June 1, 2011
Now It Costs More to Borrow
Whenever a rating agency lowers their estimate of the ability of a state to pay back its bonds, the interest rates the state pays go up. Moody's just lowered its rating for Rhode Island.
Moody's Investors Service has downgraded the outlook on Rhode Island bonds to negative from stable because of "the potential impact of rapidly escalating pension costs on the state's ability to increase its liquidity margins, diminish its reliance on one-time measures to balance its budget and reduce its debt burden."That means all those transportation bonds we Rhode Islanders love to pass (because, ya know, we gotta have roads!) will cost more over the long term. Smart states budget transportation, they don't bond it. For years, we've dealt with sacrifices to the quality of basic government services that most state taxpayers actually use--indeed, require--like roads, bridges, the DMV, etc. While other budget items have continued to increase, either with state or federal (it's magic!) dollars.Moody's added, "The state's pension costs are set to double in two years by an amount that roughly offsets its budget reserve account, raising the likelihood that it will continue to face significant budgetary pressures..."
For his part, Governor Chafee recognizes this and is trying to find ways to get off the transportation bond wagon. Unfortunately, his ideas revolve around paying tolls or mileage taxes. That's a non-starter, too. Just like his call to add more workers to the DMV. Maybe we should make Twin River a full-on casino and devote some of that revenue to transportation. Or we could just re-prioritize the state budget--baseline it--and go from there. Doubt that will happen.
Transportation??? How about higher education and open space and recreation. Even in the darkest hour of the recession we blew money we didn't have on OPEN SPACE!!!
As far as Twin River goes, Governor Bob Walsh wants to sell it to pay off the pension obligations. Even if the sale covers it, there goes $200+ million in annual revenue for the state.
We're so 'smaaat' in this state we're stupid.
Posted by: Max Diesel at June 1, 2011 10:51 AM"That means all those transportation bonds we Rhode Islanders love to pass will cost more over the long term."
For any future bonds. The bond rate isn't going to change on old bonds, right?
As for tolls, I wouldn't be opposed to putting one on 146, if it absolutely had to be done. I travel it every day and of course, my behavior would then change, but why not get a buck out of all the cars heading to the casino, umm, I mean Twin River.
Then again, we are the state that charges trucks a $3000 toll to cross a bridge in Pawtucket and then doesn't fix it, even millions of dollars later.
We're the state that charges everyone $1 per phone line for 911 and then only gives 33 cents of it to the 911 department.
So of course a $1 toll on 146 would also just go to more pensions and state employees.
Posted by: Patrick at June 1, 2011 10:54 AMThe most notable aspect of this bad news is the reason cited: "rapidly escalating pension costs".
The Senate President recently questioned the wisdom of pension reform. In light of the alarming development that Marc cites here, does she stand by that position?
Good news; now they can't re-amortize!
Posted by: Tommy Cranston at June 1, 2011 7:03 PMRaimondo has proposed a simple 3 step solution:
1. Raise retirement age to 67-immediately.
2. Suspend COLA's-immediately.
3. Reduce future benefits from 1.6%-2% to 1.2%.
These are NOT complicated. The GA could hold hearings this week and next and vote on them before month's end.
They ain't doin' it. Not in June, not in October. Bend over and get ready for some "superior behavior" as commie plagaristic scumbag Rudy Cheeks puts it.