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Riley: Rhode Island Receives a “D” from Truth In Accounting

Tuesday, September 26, 2017

 

Rhode Island received a grade of “D” in the latest Truth in Accounting (TIA) report “Financial State of the States."

TIA’s eighth iteration shows that 41 out of 50 states in America do not have enough money to pay their bills. Rhode Island is one of those states.

Determining Grades

The grades were determined by analyzing each state’s 2016 CAFR Comprehensive Annual Financial Report.

CEO Sheila Weinberg told us “TIA uses a holistic approach to determine the status of government finances. This approach compares bills—including those related to retirement systems, and excluding debt related to capital assets (such as land, buildings, and infrastructure)—to government assets available to pay these bills. We exclude capital assets because these should not be sold off to pay bills.”   

TIA then ranks each state by “taxpayer burden” or surplus. The taxpayer burden equals the amount each taxpayer would have to pay the state’s treasury in order for the state to be debt-free. Rhode Island is officially ranked 34th just behind Mississippi with a taxpayer burden of $13,600. But that is just part of the story.

What about Providence Debt?

We asked Ms. Weinberg if Providence taxpayers should then add the local tax burden, calculated the same way, to the State burden in order to determine total tax burden?

“Yes, a Providence taxpayer should add their Providence tax burden to their state tax burden.” She added, “There will be a report on the 50 most populous cities in America released in January 2018.” 

We pointed out that Providence has an enormous tax burden but is ranked about 138th in population, so it doesn’t appear in their rankings.

"Do you have a state capital list and ranking?" we asked. Ms. Weinberg said “Let me look at what we have for Providence. Hmmm."

We gave Ms. Weinberg our estimate of $40,000 in debt per Providence taxpayer. 

Ms. Weinberg said, “That could be right, it's certainly big, very big. I don’t have an official calculation but I will make an effort to include Providence in our Cities Study.” We checked the most recent 50 city reports, only two Cities in America had a higher tax-burden than Providence. They were NYC and Chicago.

We need the truth about debt

Providence’s unbelievably high debt burden (approx. $40,000) could be partially or totally absorbed by State taxpayers under current Rhode Island law which gives General Obligation Bond Holders first Lien on tax revenues in the event of receivership.

A reminder to GoLocal readers, the tax burden represents benefits that are owed for work already performed and will need to be paid or the employee benefits will be cut or forfeited. A Providence citizen, due to the horrendous condition of Providence finances has a TOTAL tax burden of approximately $13,000 + $40,000 or $53,000 per taxpayer.  All state taxpayers in Rhode Island under current law may well be forced to bail out Providence adding to their current tax burden of $13,600.

This report is an effort to inform Rhode Island taxpayers that the State is not balancing its budget and neither is the State Capital of Rhode Island, Providence. Misleading municipal investors as to the true financial condition of Providence and Rhode Island is fraud. Securities fraud is a felony.

TIA believes it is imperative to provide an honest accounting of each state's financial condition. Since all levels of government derive their just powers from the consent of the governed, government officials are responsible for reporting their actions and the results in ways that are truthful and comprehensible to the electorate.

Providing accurate and timely information to citizens, the media, and government officials is an essential part of government responsibility and accountability. The lack of transparency in financial information, state budgets, and financial reports makes it difficult for governments to meet this democratic responsibility.

Michael G. Riley is vice chair at Rhode Island Center for Freedom and Prosperity and is managing member and founder of Coastal Management Group, LLC. Riley has 35 years of experience in the financial industry, having managed divisions of PaineWebber, LETCO, and TD Securities (TD Bank). He has been quoted in Barron’s, Wall Street Transcript, NY Post, and various other print media and also appeared on NBC News, Yahoo TV, and CNBC. 

 

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