The Boston Fed cites Lawrence, MA, as an example of success for the program that it would like to bring to Rhode Island. That struggling city is actually a great case study in why Rhode Islanders should resist the Fed and any other top-down program to save the state.
PolitiFactRI is so obviously biased and has made so many blatantly wrong ratings that flew in the face of plain truth that, for me, it has achieved the status of a pathological liar. So I wonder sometimes whether it is even worth calling them out. You don’t bother to call out a pathological liar, you simply ignore everything he says because he has no credibility.
But then I remember that they have as a platform the state’s largest newspaper, the Providence Journal, which inexplicably continues to damage its own reputation for accuracy, perpetuate serious misinformation, promote bad government policies and squander valuable journalistic resources by hosting a mini-Pravda.
With that reminder, then, let’s take a look at today’s rating and the bias therein.
RIILE’s Terry Gorman has uncovered information that is especially disturbing in light of the revelation this week that that Governor Gina Raimondo would like to find a path to drivers licenses/permits for illegal aliens.
As you know, Rhode Island was recently classified as one of only two sanctuary states in the country, a disturbing revelation and a costly situation. The figure of just how costly it is to state and local taxpayers popped up yesterday in the course of some related research. F.A.I.R., the Federation for American Immigration Reform, places the cost to Rhode Island of illegal immigration at $278 million per year in 2009.
Think of that. Because state officials have so far declined to implement some very reasonable, simple measures to discourage illegal immigration into the state but have implemented policies that actually encourage it, Rhode Island is needlessly spending an estimated $278 million per year.
Projections using REMI to estimate the effects of doubling the sales tax illustrate the economic thinking that will go into the results of its review of Raimondo’s toll-and-borrow infrastructure scheme.
If a company takes on a project that comes with specific terms, such as paying employees a certain amount, it should follow those terms. That said, Governor Gina Raimondo’s statement concerning a government contractor who paid his employees less than the prevailing wage required for such jobs illustrates very well the economic thinking behind Rhode Island’s back-of-the-pack economy:
In announcing the settlement, Raimondo said it’s the first significant action of her new Workplace Fraud Unit, which will focus DLT’s effort on dishonest companies, investigate wrongdoing and enforce worker-protection laws.
“We’re going to go after companies that cheat because breaking the law not only hurts workers, it also hurts companies that follow the rules, pay proper wages and help grow the Rhode Island economy,” Raimondo said in a statement.
Think about the logic, here. Raimondo is spending taxpayer dollars to enforce a labor requirement that makes government projects cost more than they otherwise would, and she insists that doing so will help to grow the state’s economy. Put differently, the market sets a certain price for the type of work that Cardoso Construction’s employees do, and the government insists that it isn’t high enough.
As I’ve stated before, money is just a unit of measurement and a signal of value to the larger economy. Forcing it to flow to a particular place to which it otherwise would not go means that it can’t go to something else, either because the system places less value on that something else or because the individuals who would put it to a different use can no longer access it.
It’s been a while since I looked at taxpayer migration data for Rhode Island, but the picture hasn’t really changed. In the three years from 2010 to 2013, Rhode Island lost 6,613 taxpayers (accounting for about 19,634 people), who took with them $915 million dollars of adjusted gross income. (That’s on a net basis, so it does include people who moved in the other direction.)
That’s almost a billion dollars in annual income of people who found somewhere else better to live. Whatever it was that led them to leave, we can be reasonably sure that it wasn’t because Rhode Island government wasn’t taking enough money away from them in order to support laws that take even more away from them unnecessarily.
In a conversation about government-run schools’ use of taxpayer dollars to out-compete private schools, Mike678 asks:
Are not children these days a choice and a lifestyle? Why do taxpayers w/o children have to pay for other peoples choices?
Those questions rely on a pretty progressive premise that people are burdens to manage, not ends in themselves. The implied point of view also skips over the fact that having children is pretty much the social and biological default for human beings (yes, still). That is, for most couples, not having children is the more deliberate choice.
And it’s a choice with severe ramifications for the rest of us. Very directly, for example, one might ask why somebody else’s children, as taxpayers, should have to carry a heavier burden to pay the Social Security of a childless senior’s choices. Even without entitlement programs, though, the fact is that a society needs children. Look to Japan:
… in the long run the fortunes of nations are determined by population trends. Japan is not only the world’s fastest-aging major economy (already every fourth person is older than 65, and by 2050 that share will be nearly 40 percent), its population is also declining. Today’s 127 million will shrink to 97 million by 2050, and forecasts show shortages of the young labor force needed in construction and health care. Who will maintain Japan’s extensive and admirably efficient transportation infrastructures? Who will take care of millions of old people? By 2050 people above the age of 80 will outnumber the children.
I wouldn’t go so far as to suggest new child tax credits or a directly paid government child allowance, as some do. Social engineering is, after all, social engineering, and the government tends to plod along in a march of unintended consequences. (It matters, for one thing, for whom in our society we create incentives to birth more children.) However, when children are born, it behooves us to ensure that education is a priority, and alleviating that burden becomes quite a different thing than subsidizing the procreation.
With the completely unacceptable, lose-lose for Rhode Island prospect of across-the-board vehicle tolling suddenly on the table, let’s take a closer look at a high-profile toll-related incident from a couple of months ago: the closure by RIDOT of the Park Avenue Bridge.
You may recall the WPRI investigation last month by Ted Nesi on the timing of the Park Avenue Bridge inspection. RIDOT had ordered an inspection – it turned into three inspections – of the Park Avenue Bridge in Cranston, a bridge just down the road from Speaker Nicholas Mattiello’s office. The inspections resulted in the abrupt closing of the bridge at the height of Governor Raimondo’s attempt to get her tolling program passed by the General Assembly.
From the wow-that-didn’t-take-long department, the Providence Journal’s Kathy Gregg, in a piece of kick-butt journalism yesterday, reports that the tolling of all vehicles is now on the table as an option. It seems that, at Speaker Mattiello’s suggestion, Governor Gina Raimondo is carrying out an “economic analysis”.
In recent months, the administration also commissioned an “economic analysis” of Raimondo’s truck-toll plan and a variety of other possible revenue-raising options that could, potentially, include: other new “user-fees,” gas taxes and a revived effort to toll all vehicles — not just big trucks — on Route 95 near the Connecticut border.
Yesterday, I noted that Providence Journal reporter Katherine Gregg had apparently acquired a copy of the agreement between the state and the SEIU Local 1199 regarding independent child-care providers whose clients receive state subsidies. Upon my request, at that point, the state finally sent me the contract, too. The following are my notes while reading the contract.
It’s important to note that it isn’t clear which provisions are actually new. For example, the provision of vacation time isn’t new; it’s been in the state’s regulations for the program for years. I haven’t gone through to compare the contract with all pre-existing rules.
Another important note is that it is explicitly left to the legislature to provide the funding for all of these programs, although cuts would require “good faith” negotiations with the executive branch to figure out how to deal with reductions
Pay and raises:
- A 3% increase in base pay
- Another $10 per week per infant
- Another 1% increase in “step pay” for all providers
- Up to another 3% increase depending on education level
- $500 bonus for becoming licensed
- $50 per child per year “registration fee” (provided that families without subsidies have to pay the fee, too)
- $100 bonus for enrolling in direct deposit
- Two weeks of paid “vacation” (This is really an existing benefit that allows the provider to be paid for up to two weeks for children who do not attend during those weeks. However, if parents use the funds for an alternate provider, the “vacation” pay doesn’t apply.)
- Pay for holidays and professional development days
- Efforts to ensure professional development, including college courses (see my prior post for information on the millions of dollars available through the Dept. of Education)
- $250,000 fund (jointly administered with the union) to supply “training and support”
- $250,000 “quality incentive pool”
- One-time gift of a free computer that becomes the “sole property of the provider”
- Free courses on the computers and software they’ll be using as part of their job
- Agreement to initiate a “bulk purchasing” program for providers to acquire furniture and playground equipment; books, toys, and puzzles; disability insurance; tax services; home inspection and maintenance services; Internet connectivity; and other items they may think of
- Agreement to explore enrollment of providers in the same federal program for low-or-no-cost Internet that public schools and libraries receive
- Agreement to seek to sign up providers for a federal food program (which likely includes an administrative fee for the provider to implement and maintain)
- Binding arbitration
Katherine Gregg has more details on the agreement that Governor Gina Raimondo has agreed to give independent child-care providers whose clients receive government subsidies and who have organized under the SEIU:
In the current budget year, which began on July 1, the agreement promises 3-percent reimbursement rate increases, with an additional $10 per week for each infant.
In the second year of the contract, the rates rise at least 1 percent, with additional rate increases of 1 percent, 2 percent and 3 percent pegged to education-levels.
Those working on a GED — or high-school equivalency diploma — would get 2 percent. Those with three college credits or more would get 3 percent. The 4 percent would go to those with a college-level “associate degree,’’ which very few of those in this mostly female workforce have now.
The majority (61 percent) had a GED, but 14 percent did not even have that and only 4 percent of the childcare providers surveyed by SEIU 1199 in January had a college education.
The new contract anticipates expanded “access to college-credit bearing courses in English and Spanish.’’
They also all get free computers for online billing and training purposes. (Whether that means the state will pay for their Internet service, I’ll have to check the contract, which I’ve requested regularly from the state for months.)
Readers may recall recent news about a related program to pay for child care workers to receive college degrees in early childhood education (to add even more unneeded early-grade teachers to the Rhode Island marketplace). That program is not limited to the SEIU members, but they’re included. The Rhode Island Department of Education tells The Current that the total grant is projected to be over $3 million, with $1.8 million passing through T.E.A.C.H. RI, $1.1 million going through the Community College of Rhode Island, and $38,000 going through Rhode Island College.
According to Kathy Gregg, the SEIU members receive a $500 bonus for becoming licensed. Once they’re licensed, providers working out of their homes are eligible for the T.E.A.C.H. scholarships, which (in addition to paying for almost all of the tuition) give participants $585 in “bonus pay,” $50-per-semester travel stipends, and up to around $300 per semester in weekly “paid release time” (that is, approximately another $1,000 in additional cash). As reported above, once they’ve earned college credits, and then a degree, they get more money from the state in pay.
With this package of giveaways handed over by the governor and the General Assembly (which had to approve the budget), it’s not surprising that the SEIU local 1199 is able to demand one of the highest dues rates in the country. According to Gregg, the rate is 2%, capped at $65 per month (or $780 per year). Of all of the similar contracts listed on ChildCareUnionInfo.com that have a set payment or a cap, only Illinois is higher (2.1% capped at $75 per month).
If all 526 members hit the cap, state taxpayers would be sending the SEIU $410,280.
According to a recent study by Pew Charitable Trusts, higher education is typically the third largest item in state general fund budgets. While this is one area of public spending Rhode Island does not top national charts, public higher education accounts for $1 billion of the state’s $8.7 billion budget– nearly matching elementary and secondary education and more than doubling transportation spending.
That figure includes tuition and other revenue sources, so when budget season comes around, leaders of public higher ed annually assert that Rhode Island lags the nation in taxpayer “investment” in their organizations. One of Pew’s charts puts Rhode Island eighth from the bottom in per student funding, and the state portion of the columns appears small relative to other states.
The bill is still massive, though.
The mobility of human beings has advanced to the point that technology allows us to accomplish many of the things we used to have to move around to do without leaving our homes. Meetings. Research. Shopping. Collaboration.
With the growing trend of a dispersed workforce, what’s the progressive solution for saving Providence government financials? Well, if Sam Bell, leader of the state branch of the Progressive Democrats of America, is representative:
“If Providence were able to tax the income of wealthy commuters who live in the suburbs, we could eliminate or drastically reduce property taxes and solve Providence’s fiscal nightmare overnight. This is the policy solution many other states take to this challenge, but the General Assembly will not allow Providence to implement it. And so our central city crumbles—plagued by poverty, a shrunken police and fire force, struggling schools, brutally high taxes, and fundamentally impossible math,” Bell added.
The first thing to note is that Bell should really be required to substantiate his “many other states” assertion. A quick online search mainly brings up articles about cities that are seeking this particular golden goose, but their success seems limited mainly to Pennsylvania (Philadelphia and Scranton… stop laughing). New York City let its commuter tax expire with the last century.
More important, though, is the sheer economic illiteracy, matched with historical anachronism. Cities’ main problem is that people no longer have to interact with them. When transportation was limited to feet and horses, it made life a lot easier to live close to work and to the services that other people provided. Those days are gone. Not only can we drive and telecommute, but individuals and businesses alike can order products from around the world and have them shipped quickly and cheaply. Increasingly, we can order products and services that can be delivered instantly via the Internet.
Now that necessity is moving out of the picture, the challenge for cities is that people have to want to go there — for work, convenience, or entertainment. Taxing them to work there while living somewhere else makes working there less desirable. (It’s a complicated equation, I know.)
At bottom, the progressive view on such policies winds around two poles: being able to tell people how to live and distributing government services (while collecting votes in exchange). That’s a very old-fashioned model, and it’s the one that cities still serve best, as proven by the strength of Democrats in cities even within Republican-dominated states like Texas.
This simple truth is easily forgotten, but our society shouldn’t be structured entirely around government services. That’s not what life is supposed to be about, and people should be suspicious of anybody who seems to believe otherwise.
This chart, from ZeroHedge, sums up some of the points I’ve been making recently:
Note that the “Reagan Dip” isn’t a reduction in the number of pages of regulation, it’s just a reduction in the rate of growth. The summary of the economic growth of the Reagan era was that the federal government kept up its creation of money in the present through debt while cutting taxes and slowing the growth of regulation, thus allowing the debt-driven cash to flow into productive activity.
This collection of policies revved the economy, and what should have happened in the ’90s was a reduction of debt along with further reductions in taxes and real reductions in regulations. The economy’s growth may have slowed, but the country would have been on a stronger footing, with new digital technologies having already begun to emerge.
Instead, regulations kicked back into high gear, and the Clinton Administration transferred the burden of creating fake money onto the stock market and housing debt.
Regulation helps lock wealth in where it exists, so it’s good for the powerful. But when things begin to fall apart in earnest (as they probably will soon), turning the above chart into negative territory, by actually eliminating regulations, would provide a boost to the economy that would actually help the working and middle classes and shift resources more efficiently.
When it comes to economic development in blue states like Rhode Island, politicians prefer to focus on subjects like “quality of life.” A recent study published in the National Bureau of Economic Research discussing the impact state taxes have on the migration of top earners should direct attention back to the basics of economic growth.
A few years ago, with the Rhode Island struggling to recover from the recession, legislators mandated an economic development plan. What the state wound up with was a local application of the federal Department of Housing and Urban Development’s six “livability principles,” with the lead benefit, according to then-governor Lincoln Chafee (D), being “pride and appreciation” of local environment, architecture, and culture.
More recently, the speaker of the Rhode Island House, Nicholas Mattiello (D), has backed the expensive idea of moving the Pawsox, the state’s minor league baseball franchise, a few miles down the road, from Pawtucket to Providence. The team has threatened to move across state lines, and advocates like Mattiello see it as part of the state’s culture.
Economists agree that quality of life, geography, and other factors obviously affect an economy, and the NBER report’s authors, Enrico Moretti and Daniel Wilson from the University of California at Berkeley and the Federal Reserve Bank of San Francisco, respectively, acknowledge that tax rates aren’t everything.
Their study specifically looks at “star scientists,” those in the top 5 percent for the number of patents that they file. Moretti and Wilson were not able to predict numbers of star scientists based purely on tax rates. “The effect” of tax rates, they write, “is swamped by all the other differences across states.”
Pointing to that concession, however, is a long way from figuring out which non-tax thing should be changed and, even more, finding politicians to pick the right direction. By contrast, according to the economists, reducing personal income and corporate income tax rates has “large, stable, and precisely estimated effects” on star scientists’ decisions about where to locate.
As a side note to my post about the effects of tax changes on the residency decisions of “star scientists,” I stated:
If corporate income taxes have a wage component when calculating the percentage for the particular state, the effect is even greater, and wages make up one-third of the calculation for apportioning the tax in Rhode Island.
This was correct for the time period described in the study, but a change in the law that went into effect this year changes it. As of January 1, 2015, Rhode Island General Law 44-11-14 calls for the state corporate income tax to be calculated entirely on revenue: “total receipts from sales or other sources during the taxable year which is attributable to the taxpayer’s activities or transactions within this state during the taxable year.”
This being the case, according to the study’s authors, cutting corporate taxes in Rhode Island should have no effect on encouraging top-shelf scientists to move to the state or to remain, if they’re already here. The reduction in the corporate income tax that the General Assembly passed as part of its fiscal year 2015 budget — spearheaded by then-new Speaker Nicholas Mattiello (D, Cranston) — was only a cut in the rate. Changes in the law made it revenue neutral, so it wouldn’t isn’t clear whether it would have helped or hurt the scientists reflected in the study.
A new study finds that changes in tax rates have a large effect star scientists. Rhode Island should cut taxes to attract them, but it should also learn the broader taxation lesson.
With the push for a taxpayer-subsidized minor-league baseball stadium in Providence continuing, this quotation from a 2012 essay in The Atlantic seems like something worth keeping handy (emphasis added):
… according to leading sports economists, stadiums and arenas rarely bring about the promised prosperity, and instead leave cities and states mired in debt that they can’t pay back before the franchise comes calling for more.
“The basic idea is that sports stadiums typically aren’t a good tool for economic development,” said Victor Matheson, an economist at Holy Cross who has studied the economic impact of stadium construction for decades. When cities cite studies (often produced by parties with an interest in building the stadium) touting the impact of such projects, there is a simple rule for determining the actual return on investment, Matheson said: “Take whatever number the sports promoter says, take it and move the decimal one place to the left. Divide it by ten, and that’s a pretty good estimate of the actual economic impact.”
Others agree. While “it is inarguable that within a few blocks you’ll have an effect,” the results are questionable for metro areas as a whole, Stefan Szymanski, a sports economist at the University of Michigan, said.
At the request of third graders from an elite Newport private school, lawmakers in Rhode Island this year declared the American burying beetle to be the official state insect. The designation is appropriate not only because the Ocean State is one of the few that still can claim the bugs as residents, but also because the species feeds on and breeds in carrion — i.e., “the decaying flesh of dead animals.”
If Rhode Island legislators are looking for ideas for next year, the Ouroboros should be a candidate for the official state economic symbol. Historically, the mythical snake eating its own tail has been emblematic of renewal and self-creation, but Rhode Islanders may finally answer its greatest mystery: What happens when the snake finishes?
Rhode Island’s strategy of subsidizing every step in the economic chain has a similar circular feel.
Continue reading on Watchdog.org and then… return for this bonus ending, only on the Ocean State Current:
Despite a one-month increase of 1,100 jobs in “education and health services,” the total number of jobs located in Rhode Island decreased by 300, in June, after a longer-term trend of slowed growth, and the latest economic development controversy is the shift of a local star start-up company, Teespring, to Kentucky, after that state provided $2.5 million in tax incentives while Rhode Island officials had no interactions with its executives.
Bugs that require carrion to survive must live in a world of living animals. Somebody has to pay for expanded government programs that provide services to beneficiaries of other government programs. Otherwise, the economy will ultimately become a central-planning head with nothing left to eat.
Lee Habeeb’s reflections upon his father’s decision finally to leave New Jersey will have a very familiar feel for Rhode Islanders. He bought his house for $32,000 at a time when property taxes were so low he can’t remember how much they were. Now property taxes, income taxes, and sales taxes give him good reason to worry that his retirement income and savings won’t be enough.
(To some degree, it seems, Social Security is just a way to shift local taxes to younger federal taxpayers.)
Habeeb refers to people who leave a state to escape the confiscation of their property by the strong-armers in state and local governments as “refugees.” Rhode Island has produced a lot of those.
Unfortunately, experience suggests that Habeeb’s skepticism is amply justified:
… businesses are fleeing New Jersey for the same reason so many residents are fleeing: the high cost of doing business there. Indeed, New Jersey ranked 50th, dead last, in the Tax Foundation’s 2015 State Tax Business Climate Index.
It’s a vicious cycle, and stopping it is no small task. The country watched in disbelief as one of our great American cities, Detroit, created over a million refugees over five decades, as its population fell from a peak of nearly 1,700,000 in 1960 to its current 680,000. It spent, mismanaged, and shrank itself into bankruptcy. How states, cities, and nations treat capital — the human kind and the money kind — matters. How leaders think about capital matters too. The ability to manage, nurture, and preserve it, and to grow a healthy tax base (not destroy it), is what will separate winners from losers.
Megan McArdle gives some sense of the challenge when she writes about of the stupidity of rent control policies:
… this has one key advantage for local politicians: People who are not already living in your city cannot vote in local elections. Maybe in 25 years, when rent control has pushed unregulated prices sky-high and your city can’t grow because there’s nowhere to put anyone, this will become a problem for politicians. But those will be some other politicians in charge by then.
So while virtually all economists can agree that rent control is a terrible idea, local politicians may well think it’s splendid.
No development is more threatening to powerful insiders than successful non-insiders, especially those who don’t know the local rules of the game and want to do things just because (gasp!) they make sense.
Something sounds familiar about this description of Rome, doesn’t it?
A survey by the European Commission two years ago placed Rome last out of 28 EU capitals in a ranking for the efficiency of city services. Despite great food, superb coffee and an enviable climate, on an index of quality of life, the capital came second to last, with Athens at the bottom. Its Renaissance churches, cobbled streets and vibrant piazzas still wow tourists from around the world, but beyond the historic centre, the city is a mess and life is a struggle for locals.
As I’ve said before about Rhode Island, if you’re having to work too hard to go to the beach, don’t have the disposable income to go out for dinner, and have to cut corners on your grocery bill, living in a place with such attractions doesn’t do you much good. In fact, when the local establishment leverages the premium that people are willing to pay to live in such a place in order to confiscate high levels of taxes and return low levels of service, living in such a place can do you harm.
I just came across this letter from IRS Commissioner John Koskinen related to his July 17 presentation to Congress on the tax implications of ObamaCare for last tax year. I’m sure there are broad points that could be made with some investigation, about the additional expense of premiums, about likely increases next year, and so on. On the fly, though, a couple of impressions are worth making.
First is how inappropriate it is for this to be the purview of the Internal Revenue Service. It’s bad enough that the agency is empowered to take our money away and to collect all sorts of personal information in the process. Now our healthcare is mixed up with it. This is an agency that targets people for audits if they give to the wrong kind of non-profit.
Second is how the billions just slosh around in government. With two-thirds of the estimated number of Americans expected to file claims related to the “premium tax credit” having done so:
- $10 billion was paid out in health insurance subsidies (3.2 million taxpayers; $3,125 average).
- $780 million more was paid out after claims on tax returns (1.3 million taxpayers; $600 average).
- $1.3 billion was taken back from taxpayers who’d received subsidies (1.6 million taxpayers; $800 average).
- $1.5 billion was taken from taxpayers who had to pay the penalty for not having insurance (7.5 million taxpayers; $200 average). (The percentage of income used to calculate this penalty doubles in the current tax year.)
The IRS will now be sending collection letters to 710,000 Americans with a “reminder” that they have to file, along with “correspondence” to another 760,000 who filed tax returns without the ObamaCare form.
Beyond its attempt to take over healthcare across the country, this law is an excuse for government intrusion and redistribution of income.
The scam of increasing the minimum wage harms the very people whom it is supposed to help, but helps the people who sell phony remedies for votes.
John Carr’s preview of Pope Francis’s message when he visits the United States this fall raises questions about the balance of the individual with the government in the eyes of the Church.
Rhode Islanders should be pleasantly surprised to find their state coming in at number 38 out of 50 on the Mercatus Center’s ranking of the states’ fiscal condition. Any list that keeps the Ocean State out of the worst 10 is apt to be received with either relief or suspicion among the people who live here.
Of course, this particular list was sweetened by the fact that Rhode Island came in second best in New England — behind only New Hampshire, which southern New Englanders tend to see as an impossible-to-replicate land of low taxes and “live free or die” liberty. As WPRI reporter Ted Nesi put it, Rhode Island’s placement is “not great, but notably higher than Connecticut (#47) or Massachusetts (#48).”
Given this unexpected result, though, there’s reason to wonder whether Mercatus’s methodology misses the ways in which Rhode Island games every system. After all, comparing states’ employment levels with their pre-crash peak, Massachusetts is nowthe fourth best in the country. In MoneyRates.com’s “Best and Worst States to Make a Living 2015,” Massachusetts is #20, while Rhode Island is in its more-familiar territory in the bottom 10 (at #42).
Shouldn’t the health of a state’s economy bear some relation to its fiscal health?
Governor Gina Raimondo’s proposed RhodeWorks project to repair Rhode Island bridges and roads with debt financed through tolls on truckers is a 10-year project:
Our plan will get us to 90% structurally sufficient bridges by 2025, make Rhode Island more attractive for businesses, and create about 11,000 job-years over the next decade
The latest variation is the one that passed the state Senate, which the House may (or may not) take up in an autumn session. The Senate’s version presents a smaller scale, down to a $500 million bond, from $700 million, but it also includes “an additional $120 million… through the refinancing and restructuring of prior federal debt.” Folks should take a closer look at that part.
Reviewing supporting documentation, it appears that the extra money is actually the first four years of lower debt service from refinancing GARVEE bonds for an extra four years. As things currently stand, the state still owes $289 million on the bonds and will be done paying them after 2021. The refinancing will extend the payments to 2025 and add another $15 million in interest. (Refinancing costs aren’t mentioned, so let’s assume it’s part of the $15 million.)
Think about that. Over the ten years of the RhodeWorks project, this refinancing will actually cost $15 million. It will direct $15 million away from infrastructure or some other area of state spending. If the state simply pays off the bonds, it’ll spend around $50 million a year through 2021 and then that money will be freed up for the final three years of RhodeWorks.
By contrast, if the state refinances, it will free up $20 million early on but add $30 million in the later years, with an overall increase of $15 million when all is said and done.
Now let your imagination run wild and consider the possibility of the state’s paying for bridge and road repairs with savings rather than debt. $500 million is $50 million per year for 10 years. Over the course of the RhodeWorks program, the last three years would be paid for simply by paying the GARVEE debt on time.
It boggles the mind to wonder how many decisions like this are piled up on the regular expenditures of the state’s nearly $9 billion annual budget.
Battles over the annual budget in Woonsocket could open up another corrupting problem with the inadvisable and poorly written law granting the state the power to take dictatorial control over struggling local governments.
I’m in the minority among my ideological peers, on this, but my thinking on charter schools has changed quite a bit in recent years.
Many conservatives, I believe, see them as a sly way to insert wedges into public education’s cracks in order to bring about wider-scale reform of the system. If we create this alternate system of schools, literally entered with the luck of the draw, that is free of the restrictions that (for some reason) we continue to tolerate in district schools, then parents will demand that district schools be made free of the restrictions, too.
To advance this stratagem, we’ve been willing to overlook basic descriptive facts about charters that would normally concern us a great deal. In order to work around the damage that the democratic nature of our government has wrought in education (thanks, largely, to the self-interested activism of teacher unions), we’re creating institutions over which the public has less control. On the one hand, charter advocates insist that they are “public schools of choice,” so they should fall within the range of inside-government benefits, but on the other hand, they are demanding that the people paying the bills should not have immediate, democratic control over them.
In any other context, conservatives would recoil against that just as surely as they ought to recoil against crony capitalist deals giving connected insiders taxpayer cash for their private business dealings. Principle should not be something to be weighed against practicality. Rather, we should hold to our principles because they produce the outcome that we desire; it is in determining our goals that we should weigh morality and practicality.
My concern, in treading off our principled path, is that we’re more likely to get lost than to return to our firm ground. Instead of breaking the rigid grip of special interests on public schools, charters will kill off private schools — at least all of them that are accessible to anybody who’s less than rich. Then special interests will successfully tighten the vice, making government education a true monopoly rather than the near-monopoly that it currently is.
Ted Nesi has consulted with the State House librarian and learned that there were unanimous budget votes in 2008 and 1999. As a first impression, that means the House wasn’t due for another one for a couple of years, but it also suggests that shock at the unanimity might have been a little overblown. As somebody who tweeted that the vote was “an outrageous indicator of a very sick representative democracy,” I’d make two points.
First, I wouldn’t be at all shy about suggesting that Rhode Island’s representative democracy has been very sick for much longer than the period back to 1999.
Second, the final unanimous vote was mainly significant as the sharp edge of the entire evening. Looking at the journal from the House budget night in 2008 for contrast, a few things stand out. For one, the House didn’t wrap up until almost midnight, so it wasn’t the same quick session.
More importantly, there was some contentious drama. On a quick skim, it looks like two floor amendments actually passed by surprise, leading to reconsideration votes to change the outcome. That isn’t exactly the festival of harmony we witnessed last night. From the perspective of the electorate, at least it seemed like the system was working… somewhat.
So what about the tax cuts? Surely around $45 million in FY16 cuts, largely for businesses and Social Security recipients, is a positive development in line with what small-government conservatives have long recommended?
Yes, but expenditures from general revenue (i.e., local money) are expected to go up by $108 million versus last year’s enacted budget. From an economic standpoint, the question is whether the revenue sources that are making up for the tax cuts provide a bigger boost than the drag created by taking money out elsewhere. The governor’s budget schedule, for example, shows a $125 million increase in each of the personal income tax and the state sales tax; that’s money out of the economy, some of which will be going to hand-picked segments.
To put specifics on the argument, during FY16, the Social Security tax cut is expected to cost the state $9.3 million in revenue, which we could say is largely paid for with a new $6.9 million in taxes on small tourism businesses. Maybe this is an economically productive and morally sound transfer of wealth, but we never hear that argument.
On their own, each change might be positive, but at the end of the day, they fit into the mix in the same way special-interest handouts do. The lack of real contention in the budget debate is an indication that all of the interests that have a voice are now bought off.
What should the rest of us do?
Last night’s record-breakingly short budget debate marked the final end of Rhode Island’s period of representative democracy and the beginning of the last stage of its decline.