The Wrong Leaders Applying the Wrong Strategy at the Wrong Time

So, state government revenue has an even more giant hole than expected:

Altogether, Rhode Island’s general revenues fell by $405 million, to $2.486 billion, for the 11 months through May 31, according to a report issued Monday by the state Department of Revenue. …
Among the revenue report’s findings:
•The state’s personal-income tax generated about $798.6 million, a decline of $157.1 million, or 16.4 percent.
•Collections from Rhode Island’s sales-and-use tax totaled $747.7 million, a drop of $27.9 million, or 3.6 percent.
•Transfers from lottery operations totaled $279.6 million, down $16.9 million, or 5.7 percent.
•Money collected through fees, fines, penalties and other “departmental receipts” totaled $233.6 million, a drop of $57.6 million, or 19.8 percent.
•The state’s general business taxes generated $208.3 million, a decline of $26.4 million, or 11.2 percent.

And yet:

“Overall, we’ll see that many of the programs the governor cut have been restored [in the General Assembly’s budget],” [Finance Committee member Elizabeth] Dennigan [D-East Providence] said, specifically citing the state’s prescription drug program for the elderly known as RIPAE, funding for nursing homes, money for the developmentally disabled, dental coverage for low-income adults and children’s breakfast programs.
Further, [Rep. Thomas] Slater [D., Providence] noted that plans cut 7,800 people — including 5,000 children — from the state’s welfare rolls in two weeks have been delayed, although he couldn’t say for how long.
And cities and towns, which depend on the state for more than $1 billion each year, may not lose as much state funding as they feared.
Several Finance Committee members said they expect to cut $55 million in general revenue sharing, as the governor had proposed, but no more.

How are legislators accomplishing this magic trick?

“Obviously, everything is still fluid,” said Senate Finance Committee Chairman Daniel DaPonte. But “the gas tax has to be part of the equation.” …
Lawmakers are expected to eliminate Rhode Island’s preferential treatment of capital gains, according to another Finance Committee member, Elizabeth M. Dennigan, D-East Providence, referring to the break for taxpayers who profit from the sale of stocks, bonds and other such investments. …
Governor Carcieri has consistently warned Democratic legislators against rolling back the tax breaks enacted in recent years. And despite massive budget deficits, he pushed for new tax cuts.
The Assembly appears to have ignored those arguments, according to fellow Finance Committee member Laurence W. Ehrhardt, R-North Kingstown; the state budget excludes the governor’s proposal to eliminate Rhode Island’s corporate income tax or raise the value of estates subject to Rhode Island’s estate tax. …
Meanwhile, Senate leaders have sketched the likely shape of a pension-cutting package aimed at shaving anywhere from $45 million to $60 million off the taxpayers’ share of the annual cost for the retirement benefits given state employees and public school teachers.

Considering that the changes that ought to be made to pensions would save considerably more than that, one can reasonably say that the General Assembly is continuing its short-sighted strategy of relying on taxes (backwards-looking is more accurate). Once the budget is officially released and then passed, sit back and watch as revenue declines even further, when gas taxes that businesses pay are passed on to consumers, as consumers take the gas tax money from other expenditures, as both groups take their business across the borer, as capital investments in Rhode Island decrease, and as businesses continue to decline to settle here.

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