Russell Moore: Raimondo’s Spot-On Budget Warning
Monday, February 23, 2015
Russell J. Moore, GoLocalProv MINDSETTER™
The good folks who administer addiction recovery programs like Alcoholics or Gamblers Anonymous always tell those they're helping that the first step on the road to recovery is simply admitting you have a problem. It sounds easy, but the mind has a way of rationalizing away one's short comings.
On a collective level, Rhode Island is a great example of that defense mechanism. For far too long, we've suffered under leaders who've rationalized away Rhode Island's failures. They've made pretend everything was fine and dandy here (despite economic indicators that say the opposite), and that mediocrity, and in some cases, worse, is acceptable for Rhode Island.
For far too long, Rhode Island has suffered under political leaders who closely resembled corporate Yes Men telling their bosses that everything is fine and dandy and that there's nothing to see here. They’ve only wanted to talk about good things like beaches, while ignoring structural issues.
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Rhode Island, We Have A (Budget) Problem
That's why it was extremely encouraging to see Governor Gina Raimondo take to the podium last week and explain, in great detail, why the state of Rhode Island has been foundering, and what must be done in order to bring about a recovery. Apparently, Raimondo appears ready to reverse the trend of leaders who gloss over serious problems.
Because the truth is Rhode Island does suffer from an addiction, and that addiction is to overspending on our government services that we've gotten a substandard return on. And the revenue fixes they used to feed that addiction (one time fixes like stimulus cash, tobacco settlement revenue, or longer term fixes like tax hikes) only enable our problems by rewarding inefficiencies.
With her comments on last Wednesday, Governor Gina Raimondo is starting to demonstrate the leadership that she was elected to display. Golocalprov.com reported last week that Raimondo used a slideshow presentation to highlight some of the failings of our state government and what should be done to reverse those trends.
Where’s The ROI?
The slideshow highlighted several big problems inherent in state government. For instance, the state of Rhode Island spends the 45th most in the country per capita on road construction, yet only ranks 45th in the nation for road quality. Similarly, the state spends the 8th most in the nation (per capita) on education, yet only ranks 27th in educational achievement. The state also has the highest Medicaid Spending per enrollee in the country.
Rhode Islanders are also extremely generous in paying their public "servants" - the state ranks second in the nation in public employee compensation. Can Rhode Islanders, who currently have the third highest unemployment in the nation, really afford to compensate their public servants better than 48 other states? I think not. (I’m sure I speak for all Rhode Islanders when I say that we taxpayers would love to pay the public sector workers by far and away the most in the nation, but the question is can we afford it?)
As these numbers indicate, spending big money doesn't guarantee prosperity any more than a business with tons of capital is guaranteed to turn profits. That's something the so-called progressives in this state have never seemed to have been able to grasp, or at least they never acknowledge it.
Unfortunately, inefficiency exists in the world, and I think government invented it. It shouldn’t be rewarded, and it’s a threat to everyone’s wellbeing.
End the Cycle of Inefficiency
Instead of rooting out inefficiencies Rhode Island’s modus operandi is to simply raise taxes, cut spending in areas that would be more productive for the economy (like economic development or tourism), or use one-time revenue fixes that simply push problems off into the future.
Governor Raimondo pointed out that the state would have to raise the sales tax to 8.8 percent in order to meet our future budget obligations. But she also pointed out that that's not a logical way of solving the problem as it only makes us less competitive in the long run.
The pathology has been played out so many times it sickening. Instead, the Governor is encouraging a plan that would reinvest our budget dollars into more productive areas, which would in turn grow the economy and alleviate the need for tax hikes. That plan of hers is much more sensible.
A Herculean Task
Make no mistake about it: the Governor has a Herculean task ahead of her. Reversing the trends she pointed out in her presentation won't be easy as the special interests that benefit nicely from the current system are strong and will fight passionately for their own interests.
But Raimondo was impressive in her opening salvo. She laid the groundwork for reform and explained the areas in which Rhode Island state government has failed its taxpayers. The time has once again come for some "truth in numbers" and to give the citizens of Rhode Island an idea as to why the state is perpetually suffering under poor performance.
Raimondo has shown courageous leadership in the past, particularly when she led the fight to reform the state's pension system. Whether or not she can succeed in reforming the state budget to make the state more economically competitive remains to be seen, but Raimondo's first move was certainly enough to inspire some much-needed optimism.
We may just be able to recover after all.
Russell J. Moore has worked on both sides of the desk in Rhode Island media, both for newspapers and on political campaigns. Follow him on twitter @russmoore713. Send him email at [email protected].
Related Slideshow: 10 Questions Raimondo Has to Answer as Governor
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Moving the needle?
Forbes recently ranked Rhode Island 5th worst in the country for business environment -- a not uncommon position for the Ocean State in recent years. Forbes placed RI as high as 20th for quality of life -- but #49 for "regulatory environment."
How soon can Governor-elect Raimondo improve Rhode Island's basement-level assessment and make it more competitive -- and what will she have to do to make that happen? Addressing the sales tax? Estate tax? Look to Raimondo's State of the State address -- and first budget proposal -- for signs as to how the direction the new Governor plans on taking the state.
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Gambling hole?
As GoLocal's Stephen Beale pointed out, RI has no plan to deal with $307,000,000 shortfall, when casinos in MA are operational, and RI's third largest source of revenue -- gaming and the Division of Lottery -- will take a huge hit. "A consultant's report showed Rhode Island losing $108.8 million a year in casino gaming revenue by 2017. And that was a best case scenario. The worst case had the state bleeding $158.4 million by 2017," wrote Beale.
How will Governor-elect Raimondo deal with the 800-pound gorilla in the room? Newport Grand failed in its bid for table games on the ballot in November. Will Raimondo let the General Assembly continue to prop up the ailing slots parlor?
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RhodeMap RI?
The previously little-known economic development plan under the State's Division of Planning -- made possible by a federal HUD grant -- has heated up in a big way as opponents are voicing their concerns as to the scope and reach of the plan, if incorporated into the state's broader economic plan.
Will Governor-elect Raimondo get behind RhodeMap RI's vision fully, and how would she address detractors who don't appear to be going away at any point soon? Given that there will most likely need to be legislative components to implement the plan, watch to see where Raimondo's leadership is on this issue.
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Marijuana legalization?
Some of the air came out of the marijuana legalization balloon when former Speaker of the House Gordon Fox stepped down last year, and the notably more conservative Speaker Nicholas Mattiello took the helm, making the prospect of a marijuana legalization bill appear dim, at best.
The Daily Chronic reported that the Democratic gubernatorial candidates indicated during the campaign that they were "monitoring the effects of regulation and taxation in Colorado and Washington." Raimondo's certainly given no indication she'd be inclined to consider a tax-and-legalize measure, but as gaming revenues start to taper off, will marijuana discussion ramp up as a new revenue option?
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Union relations?
While Raimondo appointed five transition team members with big banking ties, she also appointed two union heads -- Pat Quinn with SEIU 1199 and Michael Sabitoni with the RI Building and Construction Trades Council.
While Raimondo managed to secure union endorsements following a primary that saw them go primarily to opponents Angel Taveras and Clay Pell, the legacy of her pension reform still looms large (remember AFSCME famously hired Forbes' Edward Siedle to investigate Raimondo's handling of the state pension fund, namely her move into hedge funds). How will Raimondo negotiate with public sector unions given a past history?
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Pension Lawsuit?
What will come of the pension reform lawsuit? While it was quiet leading up to the election following the failed settlement earlier in the year, watch to see the next steps from Raimondo -- and newly elected Treasurer Seth Magaziner (who appointed a fairly union-friendly transition team) to see what attempts may arise to reach a new settlement -- and what implications that may mean for Raimondo, the architect of the landmark 2011 pension overhaul. Depending on the outcome, watch to see how Raimondo's political star rises -- or falls -- from the outcome of the suit -- and how Raimondo addresses the financial implications if a mediated settlement is achieved.
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Budget proposal?
All eyes will be on Raimondo's first budget proposal in January. What will her priorities be? Will there be bold moves to improve the state's business climate? Education, infrastructure, tax code -- how will Raimondo choose to tackle the state's biggest issues? And will the Democratic leadership agree with her agenda?
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General Assembly?
For the first time since 1991 -- when Governor Bruce Sundlun took office -- a Democrat will be embarking on a gubernatorial administration, and Raimondo will be working with a Democratic legislature. What will Raimondo's working relationship be with Speaker Mattiello and Senate President Paiva-Weed? Will the General Assembly be in lockstep with a Raimondo agenda -- if not, what will the points of contention be? And with a democratic lock on power, what will the Republicans be able to accomplish?
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Mandate issue?
Winning the general election to become Rhode Island's first female Governor with 40% of the vote, Raimondo follows in the footsteps of Governor Lincoln Chafee with winning with less that 50% of the vote. Raimondo however has the advantage over her predecessor by being elected as a Democrat, allowing her to work with leadership in the General Assembly. However, with 40% of the vote, how will the public who didn't vote for her view here policies and proposals? Will Raimondo have to win over the public, or will Raimondo take her support from the business community and forge a path regardless?
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Transparency?
While General Treasurer, Raimondo came under fire for lack of transparency for the lack of disclosure of hedge fund fees paid for the state's retirement investments, punctuated by Attorney General Peter Kilmartin ruling that Raimondo could keep certain details of the state's investments from the press. Forbes' Edward Siedle wrote, Does [Kilmartin] seriously believe that hedge and private equity billionaires entrusted with state workers retirement savings should be shielded from scrutiny regarding potential violations of law?
While Raimondo will no longer be calling the shots as the head of the State Investment Commission, all eyes will be her decisions in the Governor's office. How transparent with the Raimondo administration be with the press-- and the public?
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