These things don’t occur overnight. But there’s no question: Rhode Island’s fiscal collapse is well underway.

It seems that we have been warned about this before:
http://www.projo.com/opinion/contributors/content/CT_laffey5_03-05-09_E4DE8CH_v24.3e6631f.html

States are supposed to run balanced budgets. One problem is that they have been saddled with so many unfunded Federal mandates that much of their spending is out of their control. In effect, Washington is forcing tax increases through the state budgets so it can claim it isn’t raising taxes. And yes, the bulk of state spending is the Progressive wealth distribution of “social services” which for most of our history, until the 1960s, was not considered a legitimate function of government by most people. One of fundamental problems of this kind of spending is that the amount of spending is not determined by the available funds, it is a function of “need, i.e. demand for free money from the government. That’s why fundamental reform of the “entitlement” system is necessary. Medicaid in particular is bankrupting the states. The Feds forced the states to increase their Medicaid programs as part of the Porkulus bill; the increase is permanent but the Federal funding only lasts two years. The state deficit crisis will be one of the biggest stories of the coming year, as taxpayers will refuse to pony up for Washington’s demands. We are very close to a tipping point where moderate economic recovery cannot make up for the debt load or the uncontrollable spending. And then we look like Greece, or Spain, or the America of Atlas Shrugged. It can happen here. Economic laws, like the laws of nature that they are, are universal and cannot be defied without consequences. States that try to raise taxes rather than reform spending will find an increasing exodus of their “best customers”, the highest-income taxpayers, who will move to other states. Perhaps the Progressives will propose building a wall to keep them in, or a confiscatory tax of their assets if they try… Read more »

Stuart, by the standards of Democrat politicians, a 10% reduction would be a disaster, and a 20% reduction inconceivable catastrophe, particularly when used to 8 (and last year 13%) increases in their spending.
Add in increasing demands to fund the pension system.
And off course, the tax base will keep shrinking as businesses continue to flee / avoid RI, and upper middle class taxpayers throw in the towel and relocate.
RI is collapsing. It’s not the only state — CA, MI, NY and NJ are in similar dire straits — generally for the same reason: Democrat-progressive control feeding the tax monster unions and poverty industries.
In turn, all this is a preview of what Obama is accelerating (but didn’t create) when Medicare / Medicaid / Social Security and other unsustainable “entitlements” collide with fiscal and economic reality.

>>RI is not anywhere among the worst….. Actually it is among the worst for per capita unfunded pension liabilities and per capita debt. >>I know all about balanced budgets and most states – and the reason most are having problems is more about the recession than it is about spending Actually Rhode Island has committed to structural deficits long before the recession, e.g., the Democrat General Assembly peed through the tobacco money — selling it at a discount to raise quick cash — long before there was the recession. >>And in much the same way, RI people and politicians are going to now get the hint that spending increases cannot go on at the same pace as before. The Democrats who run RI have a decades long record of incompetence and corruption. That is the prevailing culture throughout that Party, and there is no indication of any internal faction that seeks to reform it. Unions have a track record of driving their employers into the bankruptcy ditch rather than grant necessary concessions — then the union bosses can claim to the rank and file that the bankruptcy judge forced it on them. Meanwhile the learned helplessness of the poverty industry “clients” and unmarketability of the “skills” of their “advocates” ensures that they won’t go down without a fight. Let’s face it, with 50 states to choose from (much less other countries in many cases, as Obama is making the U.S. far less attractive), what employer in its right mind, when it has a choice of locale, would choose to invest in RI with its taxes, corruption, lousy public education system (run as a union perma-employment program rather than as an educational endeavor) and cultural hostility to the “rich” business executives? And without more jobs, particularly more skilled / better paying… Read more »

Perhaps the one thing that distinguishes RI from many of the others is the makeup of the tax base. RI has lost virtually all of its manufacturing. There are few companies located here to hire people at good wages. The punishing taxes repel companies form locating here. Now, perhaps other states are close in their tax rates to ours, but they also have other intangibles that make paying the price worth it, ie, a nice climate, an intelligent workforce, other big companies located there, etc. RI offers none of that. Oh, we have a nice coastline, but please, that is meaningless. Great for tourism, but think of the jobs and pay that industry offers. RI has little to offer companies and individuals in terms of attracting them to locate here. One of the smartest comments I heard was when Steve Laffey said we should make RI a “right to work” state. Now that is something that would set us aside from all of our neighbors, and attract some manufacturing. Of course, with the union domination in the legislature, that is highly unlikely. Too bad. And that is exactly why RI is toast. The people who control things are not looking out for the greater good. Am I just being negative? I think is pretty simple common sense. Unfortunately for RI, we are more and more coming under the grip of the “progressives”. (I laugh at that term, because they are anything but.) We have a state that repels those who pay the bills, and attracts those who suck off the system. A perverse system indeed.. Who can be surprised we have a disaster. When the state has to give out tax breaks to attract companies ie Fidelity, the progressives all rail against it, as though they really think the companies… Read more »