Rhode Island Politics and Taxation, Part II

Let’s begin a truly public debate in Rhode Island about politics and taxation issues, a necessary first step toward fixing the mess in this state.

I have published four editorials or letters in the Providence Journal Bulletin during 2004 in which I challenged the economically destructive thinking and actions of various politicians, bureaucrats and public sector unions. Let’s use those editorials as a way to begin the debate.

I served on the East Greenwich School Committee from 2001-2002. In my last three months on the Committee, we voted to extend the teachers’ union contract by one year. I was the only Committee member to vote against its approval. In that same time period, we hired a new Superintendent of School, Michael Jolin.

Fast forward to the first quarter 2004, when two different things happened. First, in response to a large budget deficit, Governor Carcieri proposed ,

Faced with an estimated $194 million budget deficit, Governor Carcieri proposed

The governor’s proposal and reaction to it:

http://www.projo.com/news/content/projo_20040228_terror28.2cf236.html

The governor’s response:

http://www.projo.com/news/content/projo_20040227_ed27.286f07.html

ProJo editorial on it:

http://www.projo.com/opinion/editorials/content/projo_20040229_29edbudge.203230.html

DBH 3/24 editorial

http://www.projo.com/opinion/contributors/content/projo_20040324_24cthaw.1b9f00.html

In the last three years, state spending in Rhode Island has exceeded revenues by $582 million. We have covered the deficit by spending all of our surplus tobacco-settlement and federal-grant money – each a one-time source of funds. With the state facing a $190 million deficit for next year, the free ride is over.

Governor Carcieri's budget proposal recognizes this reality. In that context, he has proposed reducing total state aid to local education from $638 million to $630 million, a 1.25-percent reduction. Some funding crisis!

The $630 million proposal needs to be viewed with the proper perspective of time, too. State aid has climbed from $480 million to $638 million in just the last five years.

The real debate should be about why state aid increased by $158 million, or 33 percent -- nearly twice the rate of increase in taxpayers' personal incomes. You can thank outrageous demands by public employees and the spineless responses by politicians and bureaucrats for such irresponsible increases.

The follow-on article and my letter in response:

http://www.projo.com/education/content/projo_20040331_eg31supt.3d3f2.html

http://www.projo.com/opinion/letters/content/projo_20040419_hawx.2cfaa4.html

George Nee and 12 other AFL-CIO leaders:

http://www.projo.com/opinion/contributors/content/projo_20040617_17ctnee.3454e3.html

When you are losing the substantive battle, a common technique is to change the subject. And that is just what George Nee and 12 other AFL-CIO leaders did in a June 17 editorial:

CERVANTES taught in his novel Don Quixote de la Mancha how one can be foolishly impractical in the pursuit of a perceived ideal. Unfortunately, The Providence Journal editorial board and Governor Carcieri never learned that lesson…
Over the past few months, we have tried to reach out to the governor, to work together in a spirit of cooperation. Unfortunately, the governor, supported by The Journal's editorial board, has chosen a different path. He has chosen to demonize unions and embark on personal attacks. This approach is not in the long-term interest of our great state. It is time for the governor and the Journal editorial board to come down from their high horses.
Their attacks on unions and their leaders are as ill-advised as Quixote's tilts at windmills. The attacks are unreasonable and impractical. Further, the attacks send us down a path of confrontation unprecedented in our state's history.
DBH editorial:

http://www.projo.com/opinion/contributors/content/projo_20040724_24cthaw.353316.html
While great literary fiction lifts the soul, economic fiction destroys families and societies. And economic fiction is what Mr. Nee promotes.
As unions demagogue the issues, let's – once again – bring the debate back to facts that working families live with every day.
The unions say they represent working people. Test that claim with this nonfiction test. If you are a working person or retired working person, has your work environment included:
• Annual salary increases up to 12 percent?
• Automatic increases simply for showing up, not based on merit?
• Additional longevity bonuses, just for showing up?
• No-layoff provisions?
• Seniority valued more than expertise or organizational need?
• Zero co-payments on insurance premiums?
• Eleven weeks of paid time off per year?
• A pension equal to 60 to 80 percent of your salary for the rest of your life, starting immediately after retirement and with as little as 28 years of service, regardless of your age?
…These terms are the dirty little secret of government. Unions and their partners in government thrive by being largely invisible to taxpayers. That invisibility is finally being destroyed now – and that explains their vehement reactions…
Even so, this debate is about more than current taxation levels and today's family budgets. It is about freedom and opportunity for all – and family budgets in the future. The greatness of our country is that people can live the American dream through the power of education and hard work.
High taxation and mediocre public education create a disincentive for new-business formation in Rhode Island. That means fewer new jobs, and less of a chance for working people to realize the American dream. It also means people have an economic incentive to leave the state – and the ones who can afford to do so will continue to leave.
Unfortunately, the ones who cannot afford to leave are the people who can least afford the crushing blow of high taxation and mediocre education. The status quo dooms these families to an ongoing decline in their standard of living. That is unjust.
The unions have political power on their side today. They will, no doubt, win some short-term battles. But, like all those clinging to untenable economic models, they are on the wrong side of history and will lose the war over time. The only question is how much economic pain they will inflict on the state's residents along the way.
We are at a crossroads in Rhode Island. If we tackle issues now, a turnaround with only some pain is possible. If we delay, we will doom multiple generations of working families and retirees to further tax hell and a reduction in their standard of living. That is wrong.
This public debate is about breaking the chains of bondage and giving all citizens the freedom to live the American dream here in Rhode Island. What greater legacy can we leave for our children than a fair shot at the American dream here in their state?
The number of freedom fighters is growing, so please join this noble cause. Let's tear down this wall of economic fiction, and let freedom ring out across the state. Let's make Rhode Island a vibrant land of freedom and opportunity, for all working families.
And then the statewide pension problem surfaced publicly in early August:

http://www.projo.com/news/content/projo_20040803_pensh3.2b1680.html
State and local taxpayers should pay a whopping $121.6 million more next year toward the pensions of state employees and public school teachers…
That advice, from the state's pension-funding adviser, sent shock waves through the hearing room where top labor and government officials gathered…
In late June, the deadlocked panel voted 6-6, defeating a series of moves recommended either by Carcieri, a Republican, or state treasurer Paul Tavares, a Democrat, to rein in the escalating cost of public-employee pensions, such as the adoption of a mininum retirement age.
But yesterday's news seemed to surprise some of the union leaders who had resisted any changes in pension eligibility and benefit levels…
The warning was the result of a reexamination, by the state's actuarial advisers at Gabriel Roeder and Smith, of the assumptions that determine how much money must be set aside now to cover all the promises made to current and future retirees.
After looking back seven years, the firm concluded the state has been overestimating investment returns; underestimating the salary increases, averaging 4.5 percent annually, over the seven years that ended on June 30, 2003; and failing to account for the disproportionately large number of Rhode Island public employees who stay in their jobs long enough to qualify for pensions.
http://www.projo.com/news/content/projo_20040812_pensch12.2fb631.html

"We are not bleeding, we are hemorrhaging," said Daniel Beardsley, executive director of the Rhode Island League of Cities and Towns, which represents local governments in the state's 39 communities…
Local pension systems in some of the state's communities are also in trouble -- especially those in Cranston and Providence, according to estimates by the Rhode Island Public Expenditure Council.
Rhode Island labor leaders have long resisted changes that would cut benefits for employees and teachers.
Subsequently, a retired teacher named Mr. Hosey wrote a letter whose content was simply pathetic and factually wrong:

http://www.projo.com/opinion/contributors/content/projo_20040813_13cthosey.336f4f.html

That did not stop either WorkingRI:

http://www.workingri.com/newspage.php?ord=12

or the RI AFL-CIO from posting Mr. Hosey’s letter on their websites.

http://www.riafl-cio.org/id18.htm

Note that both sites posted the factually inaccurate union letter in response to one of my editorials without the courtesy of also posting my original editorial or subsequent response.

David Sweeney, an attorney who has negotiated teachers’ union contracts, wrote a letter in response to Mr. Hosey in which he said:

http://www.projo.com/opinion/letters/content/projo_20040823_leswee.1268aa.html
Former teachers who enter the real work world from the warm womb of the education industry are consistently shocked by the work demands of employers who must compete to survive. Unfortunately, these same people are teaching our children that everyone is "entitled" to all the benefits of a comfortable life, from annual pay increases to lifetime health care, without regard to individual talent or effort.
That economic philosophy is called socialism, and it hasn't worked anywhere in the world to date.
I followed with another editorial response, in which I said the following:

http://www.projo.com/opinion/contributors/content/projo_20040825_25haw.29587d.html
Test who is truly willing to engage in an open, public debate of the facts. Here's how:
• Demand that your community and school officials post all public-sector union contracts on their Web sites, so that the facts are transparently obvious.
• Hold political candidates accountable for knowing and publicly discussing the terms of those contracts. They should say, on the record, whether such terms are acceptable.
• Vote for candidates – regardless of party – who are responsive. Throw out those who are not.
This is not simply a rhetorical debate about esoteric contract terms. We ignore the fundamental laws of economics at our peril. Working families and retirees eventually pay for every excessive contract.
The unrelenting burden of outrageous public-sector-union contracts reduces everyone's standard of living in Rhode Island without improving the mediocre quality of our public services.
We cannot afford the status quo, financially or morally.
That is the bottom line. I will shortly begin postings with further details on taxation issues within Rhode Island.