Blais: RI’s Leaders Need an “Ah-Ha” Moment Soon for the Economy
Thursday, January 23, 2014
Year over year, RI leaders fail to create a budget that includes a plan to eliminate future deficits but wrangle over how much revenue on hand will go to the various agencies and special interests. The structural deficit is definitely not an issue that fans the flames of most citizens’ interests but it sure does burn through their pocketbooks! Do most people realize that the thought process of putting the budget together never seems to consider that doing the same thing year after year doesn't address the underlying problem of not having enough money to pay the expenditures in the near future? Our state can only be run for so long by fighting the current year’s fire.
Who pays for this juggling? You do and so do the truly vulnerable who depend on a safety net in their worst of times and find that their “piece of the pie” has been cut to the advantage of others. The cost of that juggling is expressed in a variety of ways as illustrated by the high cost of living in RI and by the public debt that we approve when we are faced with bond referendum on our ballots when we show up to vote. We weigh that public debt narrowly; we might think that a particular bond is a good use of money or that it represents something that would be nice to have. But, we typically never seriously consider the weight of that debt over time. Or, recall the debt that we approved during prior election cycles.
If you paid attention to Governor Chafee’s recent State of the State Address, you heard his recommendation to approve $275 million of bond referendums this November. This in addition to the $200 million approved at the ballot box last time around which, if this years’ requests are approved, would put us close to almost half a billion in debt! This is our debt punted to future years without even considering the interest on that debt. Half a billion, give or take is a whopping number in context of the size and population of our small state.
There is also other debt that isn’t yours (because you and but a handful of your legislators didn’t specifically approve it) but that the governor has included in his budget this year. He wants us to pay the 38Studios bondholders for a second year in a row. The legislature approved the first payment, a “place-holder”, as it was referred to, of that “moral obligation” last year. Governor Chafee clams that we have a moral obligation to those bondholders for the entire amount, to those same investors who clearly understood that the state had no legal obligation to make good on those bonds.
Where is the “moral obligation” to the taxpayers and citizens of RI? It seems to be sorely lacking as we gasp under the worst unemployment level in the country (tied with Nevada) with too many underemployed people in our state. So, in the big picture who will be hurt by doling out millions to bondholders because of a “moral obligation”? The “ordinary” (tongue in cheek) folks will be and the most vulnerable people living in RI.
Last year, funding for the developmentally disabled had to be fought for while the first payment for 38Studios bondholders was made. Taxi cab drivers have been taxed and this year so will small business owners of bed & breakfasts. It doesn’t pay to be “ordinary” in RI, does it? Property taxes increase while health insurance premiums fall far short of being “affordable” for those of us who pay full boat for coverage, utility rates increase and the underdogs will face yet another fight in the State House for funding again this year.
Let’s pause and look at those utility increases. Robert Shields, chairman of the group Deep Water Resistance wrote in the commentary section of the ProJo "RI will be hurt by deepwater wind". He broke down the numbers very simply and stated that $596 million will be paid by rate payers in additional utility costs. Well, that's a given because of the agreements already reached. The wind farm has a useful life of 20 years so he basically divided the nearly $600 million by the 20 year life span and stated that it will cost an additional $30 million a year for rate payers. That is just like a tax only you don't pay it to the state; you pay it to National Grid. He also asked if the legislature has this cost to the rate payer on their radar. Good question, evidently, they don’t.
RI leaders have a “moral obligation” to the people of RI to provide a state budget that includes plans to eliminate future deficits. Projected deficits of $1.2 billion over 5 years do not even reflect the costs to meet Governor Chafee’s claim that the federal government has set a goal that calls for states to make sure that fewer than 10% of their bridges are structurally deficient. We don’t do pot holes well, what do you think that will cost us? Neither is the estimated cost to run RI’s health insurance exchange, HealthSourceRI, nor is that cost included in this years’ budget. Governor Chafee created this exchange and then stated that the issue of funding it should be discussed by the current gubernatorial candidates! Nice work. Side note, that isn’t your debt either because the legislature never approved the exchange. It was implemented by executive order on the coattails of federal revenue, federal revenue that will dry up soon. The elephant that remains in the room are any additional costs related to potential changes to the 2011 pension reform.
If RI leaders don’t take hold of dealing with the long term deficit then there are only 2 options, more taxes or revamping our notion of what government should be spending our resources on. That's it. Otherwise, the future only looks bleaker.
Remember the childhood song “the ham bone is connected to the leg bone”? The notion that everything is connected applies to our structural deficit and our state budget, too. Time is running out. We are looking for the “ah-ha” moment from our RI leaders that will ultimately save our state’s economy.
Smallest + Largest Tax Increases in RI
Below are the largest—and smallest—tax increases in Rhode Island cities and towns for fiscal year 2014. The data measures the overall change in the amount levied in taxes between last year and this year. It does not compare changes in individual tax rates for homeowners, which may have been higher than the overall increase if the change in the rates was lower for another group of taxpayers in the community. This year, for the first time, all communities stayed below the annual tax cap, which for 2014 was 4 percent. (The cap applies to the overall levy not individual tax rates. Note that the levies for any independent fire districts in a community are not included.) Below communities are ranked starting with those that had the lowest increases. Data was provided by the state Division of Municipal Finance and is current as of January 7.
FY 2013 to FY 2014 Tax Increase: 1.53%
FY 2013 Tax Levy: $59,560,610
FY 2014 Tax Levy: $60,472,810
Amount of Increase: $912,200
Note: Has an independent fire district. Levy for fire districts not included. Cumberland actual amount is an estimate reported by the town. Final levy will be set in May 2014
FY 2013 to FY 2014 Tax Increase: 1.91%
FY 2013 Tax Levy: $101,738,436
FY 2014 Tax Levy: $103,679,393
Amount of Increase: $1,940,957
Note: East Providence fiscal year is Nov. 1 to Oct. 31. Figures represent an state estimate which will be finalized in spring 2014.
FY 2013 to FY 2014 Tax Increase: 3.91%
FY 2013 Tax Levy: $49,896,853
FY 2014 Tax Levy: $51,845,789
Amount of Increase: $1,948,936
Note: East Greenwich fiscal year 2013 & 2014 levies reflect the towns merger with the fire district in June 2013.
Photo: Flickr/Jimmy Wayne
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