How the State Should Address Its Budget Challenges

Today, the RI Center for Freedom & Prosperity published a short report that Penn State Professor Emeritus Dennis Sheehan and I wrote proposing an approach that Rhode Island leaders should consider while addressing the daunting challenge of the FY20 and FY21 budgets.

The title of the report is, “Decision of the Century: General Assembly’s Budget Approach Will Set State’s Trajectory for Decades to Come,” emphasizing the importance of this moment.  Seen correctly, Rhode Island actually has an opportunity to reprioritize and change direction.  Rather than praying for a federal bailout and seeking every chance to accept the least change to the status quo, leaders could be stepping up to the plate and laying out their priorities and principles, as shown in this chart from the report.



Basically — before tough decisions are forced upon the state — leaders should think through different scenarios and tell the public what decisions they will make if need arises.  To get to that result, they should perform a thorough review of all expenditures and categorize them, first, by their degree of obligation, ranging from things the state really has no choice but to fund through to things it shouldn’t be funding even if it has the money.

Next comes what we call the “principles filter,” which is a bit more subjective.  Here, officials assess the actual effects of each spending policy (the actual effects, not the intentions) and assesses whether each effect is something that the state does or should actually want.

By thinking in this way, the government can actually reduce the amount of its shortfall and, more importantly, the economic pain of Rhode Islanders.  The report suggests that the two-year budget gap could be as big as $1.6 billion.  However, the governor and General Assembly are not helpless and shouldn’t be passively sitting back waiting for the economy to happen to them.  Choosing budgetary policies wisely could ensure that the economic hit is not as bad as it otherwise would be.

At some point, everybody has faced a moment of setback, even catastrophically so.  In such cases, we shouldn’t take the attitude of trying to preserve what we have just because we have it, and we shouldn’t throw up our hands and give up.  Rather, when we face setbacks in our lives, we should step back and reevaluate where we are, how we got there, and what we can do to make things turn out even better because of our challenges.

Our state has exactly that sort of opportunity right now.  We can ask ourselves an optimistic “what if.”  What if being knocked off our feet means we can get off the ground facing in a different, better direction?

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