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Efficiency at Ticketing May Disrupt Natural Balance

If you’re wondering why legislators are now and then suddenly very concerned about catching people who speed, run red lights (just barely), or drive without insurance, Dan McGowan and Susan Campbell of WPRI give a hint as to the origin of their urgency:

Conduent earns $2,978 per month for each camera [in Providence] and $7.50 per [speeding] violation processed, meaning it was set up to make more than $100,000 during the first month of the program. The Maryland company, a subsidiary of a New Jersey-based corporation that was formerly a division of Xerox, also receives a $3.50 convenience fee every time a violator uses their credit card to pay a ticket.

Hey, keeping us all in line is always profitable for somebody.  In this case, it’s also proving wildly profitable for the city:

A total of 12,193 tickets were generated from five speed cameras between Jan. 16 and Feb 22, with nearly all of the tickets coming from three locations: Mount Pleasant Avenue, Charles Street and Thurbers Avenue. (The cameras are not in use on Sundays.)

At $95 per ticket, that means violators were charged $1.15 million in just over one month. The city had already received $370,000 as of Feb. 22, records show. Six additional cameras will be deployed in various neighborhoods next week.

Of course, while that’s 12,193 reminders to slow down, it’s also 12,193 reasons to think twice before driving through Providence at all.

Sometimes inefficiencies create a natural balance.  In its efficiency at charging people for driving violations, Providence may be preparing to teach us something about the costs of disturbing that balance when it comes to driving 11 miles per hour over the speed limit.

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The Reason for Pension Shortfalls in Providence

Taking up Providence pension woes, Dan McGowan and Walt Buteau highlight a recent study concluding the following:

Wainwright Investment Counsel LLC projects the beleaguered fund would have an additional $305 million today if city leaders made the correct yearly payments between 1996 and 2006 and again in 2010 and 2012, an amount that would bring the city’s current pension funding level close to 50%.

The firm calculated the amount that city leaders failed to contribute to the system – $111 million – and the monthly returns the actual money in the retirement fund saw between July 1996 and June 2016. Between 1998 and 2002, Wainwright estimates the city shorted the fund by $76.8 million.

Keep in mind that this means the rest of the shortfall was due to generous benefits hidden under faulty assumptions:

Providence is still solvent, but its pension system was just 25.8% funded as of June 30, 2017, with an unfunded liability that exceeds $1 billion.

So, skipped payments account for less than one-third of the missing money.  The other 700-some million dollars are a result of elected officials’ giving away too much in benefits and deceiving the public about the cost by gaming the actuaries’ calculations.  The key piece of that deception has been (and continues to be) the discount rate, or the rate of return expected on the investment.

Both elected officials and labor union leaders (who often helped elect the people with whom they’re negotiating) haven’t minded understating the cost of government employees.  Both union members and taxpayers should be furious, but taxpayers shouldn’t be held liable for promises that they had no realistic means of preventing.

And as the bill comes due, we can be sure that the exploding tax bills and collapsing services will push taxpayers — including those collecting government pensions — somewhere that they don’t have to pay for it.

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Clarifying the Meaning of P3

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Reminder that Good Tax Reform Has Two Steps

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Borrowing Money to Make Housing More Expensive

One can have real debates about the wisdom of driving up housing prices.  If you’re trying to get started in the state, high housing prices are a huge burden.  On the other hand, if you own property in Rhode Island, making property more scarce should drive up its value… at least until the inability of people to move around easily strangles the economy even more and reduces the reasons for living here in the first place.

That said, it’s worth pointing out that this sort of thing certainly plays a role:

The Rhode Island Department of Environmental Management announced Friday that 17 projects will receive matching grants to protect 889 acres of open space and farmland. The funding stems from the Green Economy Bond program, which was voters passed in 2016.

The initiative aims to invest $35 million to preserve open space, improve recreational facilities and clean up land and waterways.

So, taxpayers committed to spending money (with interest) on initiatives that will reduce the amount of buildable land, leaving hundreds of acres that do little for anybody who doesn’t have a lot of free time.  Sure, it sounds like a nice thing to do, but it would be less of a concern if we could be confident that people understood the economics involved.  The value of land is mainly helpful when one makes the decision to sell (and buy in a less-inflated market elsewhere); in the meantime, it primarily means higher property tax bills and pressure for more debt and state-level taxes to subsidize housing for those who can’t afford it.

One thing we can say for Rhode Island government:  It’s great at creating tax traps that drag the economy down in ways that aren’t easily traceable back to them, while they buy votes from special interests.

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Tax Cuts and Extra Revenue

We’re still in the period of anecdote, when it comes to assessing the effects of the federal tax cut on the economy, but Investor’s Business Daily suggests that we’re seeing early indications of a tax cut’s ability to generate revenue that takes a bit off its projected cost:

The Congressional Budget Office says that federal revenues in January added up to $362 billion. That’s an increase of $18 billion— or 5.2% — from the year before. As a result, the government ran a surplus of $51 billion that month, which is equal to the previous January. …

Individual income and payroll taxes, it says, rose by $68 billion. “That change largely reflects increases in wages and salaries,” the CBO says. …

What’s more, the fact that employment gains continue to be strong means more people will be earning taxable wage income. It also means fewer people collecting government benefits, which will mean less government spending than would otherwise be the case.

The most shocking thing is that we’re debating the cost of the legislation.  Here, we see more people finding work and getting off of welfare.  Those sorts of positive outcomes are supposed to be what welfare programs are about, and it turns out that economic growth accomplishes them.

So to accurately assess pro-growth policy, one must first adjust the static “cost” to account for increased revenue and then assess the benefits to individuals and our society against the remaining reduction in government revenue.  Naturally, I’m biased, but it seems to me that a fair assessment will show that the U.S. and most of the states (especially high-tax ones, like Rhode Island) have a long, long way to go before cutting taxes is anything less than a no-brainer.

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Fake Claims From The Progressive Land Of Make-Believe

The legislative onslaught from the left has begun. As the poster child of their desire for government-control over the lives of residents and businesses, Rhode Island’s progressive-Democrats announced they will introduce legislation this week to establish an estimated $13.2 billion single-payer health insurance system.

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