Taxpayers' Bill of Rights, Revisited

I have previously expressed my reservations about whether the Voter Initiative (VI) will truly fix the status quo problem of an engorged public sector. In that posting, I expressed a preference for a Taxpayers' Bill of Rights (TABOR) constitutional amendment and presented numerous links to TABOR information sources. Mark has challenged some of my thinking about the VI here.

In a subsequent conversation with Andrew, he articulated one of my concerns about the VI which I had been unable to state as well:

...I think that voter initiative supporters sometimes put too much emphasis on the purely procedural stuff and not enough emphasis on the things that need changing. The Voter Initiative Alliance should have presented the text of a bunch of laws that they would like to see passed along with their petition and then said to the legislature "prove we don't need VI by giving these a fair hearing." Then they would have either gotten some of the changes they wanted or have gotten definite issues to run on in the Fall...

Such procedural talk makes VI sound less threatening but it also does not stir any passionate commitment or convince anyone of its significance. While a bit of an overstatement, it sounds like we are going through the procedure of re-arranging the chairs on the Titanic instead of changing the direction of the ship before it hits an iceberg. And that is part of what magnifies my worries that the entrenched powers will simply develop new ways to manipulate the modified system for their benefit.

Successful political movements articulate a vision during campaigns so they can legitimately claim a clear mandate after winning. So what is the mandate VI proponents are seeking from voters? Is it to modify a process or is it to change specific policies?

I think the VI movement would be ignited if they declared that the first thing they were going to do after VI passes would be to submit a TABOR to the voters. Put a constitutional cap on government spending increases. Empower state and local officials to turn down outrageous union contracts that nobody can afford.

That kind of positioning would have immediate relevance. E.g., property tax increases are driving seniors in East Greenwich to demand a tax freeze for themselves. I think it is a bad policy decision to grant the freeze but it is merely one more example of how the high taxes in RI are making people mad enough to demand change now.

Last week's edition of the Providence Business News contains an article entitled Coalition calls for constitutional spending cap, available online to subscribers only, which notes:

Comparing their actions to the Boston Tea Party, Gov. Donald L. Carcieri, the Rhode Island Public Expenditure Council, and several business leaders last week proposed a constitutional amendment to restrict future state and local expenditure growth.

The measure, inspired by Colorado’s Taxpayer’s Bill of Rights (TABOR), Massachusetts’ Proposition 21/2, and other mandatory tax expenditure limits across the United States, would do two main things:

Limit the allowable growth in state spending each year to the inflation rate (as reflected in the U.S. Consumer Price Index) plus 1.5 percent.

Limit annual increases in each town’s property tax levy to 4 percent, and bar the total levy from exceeding 2.5 percent of the full market value (a level that no town has reached yet, though Providence comes close).

Rhode Island currently has no cap on annual state spending growth. But it does require, per a 1992 law, that expenditures not exceed 98 percent of projected revenues. On the local side, property tax rate hikes of more than 5 percent require state approval.

I know from experience on the East Greenwich School Committee that getting a waiver on the 5% increase has become a procedural certainty, not something that leads to any challenging of the proposed increases. We need real limits.

The article continues:

Under those current rules, state spending from general revenue will have grown by about 18.9 percent from fiscal 2002 to fiscal 2007 (as budgeted by the governor), just above the cumulative growth of the Consumer Price Index for Northeast urban areas.

Local property tax collections, on the other hand, have grown by an average of 4.2 percent annually for the last 10 fiscal years, according to RIPEC.

With projected deficits averaging $135 million for each year through the remainder of the decade, however, and a history of double-digit state spending hikes as recently as 2000 and 2001, RIPEC Executive Director Gary Sasse believes tight controls are sorely needed. Rhode Island’s recent history shows that "the only thing that controls the growth of spending is the amount of money available," Sasse said in an interview – and that means the state gets used to splurging during good times, and doesn’t save enough for tough times.

At a news conference at the Old State House, on Benefit Street in Providence, Carcieri said high taxes are overwhelming Rhode Islanders, leading the wealthy to move away and leaving the middle class to pay the bills. State revenue is lagging, but expenditures keep going up.

The article then describes the TABOR supporters:

A growing number of business and citizens groups seem to agree. With strong support from the Northern Rhode Island Chamber of Commerce, RIPEC and the governor have assembled a new alliance called the "Affordable Rhode Island Coalition," which so far includes, among others, the R.I. Association of Realtors, the R.I. Manufacturers Association, Operation Clean Government, the Voter Initiative Alliance, and several chambers of commerce...

The measure also has the support of some Democrats, most notably former Senate Finance Committee Chairman J. Michael Lenihan, of East Greenwich...

Senator Lenihan has often been one of the few thoughtful Democrats in the state legislature and I am pleased to see him supporting this.

The article then notes the usual opponents:

...House Finance Chairman Steven M. Costantino, D-Providence, said he hadn’t examined the details, but what he knows about Colorado’s TABOR – which was recently amended by voters because it had devastated higher education, road maintenance and other key services – makes him think such measures are "extremely dangerous."

In a written statement, Senate President Joseph A. Montalbano, D-North Providence, also cited Colorado’s "failed experiment," and he added that while "efficient government is a worthy goal," elected leaders "also recognize that citizens demand a government with the flexibility to repair roads, educate children and provide a health care safety net for the most vulnerable. These factors all contribute to strong economic development."

Once again, Senator Montalbano doesn't get it. We are not looking just for efficient government - even as some of us would argue that such a concept is an oxymoron given the incentives that exist in the public sector. Rather, we are looking for limited government, just like our Founders envisioned.

Here is a feature of the Rhode Island TABOR that deserves further vetting:

Lenihan and others argue that the Rhode Island proposal is better than Colorado’s TABOR because it includes an "escape clause" – it can be overridden with a two-thirds vote in both legislative chambers – and it doesn’t mandate a full refund to taxpayers of state revenue collected above the proposed cap, but rather requires that excess go into a "rainy-day fund" of up to 5 percent of the budget.

Finally, another predictable opponent has these comments:

But Ellen Frank, an economist at the Poverty Institute at Rhode Island College, noted that the escape clause is to be used only in "emergencies."

The local limit also doesn’t make allowances for actual growth, Frank added. (The town with the biggest average tax levy increase between 1996 and 2006, for example, was West Greenwich, because of high levels of development.) And "most disturbing," she said, because the only exception to the local limit is if state aid drops, "what this would undoubtedly mean would be that cutting state aid would be the one cut that legislators could do, knowing that the cuts could be made up at the local level."

Frank also took exception to the notion that forced limits would encourage political leaders to make smart, creative spending decisions.

"I don’t think a tax expenditure limit in any state has been shown to lead to a kind of thoughtful long-term planning," Frank said. "It leads instead to a constant crisis mentality, in which the state jumps from one fiscal crisis to the next, and cuts are made at the last minute based on who is the weakest lobby."

Like we have anything close to "thoughtful long-term planning" today! Or don't live in a "constant crisis mentality" today when hefty annual spending increases result in large and perpetual budget deficits! Sometimes you just have to wonder if these people have any connection to the the real world of living within our economic means.

The really big point is one of economic fairness. As I wrote in a ProJo editorial last year:

...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...

Tom Coyne has some pithy comments worth reading in his March 14 posting.

You can also read more about the Affordable Rhode Island Coalition and related issues in articles here, here, here.