Another State Route to Riches: Institutional Attendants Earning Six Figures

The job listings for “institutional attendants (psychiatric)” positions in the state Department of Behavioral Healthcare, Developmental Disabilities, and Hospitals (BHDDH) offer a salary in the mid-$30,000s, and payroll information available through the RIOpenGov project of the RI Center for Freedom & Prosperity suggests top regular pay in the low-$40,000s.

In 2010 and 2011, however, almost all of those employees added significantly to their pay by working extra hours, as well as other salary enhancements and bonuses that the state reports as “overtime.” A significant number of them doubled their base pay or more.

Continue reading on the Ocean State Current...

Government Employee Overtime About Equal to a 38 Studios Every Year

The State of Rhode Island spent $89.6 million on employee overtime in 2011, according to payroll data acquired by the RI Center for Freedom & Prosperity. The free-market think tank will make the individual payroll data for fiscal years 2011 and 2010 available next week through an interactive transparency Web site.

The average overtime payments of the 9,415 employees receiving at least some overtime in 2011 was $9,516, but removing those who claim relatively small amounts reveals some startling totals.

Continue reading on the Ocean State Current...

Laundering and Medicaid: State Operations Have Incentive to Be Inefficient

From the time she took a job with the State of Rhode Island in 1979 to 2011, Judith Andrade had worked her way up to regular pay of $37,091 as a laundry worker at Eleanor Slater Hospital. According to payroll data collected by the RI Center for Freedom & Prosperity she actually took home $76,320 that fiscal year, with overtime pay. The year before, her total had been $79,283.

In an article on the Ocean State Current, yesterday, Suzanne Bates detailed the dozen nurses and psychiatrists at the hospital making over $100,000 in overtime alone. The experience of Judith Andrade shows that it isn’t just the nurses who offer personal care who are able to more than double their listed pay at the facility.

Continue reading on the Ocean State Current...

Government Nurses Joining Quarter-Million-Dollar Club

The Ocean State Current has an article up by Suzanne Bates (freelancing from Connecticut's Yankee Institute) detailing the sky-high overtime that some staff at the state-run Eleanor Slater Hospital take home.

These numbers come to light every now and then — usually with just a glimpse because a nurse or two makes the top however-many list of state employees. The folks on the government side will typically throw up their hands and mumble something about being short-staffed and hemmed in by union rules and hospital regulations.

In the wake of Ken Block's waste and fraud report, however, two angles become more prominent: First, we now know that this inefficient labor expenditure is a regular feature of state government, year in and year out. It's not a temporary difficulty of an inadequate workforce and some contract language in need of renegotiation, but an expected part of the budget (even as the budgets are exceeded by millions of dollars every year).

Second, we're beginning to see that the way the hospital bills the taxpayer, by way of Medicaid, both disguises the cost and distorts the economics. With the federal government picking up a large chunk of the tab, and with union benefits (especially pensions) driving up the non-salary parts of employee compensation, the incentives of government are to tax more and give more away.

The numbers are outrageous enough, and — as we'll be making evident in the days and weeks ahead — they expand beyond just a single hospital or even a single department. But as government works its way more thoroughly into healthcare and every other aspect of our lives, these examples are a cautionary tale of the distorted incentives that will ultimately bring down any centrally planned system.

Gary Alexander's Long Commute and Rhode Island's Big Compensation

Rhode Island resident and former human services chief Gary Alexander has been making news back home related to his current job as Secretary of Public Welfare in Pennsylvania.

About two weeks ago, Alexander's work came up on the Current and Anchor Rising regarding a chart suggesting that a single-mother in the PA public welfare system is better off not making more than $29,000 in gross income unless she can leap above $69,000, because her loss of public assistance payments drops so much.

This week, Alexander caught the attention of Rhode Island Public Radio reporter Ian Donnis after the Pennsylvania Independent published a story about his use of a state vehicle to travel to and from his family's home in Rhode Island.

Continue reading on the Ocean State Current...

During Hurricane Sandy, Rhode Island Vendors Should Watch Their Prices

With the declaration of emergency for Rhode Island, Hurricane Sandy becomes the first instance in which a new law, passed by the Rhode Island General Assembly and signed by the governor this spring, goes into effect.  H7409 (also S2606) outlaws price gouging during an emergency.  In the heat of the experience, the adrenaline of survival pushes the consequences of public policy even farther out of the public consciousness than its usual peripheral place.  Still, as we hunker down — with school canceled and government offices closed well in advance of the looming weather — interest in the storm creates an opportunity for education and debate.

Continue reading on the Ocean State Current...

Things We Read Today (26), Wednesday

Mainly on government's bad incentives: bad housing spending in Providence, unlearnable spending lessons for the governor, stimulus corruption, and Medicaid reform.

Continue reading the Ocean State Current...

Things We Read Today (22), Tuesday

Economic development options, from all-government to government-dominated; the heartless-to-caring axis in politics; Southern New Englanders' "independence"; solidarity between Romney and his garbage man; the media coup d'etat.

Continue reading on the Ocean State Current...

A Decade of Moving Next Door

I've been following taxpayer migration data for years, but in a haphazard way. A new study that I've coauthored for the RI Center for Freedom & Prosperity finally gave me the opportunity to review all fifteen years of available data from the IRS.

The picture — from the 2003 beginning of what can only be described as an exodus — is frightening. After accounting for the tens of thousands of Rhode Islanders who moved to other states and other taxpayers who moved in the opposite direction, Rhode Island lost 24,455 households, with $1.2 billion of annual income (not inflation adjusted). More conspicuously, a net 3,406 taxpayers moved right across the border, to abutting counties in Massachusetts and Connecticut, taking with them $254.5 million in annual adjusted gross income (AGI).

Continue reading on the Ocean State Current...

Why Are We Transferring Ownership of Two (Two More?) State Bridges to a Quango?

This Bristol-Warren Patch article is comprised mainly of a press release from the R.I. Turnpike and Bridge Authority announcing that tolls (amount undetermined) will soon come to the Sakonnet River Bridge and that there would be no change in the amount of the tolls charged to cross the Newport bridge. But it also contained a separate, equally disturbing announcement by the RITBA.

Ownership of the Sakonnet Bridge will be transferred from the Rhode Island Department of Transportation to RITBA, who will manage the tolling, maintenance and operations.

The Jamestown Bridge will also become RITBA’s property and will remain toll-free.

Is the Newport bridge currently owned by the RITBA? If so, why? Aren't these state assets? Presumably, the power of the Prince, i.e., the state of Rhode Island, was exercised at some point to seize (fine, take by eminent domain) private land to construct the bridges. At that point, the bridges became the property of the state, meaning all of us: residents and taxpayers of Rhode Island.

It's one thing to contract out the upkeep and management of the bridges, though at some point, I would ask for a review to be certain that the state shouldn't ask for profit-sharing from the tolls. But do we need to go so far as to actually give away our assets - in this case, the bridges and the state land that they sit on?

Interesting Times in Rhode Island, May 30

1. The formation of the budget commission requested by the Woonsocket City Council was announced last night by Rhode Island Governor Lincoln Chafee. As is required by the state's "municipal fiscal stabilization" statute, two of the members are the current Mayor (Leo Fontaine) and City Council President (John Ward). Sandy Phaneuf's Valley Breeze article on the appointment of the Budget Commission has some biographical detail on the other three members, Peder Schaffer (current Associate Director of the RI League of Cities and Towns), William Sequino (town manager of East Greenwich since 1988), and Dina Dutremble (former Woonsocket Education Dept. Business manager, who left that position about 10 years before the cost overruns that led to the current budget difficulties occurred); and also Woonsocket Finance Director Thomas Bruce's reaction to the appointments: "Personally, I am delighted...I'm looking forward to working very hard with these individuals". The initial steps taken by the budget commission are likely to be 1) dealing with the supplemental tax increase and 2) accelerating state-aid payments to Woonsocket, which is one of the things that the budget commission can do that the elected government can't -- and one reason why some members of the Woonsocket City Council were willing to support the request for the commission.

Addendum: More detail on other possible impacts of the budget commission is available from Justin's post this morning at the Ocean State Current.

2. The legislature's version of the state budget has been scheduled for a House Finance hearing on Thursday, with the annual marathon floor session expected to happen around June 7. though according to Randal Edgar and Philip Marcelo of the Projo, the final form of several key items is still to be determined...

Members also said key pieces of the governor’s municipal relief package, which would give cities and towns new powers to cut costs, change working conditions and curtail pension expenses, appear to be dead, though other pieces, such as more state oversight of school budgets, may survive.

And they said other budget proposals — such as expanding the sales tax to high-end clothing, raising the cigarette tax from $3.46 to $3.50 per pack and providing some $2 million to $2.6 million over five years to lessen the blow to retirees in Central Falls — still appeared to be in flux.

3. Over at the Ocean State Current, Justin reports that the table-gaming regulation bill was held for further study by the joint House/Senate finance committee that met last night. Despite the fact that this bill has obviously been fast-tracked in the legislature and is receiving a large share of lawmaker attention, Justin makes the case based on the same numbers that the legislature is seeing that the overall impact of adding table games in Rhode Island casinos will be very small compared to the impact of forces beyond the state's control, i.e. what Massachusetts does with casinos. Millions of gallons of water may have already passed underneath this bridge, but the wisdom of the state spending so much effort on trying to directly manage one not-very-productive sector of the economy is very much open to question. Expect this to be one of the major pieces of legislation considered in the flurry of activity the follows passage of the budget.

4. The overriding forward-looking question in the 38 Studios saga is what is the next move for a company with no employees.

Really? RI State Gov't Should Eliminate Internal Audits?

I'm all for cutting government. But this? A page taken directly from the David Cicilline Handbook On Governing?

The Rhode Island Society of CPAs (RISCPA) announced its strong opposition today to Governor Chafee’s proposal to abolish the Rhode Island Bureau of Audits. Under the Governor’s proposed FY2013 budget (House Bill 7323, Article 4), the Bureau, which provides the internal-audit function for all of state government, would be entirely eliminated.

“Eliminating the Bureau of Audits, a key tool in preventing corruption, would be a grave mistake,” said Robert Mancini, Executive Director of the RISCPA. “The proposal would undermine transparency, accountability and the crucial internal audit function of the State.”

The Bureau of Audits performs the auditing function for the Executive Branch of the State Government. It provides an independent appraisal and evaluation of the effectiveness of financial and operational controls through objective analyses, evaluations and recommendations.

DMV Will No Longer Spit On You

One of the big changes to the new Rhode Island Department of Motor Vehicles (DMV) is they're going to try to be a little nicer. According to the AP, Governor Chafee reported:

Rhode Island's governor says he wants residents to know they can now expect to be treated with courtesy and "dignity" when visiting their local Division of Motor Vehicles office.

I have to say, I'm quite glad that being treated with dignity by state employees who I need to give money to, is worthy of a press release and story, never mind it simply being a change in how they do business.

While we're on the topic of the DMV, one thing that I can't understand is why they're expanding.

Chafee, an independent, has said fixing the DMV is one of his top priorities. Since taking office in January Chafee has appointed a new DMV administrator and opened new branch offices.

Great, you want to make improving the DMV one of your top priorities, then downsize it. By downsize it, I mean greatly eliminate the number of employees, and use tiny offices. There's no need for offices the size of what was being used at the Apex building in Pawtucket. I'm thinking a 20 by 20 foot office would suffice. Think about this, how many things do you actually need to do in person at the DMV? I can think of two, road tests and identification photographs. You "webify" the rest of the tasks through the DMV's web site.

So you need your road test examiners, someone to take the photographs, and maybe someone as a concierge. Set up three kiosks in the new DMV offices for people who don't have access to computers, send out instructions to all the public libraries in the state, so they can help people as well. After that, have a few people in offices taking care of all the online requests for titles and plates.

What else is there? We'd drastically cut down on the redundancy of staff in the many offices. We'd have one central office handling all the web requests. We'd be able to downsize the workforce while improving efficiency for people by letting them simply go online and conduct their business through a computer instead of spending hours of their day in line at the DMV.

Governor Chafee and new DMV Chief Lisa Holley, if you want to improve the department and be more efficient, don't open more offices and hire more staff at an increased cost to the state. Join the 21st century and put it all online. It's the smart thing to do.

Who Just Said Sovereignty??? Terry G? Joe B? Oh, It Was the Governor!

This is interesting. Sovereignty for certain segments of the state's criminal justice system.

A federal appeals court has upheld Gov. Lincoln Chafee’s right to refuse to turn over accused murderer Jason Pleau for federal prosecution that could result in the death penalty. ...

Chafee issued a written statement late Thursday that said, “I am gratified that the 1st Circuit has recognized our state's right to refuse a federal request to transfer a prisoner for the purpose of exposing him to the death penalty. ... There is no question that Jason Wayne Pleau is a career criminal who deserves to be punished for his crimes. .... It is about maintaining and protecting the sovereignty and laws of the state I was elected to govern.

But not for the state's borders;

A state higher education board on Monday approved a measure that would allow students who immigrated to the United States illegally to pay in-state tuition rates at Rhode Island's public colleges and universities after the General Assembly declined to take up the issue.

not for the state's budgets; not for the state's jobs or other segments of the state's criminal justice system.

Gov. Lincoln Chafee Wednesday signed an executive order revoking the controversial Illegal Immigration Control Order issued by former Gov. Donald Carcieri more than two years ago. Carcieri’s order required all state departments and all contractors doing work for the state to use the federal E-Verify system to ensure all newly hired personnel were in the country legally and were eligible to work. It also required that State Police, corrections officials and the Parole Board to work with the federal Department of Immigration and Customs Enforcement (ICE) to assist them in enforcing immigration law.

Government: Where Popular Services Are a Problem

Here's an excellent indication that something is askew in our way of government operation:

Charles Odimgbe, chief executive officer of RIPTA, said he was aware of the problem [of insufficient beach-bound buses] but that his hands are tied.

"We have a deficit of $4.6 million," Odimgbe said. "I do understand there are way too many people wanting to go to the beach. But the riders need to understand about the funding constraints we are going through."

Odimgbe said reserve buses would cost money. "I don't see how we could compound our deficit by adding more service," he said.

"It's a beautiful day, sunny. People want to get to the beach, I understand that," he said. "But this is about all we can afford."

So, a government agency offers a service with predictably high demand, but since it loses money with every person who uses the service, it must ration it to stay within budget. Perhaps RIPTA should partner with a private company that is able to charge able-bodied, employed people for their charter to the shore.

The article mentions a federal grant that "reimburses" RIPTA for offering free bus rides on days of poor air quality but doesn't explain why that wouldn't apply to reserve buses. Readers can only guess why it is better to leave people standing at the curb for hours on such days than to charge them for the bus ride for which they're waiting.

And then there's the curious coincidence of a week-old cessation of reserve buses with a week-old doubling of parking fees for state beaches. Conflicting currents of distorted interests is big government.

Wisconsin Governor Takes on Unions to Solve Budget

Wisconsin Governor Scott Walker is squarely taking on the unions to help fix his state's budget problems (h/t).

Elements of Walker's proposal include state employee wage increases limited to the rate of inflation unless approved in a voter referendum. State workers -- other than police, fire, and inspectors -- would lose many bargaining rights and could opt out of paying union dues after current contracts expire, with dues no longer collected automatically.

State workers will have to raise the amount they contribute to their pensions to 5.8 percent of salary, and double their contribution to health insurance premiums to 12.6 percent of salary. Wisconsin's unfunded pension liability is $252.6 million, according to Moody's Investors Service.

People aren't happy:

The proposal drew outrage from labor unions and Democrats in the state, which has a $137 million budget deficit in the fiscal year ending June 30 and larger deficits to come.

"If Republicans get their way, workers will no longer be able to negotiate over the hours they work, the safety conditions they labor under or the health insurance and retirement benefits they and their families depend on," Senate Democratic Leader Mark Miller said in a statement.

Republicans--who control the state legislature--anticipate a tough road but think they have no other real options.

"We are out of money and the options are few. We can either raise taxes -- which is absolutely off the table -- reduce spending or lay off workers," Jeff Fitzgerald, the Republican Speaker of the State Assembly, told local radio.

"I expect the Capitol to explode" with protests, Fitzgerald said. "It's going to be a very difficult week."

Nonetheless, it is expected that the Governor's plan will pass.

But What About the Other Campaign Promises of Gov-Elect Chafee?

Governor-Elect Chafee has declined to reconsider his decision to rescind Governor Carcieri's Executive Order 08-01 (pdf) on the grounds that he cannot back away from a promise that he made during the campaign. After looking over some of Mr. Chafee's other campaign promises, I'm excited to hear this - at least, his grounds for doing so. H/T Patrick for picking up on this; in a comment thread that I can no longer find the comment thread under Justin's post "Chafee's Aimin' to Give It", he had wisely asked,

So why does Chafee have to keep some campaign promises and not others?

Okay, here we go. Quoting directly from the "Chafee for Governor" website.

First: the state must control government spending and be more efficient.

* * *

I will be a partner with our mayors and town managers as we work together with the General Assembly, to repeal many of the costly state mandates on cities and towns. We cannot reduce state aid to our local communities without reforming these mandates.

* * *

Third: I want to generate new state revenue from economic growth, not by raising taxes and fees.

* * *

Make no mistake, I will oppose any changes to our taxes without first reforming our spending, particularly the mandates.

Admirable fiscal goals and a fine set of promises - certainly as worthy of keeping as the one that has been the animated topic of headlines and talk shows for the last couple of weeks.

The Governor-Elect and his Transition Team Decline to Answer Anchor Rising's Civics Questions, Citing Disagreement with Their Premises

I submitted the Anchor Rising list of Gubernatorial civics questions to the transition team of incoming Rhode Island Governor Lincoln Chafee -- who, you may recall, stated during his campaign that “Rhode Island state government must be open, accessible, and accountable to its citizens" -- and asked if the Governor-elect would be willing to sit for an interview on them. A spokesman for the Chafee transition team declined the offer, saying that...

We do not agree with the premise of these questions.

The questions that the new administration is not willing to discuss, premises included, are listed below.

---

1. The previous legislative year began with the creation of a Teachers' Health Insurance Board, which on its face looks to be a violation of the separation-of-powers provision of the RI Constitution. We ended the year with the passage of a municipal fiscal stabilization bill, that can be basically used to suspend democratic governance in any RI municipality.

   Are we living through times right now that are so extreme, that basic principles of democratic government need to be shoved aside?
   
   

2. One set of criteria in the new fiscal stabilization law that can trigger a municipal takeover by the state involves decisions made by bond-rating agencies. The 1990s RI Supreme Court opinion which will likely be used to justify this new law begins with the statement that "on or about July 16, 1993, Moody's Investors Services, a recognized bond-rating agency, downgraded the town of West Warwick's municipal bonds to a grade Ba".

   Do we now live in a society that believes that financial-industry needs take precedence over democratic voice?
   
   

3. There has been speculation in national media that several states facing long-term fiscal problems -- a category that can be fairly said to include Rhode Island -- may ask for a Federal bailout, or that Federal laws will be changed to allow them to declare bankruptcy. Do you believe that either of these options are possibilities for Rhode Island in the near term?
   
   
4. The combined state and municipal budgets for Rhode Island have grown steadily (adjusted for inflation) over the past 10 years, a period of time which includes September 11, 2001 and its immediate aftermath, the end-of-the-financial world as we knew it in 2008, and the relative lull (at least domestically) in between.

   Is it by design or by accident that government has been growing as if on autopilot -- or would you disagree with that characterization entirely? Compared with 10 years ago, are Rhode Islanders getting more in return for their increased spending?

King on Pensions

Maybe I'm missing something, but it seems to me that there's a huge conceptual flaw in general treasurer candidate Kerry King's pension solution:

"We have a crazy system of 150 pension plans, which makes no sense at all," he said. "We need to bring all these plans together."

That would put all government employees into the same plan, doing away with extra perks that some municipalities may have included in their employee contracts.

"The Cadillacs are gone. We're all driving Hondas or Chevys," said King. "We can't afford Cadillacs in this state. We never could."

King said that, as treasurer, he would advocate for legislation that would require all municipalities to join a single statewide plan.

Consolidating all pensions at the state level also consolidates all of the incentive for municipal unions to install and manipulate legislators to keep the Cadillacs rolling. It will also require reform groups to work at the state level, rather than with the possibility of local neighborhood-by-neighborhood organization and advocacy. The general treasurer could certainly advocate for more intelligent control of the system, but it's still in the hands of the corrupt General Assembly.

The Little Policy Details That Say So Much

Sometimes, in the noise and rancor of politics and budgeting, one's attention becomes monopolized by particular details. Consider the following:

[The state's public-employee unions'] chief target: a proposal to limit annual pension increases to the first $35,000 in retirement pay initially. The $35,000 would go up each year, in keeping with the Consumer Price Index, and legislative budget writers stripped from their final bill a provision that Carcieri sought — to reinforce a right they already have to adjust these cost of living adjustments of up to 3 percent annually.

By way of comparison, Massachusetts has, for more than a decade, limited its annual pension increases to the first $12,000 in retirement pay.

There's no excuse for so much of what goes on in Rhode Island. Oh, there are rationalizations and complaints, and they'll continue to float to the surface as bubbles long after the state has drifted to the bottom. But the poor leadership and self-serving lobbying have no justification but greed and corruption. One class rallies and demands the continuation of ill-advised and unsustainable handouts, and another class suffers until its members reach the threshold of whatever's keeping them in the state.

The cycle continues, and down we go.

A Familiar Tale in New Jersey

A recent speech by New Jersey's new Republican Governor, Chris Christie, to that state's League of Municipalities sounds some strikingly familiar chords:

Our citizens are already the most overtaxed in America. US mayors hear it all the time. You know that the public appetite for ever increasing taxes has reached an end.

So when we freeze $475 million in school aid, I am hearing the reverberations from school boards saying now you are just going to force us to raise taxes.

Well there is a 4% cap in place as you all know, yet school boards continue to give out raises which exceed that cap, just on salary. Not to mention the fact that most of them get no contribution towards the spiraling increase in health care benefits.

He goes on to explain that the state is going to reduce its spending, give municipalities "the tools helping you to reduce spending at the municipal level," and change the rules of arbitration to balance the scales during negotiations. My understanding is that the Republican Party is not quite so insignificant in New Jersey, as in Rhode Island, so perhaps Christie will have a shot at moving changes that our own Republican Governor Don Carcieri can only suggest.

On a broader level, we can hope that we're entering an era in which leaders have some basic familiarity with concepts of cause and effect.

A Glimpse of Competitive Possibilities

I've been meaning to note this little clue of a possible reality under a more rational government:

One effect of the recession, however, was a fall-off in private construction that left contractors hungry for work. They moved into government construction work, competing with the contractors who usually do those jobs, driving prices down.

The result, Lewis said, was "a very favorable bidding environment." Last year, two projects came in more than $1 million under budget. DOT officials expect to have an extra $12.4 million that they can spend to nibble away at a huge backlog of unfunded highway, bridge and related work.

You know, this needn't be a recession-only phenomenon. If there weren't so many excuses to pay more at the various levels of government, this introduction of competition into the budgeting processes would be relatively mild by comparison. From gender requirements, to police patrols, to wage and benefit requirements for the contractors, government purposefully makes its projects more expensive. After all, those who benefit from the false minimums have more incentive to affect policy than does the individual taxpayer... except, perhaps, when the system becomes so ludicrous that bridges begin to threaten to collapse and the roads are all in disrepair, with no money to fix them.

RE: Budget Misery - Moderate Solutions

Over at the FrumForum (a moderate Republican blog run by David Frum) Eli Lehrer explains:

Many of the biggest budget items for states—Medicaid, bond payments, pension obligations to retirees—are virtually impossible to reduce. Big , broad-based tax increases, although difficult to avoid under many states’ balanced budget laws, will simply discourage investment and growth. Without indulging into liberal (“tax the evil corporations”), moderate (“run government like a business”), and conservative (“cut taxes to increase revenue”/”privatize all education”) fantasies, states looking to balance their budgets aren’t totally out of luck.

He offers six suggestions for balancing budgets, two of which address some familiar problems here in Rhode Island: pension reform and eliminating "special tax abatements and business 'relocation/retention' grants." As to the latter, Lehrer explains:

In efforts to attract new enterprises, revitalize decrepit areas, boost politically favored types of business, nearly all states run massive corporate welfare programs including “enterprise zones,” “TIF (tax increment financing) districts,” “job retention tax credits,” state “HUB (historically underutilized business) zones.” Although a few states simply give grants to private businesses, most of these programs involve issuing bonds, building infrastructure, or granting tax credits that benefit only a particular business or development. The practice produces headlines for politicians but largely serves to let political leaders decide on the location of development that would happen anyway. These business subsidies tend to feed on themselves: cities like Chicago and Syracuse, New York have made such widespread use of them that almost all new development requires some sort of tax abatement or other assistance since unabated tax rates are so high as a result. Although it appears almost certain to cause some short-term pain, many states would almost certainly increase revenue while cutting base tax rates if they simply quit the abatement drug cold turkey. Certain areas, many of them in need of help, probably would lose out. But, in the end, the free market would make better decisions about business locations than central government planners ever could.

As we've argued before, the goal should be to make the state more business friendly in general by lowering taxes and regulatory barriers across the board. This can be accomplished by simplifying and streamlining, not creating a web of loopholes and "incentives" that result in one-off deals benefiting a particular business instead of all.

Budget Misery and the Government Payroll Economy

Rhode Island is not alone in facing budget deficits as many other states (if not most) are in the same predicament. As a recent study by the Cato Institute shows, a lot of the deficit problems stem from generous public employee compensation packages.

State and local governments face large budget deficits as revenues have stagnated and spending has remained at high levels. To reduce deficits, large savings can be found in the generous compensation packages of the nation’s 20 million state and local workers. In 2008, wages and benefits of $1.1 trillion accounted for half of total state and local government spending.

Cato's charts speak for themselves.

Part of the problem is that there are now more government workers than "goods producing workers" (construction, manufacturing, mining, agriculture) in the U.S. (source, h/t):

As John Carney and Kamelia Angelova (who produced the above chart) explain:

We've gone from providing jobs in profit-making private industry to providing jobs in profit-eating government work. Toward the end of 2007, the total number of government jobs exceeded the total number of goods producing jobs. Welcome to the government payroll economy.

Yup.

Is a New Way for Labor to Limit the Options of School Committees in the Legislative Works?

The Rhode Island General Assembly has posted the list of bills from the 2009 session vetoed by the Governor that will be considered for overrides. The House's list is available here, the Senate's list is available here.

One bill (passed unanimously by both houses in the last week of the regular session) scheduled for an override that hasn't garnered much attention as of yet is H5613/S0777, which would limit school committees negotiating heath-benefits in teacher contracts to a choice of plans approved by a newly-created statewide board...

Upon expiration of collective bargaining agreements, only benefit plan designs approved by the board in accordance with this chapter may be specified in future collective bargaining agreements...

And who is it that would be siting on this statewide board?

The board shall consist of twelve (12) members, as follows:

1. Two (2) members shall be appointed by the president of the Rhode Island Federation of Teachers and Health Professionals and may be active or retired teachers or officials from the union;
2. Two (2) members shall be appointed by the president of the National Education Association of Rhode Island, and may be active or retired teachers or officials from the union;
3. One member shall be appointed by the president of RI Council 94 of the American Federation of State, County and Municipal Employees;
4. One member shall be appointed by the president of the Laborers International Union of North America;
5. Two (2) members shall be appointed by the president of the Rhode Island Association of School Committees;
6. Two (2) members shall be appointed by the Rhode Island School Superintendents' Association;
7. Two (2) members shall be appointed by the president of the Rhode Island Association of School Business Managers.

Each appointing authority may remove or replace any member appointed by that appointing authority at any time.

Governor Carcieri vetoed this particular bill despite his support in principle for consolidating school-system health plans, stating that...

The Board consists of twelve (12) members, at least ten (10) of whom are potentially direct beneficiaries of whatever benefit plans are negotiated. Additionally, none of the proposed membership represents municipal or state government or Rhode Island's taxpayers. Municipal officials and the people elected by the voters to balance budgets, fund education and set property tax rates should have more control over school budgets, not less.

As the Governor explains, this legislation is yet another attempt to subordinate the budgetary authority of elected representatives to an unelected panel, to move some actual decision-making power to a body whose members are are directly accountable to special interests, rather than to the taxpayers whose money is being spent.

Or, stated more pragmatically, if the citizenry doesn't like the limits on their representatives that are imposed by this new board, how exactly do they go about changing its membership?

H5613/S0777 would also continue Rhode Island's unfortunate tendency to obscure the clear lines of responsibility that should in exist in a government budgetary process. The ever-increasing layers of indirection added by the state serve mainly to allow officials to point fingers at someone else for the problems that exist -- think of a school committee suing a city or town council in court through the Caruolo Act -- and claim there's nothing they can do to help correct bad situations (other than raise taxes), because the important decisions have already been made somewhere else.

Unless I'm missing something here, this is one bill that legislators should think twice about and have to explain to the public before voting to override.

Morfessis Withdraws as EDC Director

WPRO news (630AM) and Projo 7-to-7 are reporting that Ioanna Morfessis has withdrawn herself from the Directorship of the Rhode Island Economic Development Corporation, citing a family medical concern.

Pawtucket and East Providence Have a New Rep. With Old Ideas

The last paragraph of Alisha A. Pina's story in today's Projo on Democrat Mary Messier's victory in Tuesday's District 62 special election (former Rep. Elizabeth Dennigan's old seat, mostly Pawtucket with a little bit of East Providence) provides a perfect example of how the state Democratic Party's intellectual bankruptcy on fiscal issues continues to propel Rhode Island towards the more conventional form of fiscal bankruptcy…

During her campaign, [Ms. Messier] said the “need to control taxes” is a top priority and also supported the development of a new school district financing formula that would be fair to all cities and towns.

Alas, as has occurred all too-often in Rhode Island, we have a brand-new Democratic representative who believes that a "funding formula" can do the impossible: bring more money to her community, without requiring substantially higher new taxes to raise that money -- unless 1) soon-to-be Rep. Messier meant during the campaign that Pawtucket, already one of the largest recipients of state aid, should receive less money from the state, when she discussed making things "fair to all cities and towns" or 2) "controlling taxes" has become a new Democratic codephrase for "raising statewide taxes", i.e. "we controlled them by not raising them as high a we could have!"

Rhode Island won't be able to pull out of its fiscal and economic crisis if it keeps electing representatives who expect that state's problems to be solved by revenue-shifting programs funded by magic money that will fall from the sky.

The Future According to RIPEC

It seems to me that the most important numbers from Katherine Gregg's Projo story about Rhode Island Public Expenditure Council projections on the state budget are the ones at the bottom…

The state’s overall budget for this year soared 12.9 percent over last year’s to a record-high of $7.8 billion with new federal dollars accounting for most of that new spending. With the added federal dollars, lawmakers were able to shave $275.9 million (8.4 percent) off the state-funded portion of this year’s budget.

The problem as RIPEC sees it: 0.3-percent growth in state revenues to support a 6.2-percent spurt in spending in 2010-11; 2-percent growth to support a 9.2-percent increase in required state-spending in 2011-12, after the stimulus dollars run dry.

...but for those who prefer absolute numbers, rather than percentages, there's this...

Worst case, RIPEC foresees the state ending this budget year with a $60.6-million deficit — on top of the $61.7-million deficit left over from last year, and then accumulating deficits of $244.4 million next year and $483.8 million the year after that. If lawmakers are unable to close the gaps along the way, RIPEC predicts, the cumulative deficit would swell to $850.6 million by 2012.