Perspectives on the State Budget Crisis
Last evening, The Taubman Center for Public Policy at Brown University hosted a panel on the Rhode Island budget crisis, moderated by Professor Darrell West. Four panelists presented their perspectives on where the problems are and what needs to be done…
Gary Sasse (Director of the Rhode Island Department of Revenue) classified the Rhode Island budget into 3 main silos…
- Personnel and government operations, $950 million.
- Entitlements, including Medicaid, $1 billion.
- State aid, 80% going towards education, $1.1 billion.
- Government needs to be redesigned and made to work smarter. The Governor’s proposed budget will reduce the state workforce to 14,800 FTEs (Note: down from 15,688.7, according to this year’s official state budget document).
- Medicare needs to be made more efficient, especially in moving long-term care away from institutional settings wherever possible.
- Schools are being “held harmless”, i.e. level funded, for the time being.
Linda Katz (Policy Director, Rhode Island Poverty Institute) observed that 21 states are also facing budget crises, so Rhode Island is not alone. She suggested places to look to for enhancing revenues…
- Reverse the recent tax cuts (capital gains, flat tax for higher income taxpayers).
- Look closely at tax expenditures.
- Modernize the sales tax, especially to include more household services.
Katz agreed that Medicare reform is needed and that government needs to be made more efficient. But cuts that ultimately take money out of the healthcare economy can have negative ripple effects.
Paul Choquette (Chairman, Gilbane, Inc) used two phrases to describe the Rhode Island budget crisis…
- The Perfect Storm
- The chickens coming home to roost.
What needs to be done…
- Reduce the cost and size of government.
- Review all services that government delivers, does government need to be doing everything it’s doing now, and can it be done more efficiently?
- Explore regionalization and sharing of services.
- Recognize that government can’t provide all the answers.
Robert Walsh (Executive Director, Rhode Island Chapter of the National Education Association) said that budgets reflect values. He agreed with Gary Sasse and others that we need to take a serious look at government efficiency, but (and this is an exact quote) “I want to spend a lot more of your money than he does”.
He cited the Masonic temple renovation as an example of a good tax expenditure, because it created permanent jobs, involved apprenticeships and removed an eyesore from downtown. But for the most part, because of the development of a secondary market, tax credits are not being used in ways that stimulate the economy.
He challenged the public-employees-are-15%-of-workforce figure as inflated, because of the inclusion of seasonal and ceremonial employees. RI actually has a small state employee workforce, relative to the other New England states.
Walsh cited figures showing wealthy people are not leaving Rhode Island. RI has gone from about 5,700 to over 9,000 people making over $200,000, from about 9,000 to over 14,000 making $150,000-$200,000, and from 28,500 to 41,000 making $100,000-$150,000 in recent years (In scribbling down population figures, I missed the exact years cited [2001 to 2006 says commenter “Red”])
He cautioned that regionalization is not the panacea that some would have you believe. About 4,000 – 6,000 students is the optimal size for a school system. Beyond that point, fiscal savings are limited.
People may oppose the idea of “welfare” in an abstract sense, but when you ask them about the specific functions that government is currently performing, they will support them.