When state agencies put forward the “painful” actions they’d supposedly have to take if elected officials to catch their budgets up to their actual spending, taxpayers should look at the actual spending.
This year was a GREAT year for worker freedom across the country, and here in the Ocean State. Early in the summer, the SCOTUS decision in the historic Janus case determined that state and local governments are forbidden from forcing their employees to join unions as a condition of employment. The ruling means union leaders can no longer automatically plunder the pocketbooks of public employees to fund the unions’ political agendas.
In August, we launched our MyPayMySayRI.com campaign to educate public servants about their restored First Amendment rights.
But the insiders want to keep workers in the dark, and in the unions… at any cost.
Unfortunately, we have to admit that this is nothing new:
Overspending by state agencies has opened up a $42-million hole in this year’s budget, according to new estimates from the state budget office.
The state departments of Children, Youth and Families; Behavioral Healthcare, Developmental Disabilities and Hospitals; Labor and Training; and Revenue were among eight agencies over budget in the first quarter of the fiscal year that started July 1, according to a memo from State Budget Officer Thomas Mullaney on Thursday.
Some doubt is arising, however, whether we can really claim that these agencies are “overspending.” When departments regularly spend more than their budgets and the governor and General Assembly simply add money in a supplemental budget as the books come to a close and then audits come in much lower, it begins to look as if the departments are simply following the ordinary course of operation.
For fiscal years 2012 through 2017, the state government increased its supplemental budget by an average of 2.4% and then actually spent an average of 4.7% less than that. Every year, the state estimates that it is overspending and adds money to the supplemental budget. The local news media for some reason tends to trumpet the increase from the supplemental amount to the next year’s final, which looks more reasonable because the bulk of the increase is in the supplemental. All of this happens with plenty of fluff above the actual spending of the state, with a reliable 2.6% annual increase.
Here’s an odd moment in a Scott MacKay essay on The Public’s Radio, about Amazon’s choice of our nation’s two bases of power — New York City and Washington, D.C. — for its new headquarters:
Luring 21st century innovation jobs to Rhode Island and southeastern Massachusetts will require changes in economic development thinking. These companies aren’t going to places that rely on the traditional metrics, such as low-taxes, low rents and cheap labor. “They aren’t going to low-cost places, right to work states,” says Michael Goodman, director of public policy at the University of Massachusetts Dartmouth. “Nowadays brains matter much more than brawn.”
That’s music to MacKay’s ears, because his a big union and high-tax guy, but it’s weird that he would present a behemoth establishment player like Amazon as an archetype of “innovation jobs.” The choice of NYC and Washington for its new locations is an indicator that Amazon is shifting into robber baron mode, which means using the power of the media and government to suppress competition and secure its advantages.
Of course the company is fine with high taxes and organized labor. Its executives want to be sit in a room with other powerful people who can tell their constituents or members what to do. The freedom of low taxes and a right to work makes things unpredictable for the power brokers.
But the real innovators will go to places where they aren’t inhibited by these legacy systems, meaning places where they can try new things and reinvest what they earn. Mix that economic flexibility with a culturally intriguing location (characterized, I’d suggest, by the freedom and character that come from a government that doesn’t meddle in people’s lives), and we’d have something powerful in Rhode Island.
Unfortunately, that’s a big “if” and a big lift in Rhode Island.
Sometimes when one follows the news it seems like the lessons are right in front of us, yet never heeded. Such is the case with Diana Pinzon’s WPRI article about the explosion of microbreweries in Rhode Island:
In 2016, the General Assembly voted to allow breweries and distilleries to sell limited amounts of their products to plant visitors for sampling and off-site consumption. Prior to that change in law, only wineries were allowed to do that.
Since that change was made, the number of microbreweries nearly quadrupled in the two years, according to the R.I. Department of Business Regulation.
One of the construction companies for which I worked had its shop a few units down from Newport Storm brewery, and when they had their weekly tours (with sampling), there would always be a line. But expanding the ability to serve customers directly from the brewery wasn’t the only regulatory change, and the state reduced the targeted taxes and fees on brewers, as well:
Earlier this year, two additional beer industry bills were signed into law by Gov. Gina Raimondo.
The first eliminated the so-called “Keg Tax” that required brewers to pay sales tax on kegs they purchase to fill with beer and then sell to distributors. The second piece of legislation reduced the alcoholic beverage manufacturing and wholesale licensing fee from $3,000 to $500.
What if we took the same hands-off approach across our economy? Existing businesses would expand, and we can only guess how many innovations might emerge that lawmakers can’t even imagine, let alone be aware that Rhode Island’s regulatory regime is blocking.
Rhode Island is in desperate need of leadership that will step up and take the Progressive agenda head-on. For too long, the far-left has schemed to take the people of Rhode Island backwards. They want to move us further away from the pro-family and pro-business reforms our state desperately needs.
Because I looked into the concept when Democrat Governor Gina Raimondo attempted to corrupt it into a statewide tax on high-end vacation homes, the new “non-utilization tax” in Providence that Madeleine List describes in the Providence Journal caught my eye. The policy rationale from the city is to make it expensive to leave property deteriorating into blight:
“It is in the best interest of all Providence residents that we address the vacant and abandoned properties that negatively impact the quality of life in our communities,” Elorza said in a statement. “The non-utilization fee aligns with our EveryHome program by holding property owners accountable while encouraging them to rehabilitate properties into productive reuse. This powerful tool will help us to support stronger, more vibrant neighborhoods throughout the capital city.”
The legal rationale, as I explained my understanding back in 2015, is as follows:
With the nonutilization tax, the General Assembly of the 1980s was saying that doing nothing with land is essentially holding it for some other purpose, like an investment, which is a financial “use” that can be taxed separately from ownership.
While I can understand the impulse for this approach, I’m not a fan. Especially, in the city, people don’t just buy property to sit on it. If they’re not using it for some productive purpose, something is probably preventing them from doing so, and there are a range of policy solutions a local government could pursue.
The problem is that the politics of our day create this us-versus-them mentality whereby politicians pledge to impose pain on those rich slumlords to get them to change their ways, rather than see the property owners as people who might be grappling with some problem… perhaps a problem that originates with the politicians. Maybe some tax is too high, making the property difficult to sell. Maybe the person just hasn’t thought of the property as a potential source of value. Maybe some special zoning plan could help somebody make use of the property while the other person owns it.
Or maybe — stop me if this sounds crazy — the local government could concentrate on getting out of the way of the economy so the property becomes valuable enough to prompt a sale.
On Tuesday, you and I have a chance to make a big difference! I am personally encouraging you to vote… to exercise your precious right and to vote for candidates who support a pro-growth, pro-business, and pro-taxpayer agenda!
The RI Center for Freedom & Prosperity has released a statement against all three ballot questions for more debt:
Broadly, Rhode Island is relying too heavily on debt to cover its bills. The Mercatus Center at George Mason University puts Rhode Island’s long-term liabilities at 90% of the state’s assets, which is higher than the average state. Truth in Accounting’s State Data Lab gives Rhode Island a D for finances, with $8,288,881,000 in bonds and other liabilities, plus another $4,316,527,000 in pension and other retirement liabilities. A recent Rhode Island Public Expenditures Council (RIPEC) report finds Rhode Island already among the worst states when it comes to debt per capita and debt per income.
More debt is not the answer to the Ocean State’s problems; it is a major problem in itself. Adding $589,462,045 in principal and interest by passing the three ballot questions will make it worse.
The State of Rhode Island and its municipalities must be more prudent with the tax dollars they already collect — for example, prioritizing school-building maintenance over more frivolous projects.
Every election brings this same issue. It’s just too easy for people to tally up the promised benefits and not consider the costs. Meanwhile, the special interests — from the construction unions to the environmentalist groups — have huge incentive to advocate for the debt. (Contrast that, by the way, with the dangers of advocating for a bigger piece of existing spending, which might go up against other special interests who want to keep what they’ve got.)
This is another area where the public needs more education on the issues and all too few people have any incentive to provide it.
Rhode Island remains trapped at the bottom of the pack on the Center’s Jobs & Opportunity Index. The Ocean State comes in 46th place amongst the worst in the country trailing behind our neighbors.
I’ll provide more depth with my usual employment post and Jobs & Opportunity Index (JOI) write-up after all the data becomes available tomorrow, but at first glance, it looks like the national recovery might be stalling out in Rhode Island:
The number of employed RI residents was 539,800, an increase of 200 from the August figure of 539,600. …
The RI labor force totaled 561,900 in September 2018, down 300 from August 2018 but up 6,000 from September 2017 (555,900).
… In September, the number of Rhode Island-based jobs was unchanged from the August revised employment level of 502,100. Overall, Rhode Island’s job count is up 7,000 from September 2017.
Keep in mind that these numbers are all seasonally adjusted, so one can’t cite the end of our summer season as the reason that RI-based jobs have stagnated, employment growth has slowed, and the trend of fewer people looking for work has resumed. If this is a slowdown, then maybe Rhode Island is a leading indicator for the rest of the country, or maybe our approach to policy has become so different from that of the federal government and other states that the Ocean State is now unable to capitalize on economic growth, period.
Tangential to this topic, I’ve seen murmurs here and there blaming the Republican tax cuts for current deficit problems at the national level. Yeah, well, I kind of wonder about that:
The Treasury Department reported this week that individual income tax collections for FY 2018 totaled $1.7 trillion. That’s up $14 billion from fiscal 2017, and an all-time high. And that’s despite the fact that individual income tax rates got a significant cut this year as part of President Donald Trump’s tax reform plan. …
Other major sources of revenue climbed as well, as the overall economy revived. FICA tax collections rose by more than 3%. Excise taxes jumped 13%.
The only category that was down? Corporate income taxes, which dropped by 31%.
Overall, federal revenues came in slightly higher in FY 2018 — up 0.5%.
Spending, on the other hand, was $127 billion higher in fiscal 2018. As a result, deficits for 2018 climbed $113 billion.
The U.S. economy sits atop of the World Economic Forum’s annual global competitiveness survey for the first time since the 2007-2009 financial crisis, benefiting from a new ranking methodology this year, the Swiss body said on Tuesday.
We are the economy — you and me. Our activity is the economy. The progressive approach to economic development that Rhode Island pursues is to control what we do in a way that powerful people believe is best, which includes taxing us so the government can redistribute the wealth. Stop doing that, and our economy will soar; government revenue should be secondary.
Warwick fire fighters’ sick time benefit would be the envy of any private-sector employee, but apparently even what’s in the contract wasn’t good enough.
Our education conundrum: We’ve layered too much mere stuff in the system and created too many incentives for people to advocate against reform.
If we apply just a little bit of reasonable perspective to the issue of school safety, filling them with paid guards begins to look like less wise of an idea.
Rhode Island does need an economy that capitalizes on cross-pollinated innovation, but that means getting government and faith in central planning out of the way.
Tiverton resident Donna Cook notes that the General Assembly is too willing to impose difficulties on working Rhode Islanders while the Town Council is happy to put taxpayer dollars under its control.
In early July, we reported that the first RhodeWorks tolls were performing as projected, which the state Department of Transportation (RIDOT) promoted as a positive sign. However, this may be another area in which Democrat Governor Gina Raimondo is indebted to Republican President Donald Trump:
The transportation sector is a reflection of the goods-based economy in the US. Demand has been blistering across all modes of transportation. Freight shipment volume (not pricing… we’ll get to pricing in a moment) by truck, rail, air, and barge, according to the Cass Freight Index jumped 10.6% in July compared to a year earlier. This pushed the index, which is not seasonally adjusted, to its highest level for July since 2007.
The dynamics in the transportation sector are “clearly signaling that the US economy, at least for now, is ignoring all of the angst coming out of Washington D.C. about the trade wars,” the report by Cass said.
Things are just easier when the economy is strong… even bad government.
Although some Internet sifting didn’t reveal their state-by-state list, leaving Rhode Island’s standing as an unknown, Rob Arnott and Lisa Meulbroek’s warning in the Wall Street Journal is worth consideration:
Most cities, counties and states have committed taxpayers to significant future unfunded spending. This mostly takes the form of pension and postretirement health-care obligations for public employees, a burden that averages $75,000 per household but exceeds $100,000 per household in some states. Many states protect public pensions in their constitutions, meaning they cannot be renegotiated. Future pension obligations simply must be paid, either through higher taxes or cuts to public services.
As I’ve noted repeatedly, government investment boards get away with unrealistic investment assumptions because their financial advisors and actuaries accept that the ability to increase taxes allows for higher risk, and Arnott and Meulbroek note that this power ultimately flows to one tax in particular:
State taxes are collected on four economic activities: consumption (sales tax), labor and investment (income tax) and real-estate ownership (property tax). The affluent can escape sales and income taxes by moving to a new state—but real estate stays behind. Property values must ultimately support the obligations that politicians have promised, even if those obligations aren’t properly funded, because real estate is the only source of state and local revenue that can’t pick up and move elsewhere. Whether or not unfunded obligations are paid with property taxes, it’s the property that backs the obligations in the end.
Thus, the authors say, the pension debt is like another mortgage on our homes. (For Millennials with big education debt, it’s arguably a third mortgage.)
In some states, perhaps the resolution will weigh more in the direction of justice — hitting the honey pots of the politicians and labor unions that inflated this suffocating balloon. In states like Rhode Island, though, we’d best come to grips with the reality that, more and more, we’re working for the benefit of the government, not the other way around. What we owe on our government bill already far exceeds the value we derive, and that’s only going to get worse.
Every Thursday morning, as you probably know, WPRO’s Gene Valicenti hosts RIDOT Director Peter Alviti on the WPRO Morning News for a half hour plus segment. (Yeah, I know, I find it annoying, too.) Alviti takes questions from callers and spends a significant amount of air time promoting Governor Gina Raimondo’s wasteful, unnecessary, highly damaging RhodeWorks toll scheme.
On July 19, Alviti ratcheted it up a notch by involving his host.
For eight years, progressive-left politicians have told us that the ‘new normal’ for economic growth would be limited to the 2% range. And for years, our Center and other free-market advocates argued that major tax and regulatory reductions would reverse this course and lead to rapid economic growth, meaning more money and prosperity for families. After this week’s 4.1% GDP growth report, there can no longer be any doubt that we were right.
Having reviewed dozens of public financing deals, I have a hard time believing that there isn’t some catch to this arrange:
Samuel Bradner, one of the principles of the East Providence-based Peregrine Group, which is developing the project, said the tax break, known as tax-increment financing, was needed to close a gap in financing for the $28.3 million project.
Gov. Gina M. Raimondo, who chairs the Commerce board, said the project would pose no risk to the taxpayers.
Commerce Secretary Stefan Pryor explained that the developers would receive the $3.5 million over 10 years only after they had paid taxes each year. If the project is a bust and never pays taxes, the state doesn’t give the developers any money, Pryor said.
What Paul Edward Parker’s Providence Journal article gives one to understand is that the state returns taxes to the business only after having collected it and that this circular transaction somehow makes the developer a better investment for its debt. How does that work? The only obvious way this makes a difference is if the amount of tax creates such a margin that a too-risky project becomes palatable for lenders. Put differently, the amount of taxation would be what makes Rhode Island businesses a bad investment.
If that’s the case, Rhode Islanders have yet another indication of how much healthier our state’s economy could be without so burdensome a tax and regulatory regime.
What’s one advantage of having an unprecedented war chest to fund the re-election campaign of an unpopular governor? Well, as Spencer Rickert points out from Smithfield, the candidate can buy town-specific videos naming specific road repair projects that were “fixed by” the candidate:
Gina Raimondo fixed Capron Road Bridge in Smithfield to make Rhode Islanders safer and put our construction crews back to work. Under Gina’s leadership, we have already fixed more than 75 bridges and roads, in every community in Rhode Island, as part of a 10-year, $4.7 billion investment in the state’s infrastructure.
No, the video does not provide any evidence that Rhode Island’s Democrat governor, Gina Raimondo, was at any point out in the field repairing Capron Bridge Road, but the online video does bookend her initial use of the RhodeWork signs to promote her own name. Just so, the video claims:
In Smithfield Gina Raimondo is investing $8 million in roads and bridges
If that means the Raimondo family has taking $8 million of its own money and generously donated it to the cause, this might really be breaking news. As Alan Gianfrancesco comments to Rickert’s post:
She did not fix anything. We did. With our high sales tax, gas tax, corporate tax, nookie tax, toothpick tax and animal waste picking up tax.
Tell the truth.
Over the months that John DePetro and I have been discussing the election, I’ve wondered how effective standard political materials could be (even when inflated with millions in campaign funds) after four years of scandalous failure on the part of state government. Will people forget UHIP, “Cooler & Warmer,” and all the rest because the governor is claiming credit for fixing roads, or will they bristle at the notion that spending more of our money (including with tolls) to do what should be the normal operation of government is some sort of act of altruism on her part?
As Larry Gillheeney and Monique Chartier have both already noted, the American Trucking Association has filed a lawsuit against Rhode Island for uniquely targeting its members (and other interstate truck drivers) with tolls. With this topic in mind the Ocean State Current contacted the Rhode Island Department of Transportation (RIDOT) to check in on how the tolls are performing, thus far.
According to a spokesperson, the available numbers are still rough, in part because they are awaiting verification from the truckers’ home states. They are also only available for the three weeks from June 11 through June 30.
During that period, RIDOT reports 133,000 toll transactions. The spokesperson said the original projection was around 7,300 per day on weekdays and “about half that” on weekends, which would suggest that the actual numbers are beating the projections by about 5,000 tolls during that period.
Of course, two considerations come into play, at this point. The first is that these were the very first three weeks of tolling, so any truckers who might decide to reroute in the future may not have adjusted their behavior, yet. The second is that the tolls’ hitting their projected targets isn’t but so significant, given that the fully implemented program will have seven times as many tolls, creating more incentive to divert away from them, and that the judiciary might rule RhodeWorks unconstitutional, as currently structured.
This afternoon, the American Trucking Associations filed suit against Gina Raimondo’s RhodeWorks truck-only toll scheme, stating that it violates the Commerce Clause, citing its discriminatory nature and challenging its constitutionality. (View the lawsuit here.) Tune in now to 630 WPRO now, by the way, to hear the famous Mike Collins talking to John Loughlin (filling in for Dan Yorke) about the lawsuit.
The national truckers are not messing around: they are represented by Mayer Brown, the fifteenth largest law firm in the United States. Heavy artillery has been cut loose on a highly destructive, unnecessary new revenue program. On a certain, visceral level, that’s a beautiful thing and one wishes that this would happen with far more bad government programs.
Unfortunately, a highly likely outcome of the case will be an order to the State of Rhode Island to either desist tolling trucks or make it non-discriminatory by spreading the cancer to all vehicles including cars. Yet not one but two studies confirmed that tolls of any kind are not needed to repair Rhode Island’s bridges.
There have been many unanswered questions swirling around Gina Raimondo’s highly dubious, highly destructive toll plan.
Why was Governor Raimondo only capable of coming up with a cutting-edge, outside-of-the-box program that is destructive and burdensome rather than positive and propitious?
How did RIDOT get the truck counts and diversion rate, a critical basis for restricting tolls to only certain classes of vehicles, so wrong?
How did RhodeWorks tolls explode from $400M (per Governor Gina Raimondo in August of 2016 at Minute 15:00) to a completely open-ended, multi-billion dollar revenue stream?
Did Gina Raimondo, Nicholas Mattiello and Theresa Paiva-Weed truly believe that tolling trucks only, something that no other state does – a “unique approach” as RIDOT itself admits – was going to pass a legal challenge?
But the biggest question: if the lawsuit goes sideways and RhodeWorks tolls are ruled unconstitutional, will Nicholas Mattiello, Gina Raimondo and all Rhode Island legislators stand by their promise that tolls will never go on cars and scrap the RhodeWorks tolls?
[Monique has been volunteer spokesperson for StopTollsRI.com since tolls were first proposed three+ years ago and began working for the Rhode Island Trucking Association as a staff member in September of last year.]
After years of citizen outrage against truck-tolls in the Ocean State, the American Trucking Associations and three motor carriers representing the industry are bringing a federal lawsuit against the State of Rhode Island on constitutional grounds likely to cost taxpayers millions.
Progressives and conservatives frame things like tax policy differently, and not only does it prevent fruitful discourse, but progressives’ errors undermine an economic system that makes shared prosperity more likely.
… there is indeed a correlation between compulsory union dues and public-sector compensation. Based on data from the report that Andrew and I wrote in 2014, state workers in compulsory states were paid 17.0 percent more on average than comparable private workers, while state workers in non-compulsory states were paid just 5.6 percent more.
Take a look at Rhode Island’s position on his related chart:
How much more economic activity would we be experiencing if it weren’t for this premium taxed out of our economy, and how much more work could we get done on government services and maintenance if it weren’t so expensive?
When will Rhode Island’s political leaders remember of the real needs of families? Despite a large and unexpected revenue windfall and clear policy lesson, resulting from the recent federal tax and regulatory cuts, Rhode Island’s General Assembly has wasted an opportunity for reform and, instead, are seeking to maintain the status quo in the FY2019 Budget.
One last minute bill in the Rhode Island General Assembly, H8324, may or may not be going anywhere, but it’s worth a look as an educational exercise.
Very simply, it would require any “hosting platform” (e.g., AirBnB) that allows people to “offer any property for tourist or transient use” to be responsible for making sure that the rentals are in compliance with state and local laws and regulations. It would also require the platform operators to take a more active role in the collection and transfer of all relevant taxes.
This little change in law, affecting a narrow portion of a single industry in the state, carries some important questions of the sort that we don’t consider thoroughly enough. What is the nature of commerce? Who works for whom? Who has responsibility for whom?
From a free-market perspective that starts with the individual as the origin of all economic activity, the property owners are responsible for the product that they are offering, and the hosting platforms work for them. Because they are the constituents of state and local government, they have a say in that government and can arguably be said to have consented to granting it some authority to regulate their activities.
The progressive perspective that has long been insinuating itself into Rhode Island government and encroaching on Rhode Islanders’ rights is very different. That view doesn’t begin with individuals as autonomous sources of responsibility and power. The Rhode Islanders seeking to rent their property don’t truly have ownership of themselves. Rather state and local government has claims on their activities, and the hosting platforms own their rental businesses. It is therefore reasonable for the government to require platforms to make sure that their workers comply with its requirements.
From a free-market perspective, a government that imposes requirements on people might create incentive for them to hire a contractor to do tasks for them — for AirBnB to provide inspections for regulatory compliance, for example, with an extra fee. But from a progressive perspective, the government has a right to tell companies that intend to draw profits from its people what conditions they must impose, or else they cannot do business here.
In other words, progressives implicitly believe that the government is renting us out to the companies.
Pioneer Institute’s study “Back to Taxachusetts” tracks ten years of Connecticut data from 2008 to 2017 and is rife with sections entitled “Corporate exodus,” “Stagnant economy,” and “Voting with their feet,” to show Connecticut’s tax policies have left the state failing, whereas Massachusetts has become an economic powerhouse.
“Connecticut provides a real-world, sobering example of how a seemingly attractive tax-the-rich scheme can backfire badly on a state, turning rosy projections of revenue gains to real-life losses, and damaging business confidence in the process,” wrote Gregory W. Sullivan, research director for Pioneer Institute.
The study was authored in response to a “coalition of labor unions, community groups, and social advocacy organizations,” trying impose a 4 percent tax surcharge on individuals in Massachusetts earning over $1 million per year through a “Fair Share Amendment” to the state constitution. The amendment was placed on the voter ballot, but was challenged in court.
Union-aligned progressives are pushing for the same sorts of things in Rhode Island. So far, the firewall of sanity has held in the Ocean State, but one can only hope Rhode Islanders are paying enough attention to learn the lessons when other states fall for the far-left pitch.