property taxes, eliminating costly and non-value added regulations, changing a hostile legal system, restoring ethics, and reducing the cost of government instead of tacking on new taxes, fees and tolls each year.”

“Companies should come to Rhode Island because it’s a great place to grow, not because we pay them to come.”

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Article 18: Another Insider “Deepwater” Scam in the Making? (Corrected)

Despite disturbing new revelations and renewed public criticism about insider legislative grants, cronyism appears to be alive and well at the Rhode Island State House. And once again, Ocean State families and businesses would be asked to foot the bill.

In the budget that got voted out of the Finance Committee early Wednesday morning, alert observers spotted and brought to the attention of the RI Center for Freedom and Prosperity as well as the Ocean State Current on Friday an extensive revision to Article 18.

They are correct to loudly ring warning bells about it. If it stays in, state electric ratepayers are in for even higher electric rates than they currently pay.

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What’s Really In Your Best Interests? CEO Stenhouse on the 2017 RI Budget

In this episode of “What’s Really In Your Best Interests?”, I talk about the 2017 RI Budget. There are better solutions than big spending in the RI State Budget. It is time to end the insider culture where the little guy is hurt. Only when the total relief package is bigger than new spending can we claim that Rhode Island is heading in the right direction.
The Ocean State must stop supporting special-interest spending policies. Instead, we must demand broad-based tax and regulatory cuts that benefit all. While we recognize the reductions in retiree income taxes, the corporate minimum tax, and trucker registration and beach parking fees, the Center notes that these cuts are themselves narrowly targeted and are more than offset by the increases in corporate welfare, new Uber and marijuana taxes, pre-K funding, and new special-interest bond initiatives.
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At $55,650/Job, RI Cannot Afford the Governor’s Economic Development Approach

In the “Absolutely!” segment of his column in today’s Providence Journal, Ed Fitzpatrick praises Governor Raimondo for bringing one hundred General Electric jobs to Rhode Island. His column continues,

Raimondo has talked about public criticism, saying, “At the end of the day, the governor is judged based upon results.” Well, these are the kinds of results she envisioned in creating an economic development “tool box.” GE will apply for $5 million in tax credits over 10 years and $565,000 in closing funds. While critics decry “corporate welfare,” Raimondo says other states use such incentives, and “you cannot fight with one hand behind your back.”

One hand tied behind your back is a good way to describe what it’s like to try to run a business in business-unfriendly Rhode Island. Yet, rather than improving the state’s business climate by reducing state spending so as to lower taxes, Governor Raimondo has actually been doing the opposite by ramping up a whole array of targeted tax subsidies that everyone else has to pay for.

Yes, we will, indeed, judge the Governor based upon results. But our measure will be much broader than the very occasional photo op success. We’ll be looking for a consensus among national rankings that the state is going in the right direction, for example. And we will definitely be keeping an eye on Rhode Island’s ranking on the RI Center for Freedom and Prosperity’s Jobs and Opportunity Index (JOI).

At anything like $55,650 per job, Rhode Island simply cannot afford the “tools” Governor Raimondo is using, either literally or in the cost of her continued inaction to improve the state’s business climate. She needs to begin looking outside of a “tool box” that, so far, resembles a corporate legislative grant program on heavy steroids.

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Toll Relief (Shhhh! It’s Not That!) for In-State Truckers Falls Way Short

It turns out that the General Assembly’s proposed 2017 budget will, after all, contain very partial relief from impending truck tolls in the form of lower registration fees for in-state trucks though, due to questions of constitutionality, the Speaker is asking that we not connect the two.

With the national trucking industry threatening to challenge the constitutionality of the truck tolls in court, after the first gantry goes up, House Speaker Nicholas Mattiello was insistent on Thursday that the registration-fee cuts in the newly unveiled budget bill have nothing to do with the tolls.

“I don’t want to connect the two,’’ House Speaker Nicholas Mattiello said Thursday.

Okayfine, they’re not connected. The reduction in registration fees for this NON-RELIEF from tolls will vary with truck size.

At the lowest end, the annual registration fee would drop from $106 to $78. For trucks weighing more than 74,000 lbs. — which are at the top end now — the fee would drop from $972 (plus $24 for every additional two pounds in weight) to $510. For even larger rigs, there would be a graduated fee schedule, topping off at $690 for tractor-trailer trucks weighing more than 104,000 pounds (plus $12 for every additional 2,000 lbs. of weight).

Soooo, on the upper end – $500-$600 savings per year? By the way, this means that some of the heaviest trucks which do the most damage (to use Governor Raimondo’s logic for implementing truck tolls) to our roads and bridges will be getting relief from tolls EVEN THOUGH THEY WILL NOT BE PAYING TOLLS.

Back to the matter at hand. Approximately $500-$600/year in registration savings for this NON-TOLL RELIEF. Now let’s look at the cost of tolls. At the $40 max per day, a truck driving around in Rhode Island, assuming he operates five days per week, fifty weeks a year:

5 days/week X $40/day = $200. $200 X 50 weeks/year = $10,000/year

Ten thousand dollars a year. Yeah. “Token” relief is actually an understatement, Christopher Maxwell, President of the Rhode Island Trucking Association:

“If they’re trying to help the truck industry, great,” Maxwell said. “But it’s a long way from undoing the damage the tolling would do. It looks to me more like a token gesture.”

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Truck Tolls and Learning to Govern Honestly

Yesterday, we talked about the wink-wink-nudge-nudge falsehood that 38 Studios bonds were actually an investment in the videogame company.  Today, we get another yeah-sure moment as Speaker of the House Nicholas Mattiello (D, Cranston) attempts to claim that a budget gimme for local truck drivers isn’t an attempt to offset the cost of tolls for them in a preferential way:

With the national trucking industry threatening to challenge the constitutionality of the truck tolls in court, after the first gantry goes up, House Speaker Nicholas Mattiello was insistent on Thursday that the registration-fee cuts in the newly unveiled budget bill have nothing to do with the tolls.

“I don’t want to connect the two,” House Speaker Nicholas Mattiello said Thursday.

But “if it’s a Rhode Island company with a Rhode Island registration they are going to benefit from this new plan which cuts their registrations in half. If they are registered out of state, they won’t receive that benefit,” he told The Journal, moments before a public briefing on the budget bill got under way.

Well, that’s great.  When courts strike down the tolls as a targeted tax and public outrage makes politicians weak kneed about implementing car tolls, no doubt the General Assembly will keep this nice benefit for in-state truckers.

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Major Correction, Governor: GE is Coming Here Due to Corporate Welfare, NOT an Improved Business Climate

So you’ve probably heard – and if you haven’t yet, Commerce Corp, formerly the EDC, will be sure that you do – the mildly good news that General Electric will be creating one hundred new jobs in Rhode Island, and possibly more down the road.

But in announcing this, Governor Raimondo fibbed in a big way.

“This is real validation that the steps that we’ve taken to improve our business climate … are paying off,” Raimondo told reporters during a Statehouse news conference.

No, indeed. Just the opposite. General Electric is bringing those jobs here due to targeted taxpayer subsidies, a.k.a., corporate welfare. From the Governor’s own Commerce Secretary:

Commerce Secretary Stefan Pryor said the expected cost in state incentives for those initial 100 jobs is $5.65 million, over 10 years.

Look, I don’t agree with it, because it is unfair and bad policy. But the reality is that once in a rare while, tax incentives are needed to land a big fish.

Of course, the problem is that the Raimondo administration, with the unwise acquiescence of the General Assembly leadership, has substituted wholesale corporate welfare for the broad-based tax and regulatory cuts that the state’s business climate so badly needs. Worse, however, is that the Governor is attempting to mischaracterize the business-as-usual corporate welfare that she offered to G.E. as the broad-based improvement to the state’s business climate that she is strangely reluctant to undertake.

Rhode Island ranks forty eight out of fifty on the RI Center for Freedom and Prosperity’s JOI, Jobs & Opportunity Index. I’m not going to ask Justin Katz, the Center’s Research Director and chief architect of JOI, whether one hundred good paying jobs would improve Rhode Island’s JOI ranking, in part, because he has more than enough to do but mainly because it’s a good guess that the answer is: marginally if at all.

More important is the big take-away from the G.E. news, which WPRO’s Matt Allen nailed this afternoon: companies will respond to lower taxes by bringing jobs. Let’s throw open wide our doors by reducing taxes across the board, rather than on a case by case basis.

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Clearly Bogus that a Local Drainage Project is Getting a Grant

Community service grants – but not, notably, legislative grants – have been cut back, with some becoming line items in the budget. Speaker Mattiello has outlined the criteria for an organization or project to receive a community service grant.

“If the service could be duplicated somewhere else or it wasn’t significant enough, we just deleted it,” House Speaker Nicholas Mattiello said Wednesday afternoon. “We tried to discern which ones were addressing a compelling need, a unique need that was not being addressed anywhere else in state government.”

Accordingly, how to explain this grant when so many worthy causes lost their grant?

One obscure community-service grant was also added to the list: $200,000 for a drainage restoration project on Elliot Avenue in North Providence. It was not immediately clear why this project was funded when so much else wasn’t, but the town has at least one powerful advocate in the General Assembly: Senate Majority Leader Dominick Ruggerio represents North Providence.

So this grant does not appear to fit the speaker’s criteria. Perhaps, however, the award of this grant has inadvertently revealed an unstated grant criteria: that of the political pull of the grant requester. Dominick Ruggerio is not only the Senate Majority Leader but is employed by New England Laborers. It appears that politics have largely but not entirely been removed from the doling out of community service grants. (Not to be confused with the legislative grant program, which was left completely intact, both in amount and criteria: 100% politics.)

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Providence Finance Committee Cuts Taxes … Without Identifying Spending Cuts

Wow. This is a pretty irresponsible way to budget.

The council Finance Committee unanimously approved a $363.9-million tax levy Monday night without passing a corresponding spending plan, making marginal reductions to Mayor Jorge Elorza’s proposed tax rates on owner-occupied homes and rental properties.

State officials agree and have sent a letter to Mayor Jorge Elorza and Council President Luis Aponte expressing alarm.

In a letter sent Tuesday, Auditor General Dennis Hoyle and state revenue director Robert Hull said they understand the city’s need to send tax bills to residents as soon as possible, but called the committee’s decision to approve the tax levy separate from the rest of the budget “ill advised.”

“All components of the budget – both planned revenues and expenditures – must be included to demonstrate that the budget is balanced,” the two officials wrote. “We note that the tax levy was decreased without specific expenditure decreases leaving the budget temporarily unbalanced.”

The city is rushing to get tax bills out so as to minimize the interest it has to pay on a deferred payment to the city’s pension fund. This sure is the wrong way to do it, however. It’s difficult not to believe that the Finance Committee’s irresponsible action here is not mainly inspired by this being an election year [see correction below] and a strong desire to be able to tell voters that they marginally reduced the city’s very high taxes.

UPDATE

Scratch that last theory. WPRI’s Dan McGowan has contacted me and advised that this is not an election year for Providence Council members as they serve four year terms.

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Doubling Down on Special Interests

While most Rhode Islanders slept, last night, the General Assembly’s House Finance Committee received, made public, and recommended for passage a slightly revised version of Democrat Governor Gina Raimondo’s proposed budget.  The technical documents are not available, yet.  (House staff, having arrived home well after last call at your typical pub, have understandably been permitted to sleep in a little.)  But news reports have given some details, and the people of the state will have all of seven days to digest the budget and tell their representatives their opinions… which most legislators will then disregard in favor of instructions from House and Senate leaders when the budget hits the chamber floors next week.

That isn’t really what one might call “representative democracy.”

Just so, Speaker of the House Nicholas Mattiello (D, Cranston) offered the defining comment on the budget, last night:

Asked where legislative budget-writers found the revenue for all of these election-year tax cuts, Mattiello said “We had a little bump” in the last official forecast in May “and we are able to move money around.”

The cuts include:

  • A laughable reduction of the minimum corporate tax that Rhode Islanders must pay for the privilege of owning a corporate name, whether they do nothing with it or even lose money, from $450 to $400.  (With this minimum, the money isn’t so much the harm as the insult of the premise, which the General Assembly still can’t let go.)
  • Preferential tax treatment for the income of senior citizens (who tend to vote in greater proportions, you might have heard).
  • A return of beach parking fees to the pre-Chafee rate.

To give some specifics to Mattiello’s comment, refer to the May revenue estimating conference report.  The state is expecting $46 million more in broad-based taxes for the next fiscal year.  So all of these lauded tax cuts are essentially the conversion of new broad-based tax collections into special-interest handouts.

When the government gets this cute and targeted about cuts, there really is no difference between cutting taxes and giving out grants to favored groups.