Tom Sgouros: Expensive Ways To Save Money
Monday, September 12, 2011
I learned late last week that our state's straitened circumstances, made necessary by the appalling budget passed this spring, will result in about 175 mentally ill poor people losing their housing. These are disabled people, living off Social Security who, until now, have been getting a little extra from the state to pay for assisted living situations. They were all cut a couple of hundred dollars a month. Not much, but enough that lots of them will lose their places, and at least one assisted living provider will close its doors, probably more.
So let's see: 175 people, losing $200 per month. This equals about $450,000 per year. If only 12 of those 175 people -- seven percent -- wind up in a hospital for a couple of months, those savings will evaporate. If a few wind up in prison, that will be almost as bad, from the budget's perspective. Needless to say, the odds that more than 7% of them will need intense care for more than two months are quite good.
And of course, the budget is hardly the only consideration here. After all, where will these folks go? For many of them, the streets are the most likely destination. In other words, this is a compassion-free cut in the budget that likely won't save money. But hey, I guess this is one of those "tough choices" we hear about all the time, and we should feel proud that we have elected officials willing to make them for us.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThere's a conversation I have fairly often with friends and acquaintances. It usually begins with the friend making some commonplace observation about those greedy unions. After I've jumped down their throat -- pointing out how little of our budget is labor costs, how unions keep losing at the Assembly, and listing all the tax cuts and dumb policy decisions that created our state's fiscal nightmare -- after I've climbed back out again, dried off, and made my apologies in order to preserve the vestige of our friendship, the conversation continues with, well if it's not the unions than what is it?
At that point, there generally isn't a socially acceptable moment for a long discourse, and pressed for a way to summarize, I say, "it's all about pretending to save money in expensive ways."
Too many to list
Let's look at the expensive ways we "save" money:
We routinely borrow more than we need to, since borrowing is a way to put expenses off into the future. DOT is the poster child for this kind of abuse, borrowing $40 million year in and year out, in order to avoid appropriating $40 million more in the budget. By now, we pay well over $40 million per year in debt service, so we're really just borrowing to pay off previous year's debts; just as fiscally unhealthy as it sounds.
We rely on contractors where we really should own the expertise. For example over 20 years ago we hired contractors to create the computer system that pays DHS benefit checks. But the rules for all those benefits change all the time, and so we had to pay the contractor (Lockheed Martin) over $5 million per year to keep the system up to date. Keeping that expertise in-house would have been far smarter -- and much less expensive.
We come up with insane gimmicks. Ed DiPrete thought that an early-retirement initiative would cut state payroll. It didn't, but it bumped the number of retirees up suddenly, making the pension system more expensive. Don Carcieri thought that encouraging people to retire by revoking free health care would also cut the state payroll. It did, at least for a little while, but it was a disaster for the pension system (LINK: see last week's column), and cost us far more than it saved.
We come through with things that sound like cuts, but aren't. As if the assisted living cut isn't enough, does anyone remember proposing to send 17-year-olds to the ACI in 2007? That was supposed to be a cost-saver because the Training School costs $90,000 per kid per year, while the ACI is only $40,000. But it turned out that rules required those kids to be in protective custody within the ACI, at $100,000 per year, not to extra expense of adult trials.
We ignore the need for maintenance. I have a grudging appreciation for the new I-195 bridge in Providence, but does anyone beside me remember that we build it -- costing about $1 billion after you add all the financing costs -- because DOT had let the existing bridge deteriorate through lack of maintenance? The Sakonnet River Bridge is currently being replaced for exactly the same reason, at the cost of $130 million (if you believe the estimates) plus a couple dozen houses and businesses.
It's possible to go on, but this is painful enough, isn't it?
Cutting is possible, but it's not simple
The truth is that our state's problems are complicated, and the best solutions are also complicated. There is nothing simple about lowering labor costs, lowering health care costs, lowering road construction costs, or any of the rest. In many cases these are not impossible tasks, but they aren't simple either. Worse, in many cases you need money up front to save a lot later, something that no one wants to hear during budget season. The people who harp incessantly about the labor costs in our state government have been doing so for years. They're like a doctor who prescribes aspirin for the headaches arising from his patients' brain tumors -- and who isn't even curious why his patients keep dying.
There are plenty of reasons for our state's fiscal crisis that have nothing to do with labor costs and nothing to do with pensions. The awesome concentration of attention we're giving to those subjects will do little more than impoverish some retirees, and do almost nothing to solve our state's fiscal crisis. But I suppose some find it more rewarding to rant about state workers than to solve problems.
Tom Sgouros is the editor of the Rhode Island Policy Reporter, at whatcheer.net and the author of "Ten Things You Don't Know About Rhode Island." Contact him at [email protected].
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