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Russell Moore: Death by 1000 Cuts—RI Style

Monday, March 03, 2014

 

We have the highest unemployment, high energy costs, and are about to see a huge drop in our third largest source of revenue—in other words when the situation is dire, believes Russell Moore.

We saw job cuts, energy cost increases, and a potential drop of $440 million in revenue over the next five years to our state coffers. Oh, it was just another week typical week in Rhode Island news.

The state had a higher unemployment rate in December than previously reported—coming in at a whopping 9.3 percent—two-tenths of a percentage point higher than expected. We were already had the distinction of being the highest unemployment state in the nation before the negative revisions took place.

To make matter worse, Cox Communications, one of the state’s largest private sector employers, announced plans to lay off more than 234 people. The company decided to consolidate by closing their smaller call centers and relying more on their larger ones. According to their spokesperson, it was not part of a cost cutting effort (say, what?).

Bad to worse

That means, we’ll soon be adding another 234 people to the ranks of those who desperately need work, but thanks to our miserable economic climate—will have trouble finding it.

National Grid then announced later in the week that the company was seeking a natural gas rate hike that would cost consumers an average of 16 percent. It’s not just Rhode Island’s ridiculous tax and regulatory climate and high health insurance costs—it’s also the high energy costs that inhibit our economic growth as much as anything else. Last week brought us just one more instance of our troubles increasing—not going the other way.

Slot threat

But wait! There’s more. We learned that Plainridge race course, located a measly 12 miles (a short distance even by RI standards given how the track is right off of 495) away from Twin River Casino (it will always be Lincoln Greyhound Park to my mind). This is a bigger slot threat than Wes Welker.

It was amusing to watch the local network television stations tried to play down the significance of Twin River taking on world class competition literally just up the road. I suspect this had something to do with the fact that they’re not looking to irritate one of their larger advertisers.

Twin River reportedly is only expecting a 10 percent drop in revenues. That’s a borderline laughable prediction unless they’re changing their business model and marketing campaign to something other than “so close”.

Once you get past the folks who prefer to whistle past the graveyard, it’s hard to underestimate what type of a blow represents to not only Twin River, but the state of Rhode Island as a whole. Rhode Island relies heavily on gaming. It’s our third largest source of instate revenue. The latest available data, which dates back to June 30 2012, shows that the state raked in $321 million from slot machines alone—the preponderance of that revenue from Twin River casino.

Nothing to see here

In other words, when your state is addicted to gaming revenue, the last thing you want to see is the fixes get cut back. Just ask Nevada, our biggest competitor in the highest unemployment race what its like to see a drop in gaming revenue.

Golocal reported that the addition of slots to Plainridge could mean a loss of $422 million. For the math disinclined, that makes the 38 studios fiasco seem like a drop in the cup of coffee milk.

Surveys and studies have shown that approximately 51-percent of the vehicles parked at Twin River have Massachusetts license plates. Granted, some of the patrons will show loyalty to Twin River, but on the other hand there will be plenty of folks from Rhode Island who will check out the new competition. So those numbers stand to reason.

Make no mistake about it: the new slot operators at Plainridge are world class casino management. They currently operate 23 gaming facilities in 18 different states. That means they know what they’re doing, and they’ll be doing their best to take business away from Twin River. (The silver lining in all of this is that the gaming experience will be better for the customer as Twin River will be forced to treat its customers better to retain their business.)

Beaches, Del’s, Coffee milk

It’s always interesting to hear the folks who say Rhode Island is suffering because we’re just not thinking positively enough. These pollyannas types who claim the realists are just too negative. Governor Chafee and former Governor Lincoln Almond are among the people who point fingers at folks living in a reality based world and say that we’re just a bunch of Negative Nancy’s. The rest are usually other connected people who have benefitted quite nicely from the state and local governments here in Rhode Island at the expense of the rest of us.

But when we have the highest unemployment, high energy costs, and are about to see a huge drop in our third largest source of revenue—in other words when the situation is dire—it’s irresponsible to make like an ostrich and pretend everything will be fine. (Yes, I know we have coffee milk, beaches, hot wieners, and Del’s lemonade.)

And oh, did I forge to mention that Providence doesn’t have any salt for today’s storm?

 

A native Rhode Islander, Russell J. Moore is a graduate of Providence College and St. Raphael Academy. He worked as a news reporter for 7 years (2004-2010), 5 of which with The Warwick Beacon, focusing on government. He continues to keep a close eye on the inner workings of Rhode Islands state and local governments.

 

Related Slideshow: New England States With the Most State Debt

Prev Next

6. Vermont

Debt Per Capita: $12,566

National Rank: 36th Most

Total Debt (in thousands): $7,866,666

National Rank: 49th Most

Debt as a Percentage of Gross State Product: 29%

Prev Next

5. Maine

Debt Per Capita: $12,577

National Rank: 35th Most

Total Debt (in thousands): $16,717,250

National Rank: 42nd Most

Debt as a Percentage of Gross State Product: 31%

Prev Next

4. New Hampshire

Debt Per Capita: $13,951

National Rank: 27th Most

Total Debt (in thousands): $18,425,567

National Rank: 41st Most

Debt as a Percentage of Gross State Product: 28%

Prev Next

3. Rhode Island

Debt Per Capita: $17,960

National Rank: 16th Most

Total Debt (in thousands): $18,863,153

National Rank: 40th Most

Debt as a Percentage of Gross State Product: 37%

Prev Next

2. Massachusetts

Debt Per Capita: $19,493

National Rank: 12th Most

Total Debt (in thousands): $129,550,263

National Rank: 10th Most

Debt as a Percentage of Gross State Product: 32%

Prev Next

1. Connecticut

Debt Per Capita: $31,298

National Rank: 3rd Most

Total Debt (in thousands): $112,372,072

National Rank: 12th Most

Debt as a Percentage of Gross State Product: 49%

 
 

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Comments:

I'm sure I'm sounding like a broken record but the state's economy is going to take a huge slash, not a cut, when all those already and retired or near retirement state workers, teachers, police, and fire personnel are forced to relocate to other states friendlier to senior citizens because they cannot afford to live on their pensions without COLAs. Although the press like to push Raimondo's point that COLAs will be more frequent, the truth is that at most they would be $500 every four years and most likely there would be no COLAs at all due to the way her system is rigged. So the retirees leave the state. The revenue the state will lose in state income tax and sales tax will be enormous. Cities and towns will lose property tax and individual homes will lose value in a wave of selling. Seniors don't use the public schools and in effect subsidize them. Businesses will lose customers as seniors need more services to be able to remain in their homes. Charities will lose volunteers and donations, particularly legacies. All will go out of state. Rhode Island would need at least a generation to recover if at all. There is no free lunch. You can't take away the COLAs that people were promised their entire working life by law and that they planned their retirement around without consequences. Also, now that Rhode Island has demonstrated that state laws are not considered contracts, what business would want to start-up here or relocate here. Look beyond your nose. This is economically disastrous.

Comment #1 by Fruma Efreom on 2014 03 03

Fruma--you understanding is faulty. Many retired people of all stripes leave RI because of the tax environment, period. Taxes will increase BECAUSE of the unfunded pension liability, which will increase the numbers leaving. The COLAs increase the unfunded liability--and taxes--thus accelerating the outflow. What happens when the taxpayer leave and there are no funds to pay the pensions?

We need to slow the outflow of taxpayers--thus reduce taxes. Reducing COLAs does this--a painful step--but a necessary one. Frankly, COLAs shouldn't be reduced on the smaller pensions, but that is a policy decision. Wouldn't you rather have 3/4 of a pie than none?

Comment #2 by Jimmy LaRouche on 2014 03 03

You arrogant state retirees threatening to take your millions in ill-gotten gains to another state because you thieves won't get raises every year?
Here's an idea, go retire on a houseboat in hurricane alley and do forget to batten down the hatches.

Comment #3 by Odd Job on 2014 03 03

84.4 million a year is about 10 million more than what RI said it would back 38 Studios with, 75 million. The biggest difference is with 38 Studios RI was ensuring a loan, with the gambling facility, we're not losing anything, we're just not making it. This happens when you're spending money you don't have. Of course most of us know this, it's the General Assembly that needs an economic lesson.

There was a saying back in the day, "Don't count your chickens before they hatch." RI has been counting the chickens before the eggs were laid.

Comment #4 by Wuggly Ump on 2014 03 03

You'll see that I'm right in about five years when it's too late and Raimondo has moved on to a big job at the federal level or in finance. People will have no choice unless they want to live over their kid's garage or in their basement. Sure some left Rhode Island already because their retirement budget couldn't afford for them to stay. This state is very unfriendly to seniors in general. Now you'll add virtually all retired state workers and teachers to that mix. The tax dollars that you'll lose is more than what you would pay in COLAs. This isn't a threat; it's a prediction. The only state retirees and teachers who will stay are those who have no choice because they have family commitments or ill health. And when the others leave, they will pass the word not to trust Rhode Island.

Comment #5 by Fruma Efreom on 2014 03 03

Fruma - I'm not sure you get the economics here

"The revenue the state will lose in state income tax and sales tax will be enormous."

The state gets at most 5+% on income (so a nickel on a dollar spent on a COLA) and 7% on (some) sales. At best, that is 12 cents on the dollar. The state saves a whole dollar on not spending on the COLA.

Even if you argue some multiplier effect from increased spending by seniors (whose propensity to consume is less than younger folks), there is a corresponding offset because that dollar has to come from someone else.

"So the retirees leave the state. The revenue the state will lose in state income tax and sales tax will be enormous. Cities and towns will lose property tax and individual homes will lose value in a wave of selling"

First, take it to its logical conclusion, given the majority of people own homes. If all the retirees sold, there would need to be willing buyers. RI has a net decline and the in-flows are primarily lower income socio-economic groups. Given the burden of property and other taxes, RI is not attracting the families to move in and buy those houses nor providing the economic opportunities for young people to stay and eventually become homeowners. Cities and towns won't lose property tax because unless the housing stock is destroyed, the current owners are on the hook and if they can't pay, well yes, the vast amounts of foreclosure will mean cities and towns replace tax revenue with hard to liquidate fixed assets.

Also, now that Rhode Island has demonstrated that state laws are not considered contracts, what business would want to start-up here or relocate here"

Well, assuming the business climate improves, business owners who would fear less that they'll be punished even more to pay for implied "promises" demanded by the unions. But fear not, with brilliant legislators proposing bills that businesses can't "shut down operations", I'm sure there won't be many businesses looking to relocate here.


"This state is very unfriendly to seniors in general."

Just seniors? Fear not, the same brilliant legislators will probably pass a law that forbids people from leaving the state without paying a massive penalty too..

Comment #6 by Prof Steve on 2014 03 03

I see the useful idiots of the ruling party are with instructions to say "Nah, fagrgedaboitdit" Fruma. And when Governor Palin warned about Russia and the Crimea some years ago, useful idiots mocked and insulted her.
Democrats, for whom reality is an annoyance on the way to reelection.

Comment #7 by G Godot on 2014 03 03




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