Rhode Island Fiscal Crisis -- When the chickens come home to roost

There has been quite a lot of shouting, finger pointing, denial and general childishness lately in Rhode Island by special interest groups complaining about the troubles in the Rhode Island economy and state government finances. While deeply felt, I assume, it is very selfish, self centered and wasteful. In today's Providence Journal there is a story about recent meetings (hearings??? or shoutings???) at the Rhode Island State House to discuss Governor Chafee's sale tax reform program. One of our readers has commented on what he/she sees as the real problem.

Here is a guest comment by Ethnographer in response to a story, Lawmakers seek sales-tax alternatives, in the Providence Journal  

With the Fox in the hen house, what do you think we can expect? Maybe the same old, same old stop gap squandering of state assets -- the one time sale of the state's gambling license maybe? This is the caged thinking of chickens laying eggs to get fed and denying that they are really McNuggets in waiting.

The problem is systemic and long term. What we need is leadership and strategic thinking. We need leadership with vision. We need a system-wide review and change in the tax structure. We need a long term plan to get us down to a sustainable debt level. One area that can be corrected is the sales tax which the Governor has proposed. But that is just the beginning.

Unfunded mandates need to be addressed. The chickens in the GA are happy to pay their owners with promises in the form of mandates (eggs) but lack the will to pay for (hatch) them, preferring to pass that responsibility on to the local governments. Maybe that's what we are smelling.

Let's do a complete review of these mandates -- Why do we have them? Who benefits? Do we really need them? and Can we really afford them?

The income tax structure needs to be reviewed. If RI is to be the low wage, low cost state in New England, then the wealthy who benefit from that will have to pay more of their share of costs to government for supporting this low wage environment. You can't have low wages and expect the income tax breaks to the wealthy to make up the difference, can you?

Public worker compensation definitely needs to be reviewed and reformed. But cutting for the sake of cutting is STUPID. What we need is a system that recruits talent and rewards productivity and quality. Instead, we have seniority, cronyism, and the kind of influence we are witnessing in the GA staff raises.

User fees and registration fees should at least recover the full cost of administering the services that the fee is designed to provide. For example, how much does it really cost to register and maintain a real estate deed, or to record and maintain the record of ownership title for a new or used car? Who should pay for these?

The relationships between state and federal matching funds should be looked at more closely. Are we running after short term federal funds but committing local tax payers to long term maintenance and carrying costs?

 

It is time for the chickens in the hen house to stick their heads out of their cages, and take a look at the real world in which the rest of us live. They need to start thinking outside of the cage, start thinking outside of the box.

One more desparate attempt to sell off RI Assets

From Projo.com Breaking News  3/9/2011

PROVIDENCE, R.I. -- Rep. Charlene Lima, D-Cranston, is proposing a Nov. 6, 2012, statewide vote on a suggested change to the state Constitution to allow a privately owned and run casino in Rhode Island in exchange for a $100 million one-time licensing fee. Similar to a bill introduced at least once in the past, the bill envisions a competitive bidding process. But it also suggests possible locations for the state's first full-scale casino.

 In my opinion:
     
     The gambling tradition and short sight legislature once again is asking us to sell off a state assets at a bargain rate price. If a casino is a major source of state revenue, why is  it being offered as one time license and a fixed price? The license should, if we go in this direction, be subject a periodic renewal date and be awarded on the basis of an open competitive bidding process.

     The licensing authority belongs to the tax payers of RI, and the legislature should be acting as the fiduciary agent of the tax payer. Such a duty requires stewardship and acting in our interests, not some backroom deal.

     And Should the State's Constitution be used as the vehicle for such a decision? 
     Is our Constitution that petty that we seal business deals in constitution amendments?

What do you think about it?

Another perspective: Teacher and Public Employee Pensions

A major debate has been and continues to go on about the role of public service workers (government employee) pensions and the rebellion by taxpayers exemplified by the position taken by such groups as the Tea Party and RISC (Rhode Island Statewide Coalition). The underfunding (or legislative stealing) of the state and local pension funds by legislative and community governing bodies and poor (or blatant) mismanagement of such funds by the trustees of these funds  (such as West Warwick) has certainly added to the current and future fiscal problems facing the citizens of Rhode Island at all levels. These issues have been discussed here over the past year and more.

At times, the blame game become more the focus for debate, than any substantive discussion of solutions. Ideological battles between Unions verses taxpayers, legislatures vs taxpayers, citizens verses public employees, reactionary conservatives (know nothings) verses reactionary liberals (progressives) generate a lot of entertainment and media noise. But just as the BP oil well in the Gulf of Mexico continues to waste millions of gallons of crude oil and natural gas and pollute the environment, the public treasury is still leaking and the state's fiscal future and public trust is being polluted by incompetent and greedy management.

Despite the debate and rancor at the State and community levels, we need to step back a little. The misbehavior which lead to the problem can be traced back to its source. That source is the general public, you and me, that is US, who through our uncritical support of our local elected officials have created a calcified legislature incapable of making the hard choices the times demand. We condemn the General Assembly but keep our own representatives who, when "they go along to get along," are not acting in our or the state's best interest.

Instead we elect representatives who can only make the easy choices, such as fireworks, cashing in the future earning from the tobacco settlement, approving budgets based on speculation about a federal bailout. The General Assemble has made short sighted and short term decisions over the past two decades that are today having real negative consequences, often unintended self inflicted ones.  Even those who promote such short sighted and selfish behavior are feeling the consequences today.

What are these consequences?

Every once in a while you run across an article, or posting, on the web that is worth sharing, especially in light of the issues confronting Rhode Islanders these days.  An article appearing on the Money and Market Website, entitled  State Pension Woes Only Worsening  by Nilus Mattive describes the significance of the public pension situation on the individual public employee who is, or has been "planning," for his or her retirement and expecting that the government will be able to keep its promise. After describing the sad state of affairs facing this public employee, he concludes with this warning.

I’ll Say It Again: Do NOT Count on Any
Government to Pay for Your Retirement!

As we go into this election year, it will be important that each citizen, each of us, consider the promises we made to state and local public employees through the actions of the legislators, council persons, and board members we elected to represent us. And especially those of you who are public employees, consider what the real consequences of your actions as a union member and as a taxpaying citizen have been. Consider where does your true enlightened self interest  rest. Consider what you have done to plan for your future and what you will do now. Consider what your chances are to retire with those rich pension deals negotiated at another time when we were all in a better place. 

The secret to life is change. The secret to success in life is the ability to change in response to a changing environment. Today, is the first day of the rest of your life, are you prepared to change?

Central Falls out of the frying pan and into the cauldron

Well it seems that a touch of reality has entered the Central Falls (CF) school crisis. When the union members discovered that there are over 700 - 800 teachers from around the nation willing to apply for the 90 or so opening created by the union leadership, reality struck. It seems that Central Falls is not the center of the universe. It is not isolated from the economic conditions facing the nation and the education profession. The local union can't control supply and demand on a national level.

Oh! Did I say, the union leadership caused the problem? The settlement reached between the teachers and the CF school administration is the same as the leaders refused to offer to their membership back in February. So where was the leadership then and why are they agreeing to it today?

It seems that threatening to sue, another union tactic, was not a viable option. So today, they are working behind closed doors to get their "FRIENDS" in the RI General Assembly to pass a law which

... seeks to prohibit the General Assembly from enacting changes to pensions that “diminish, impair or deprive” vested state employees of “presently existing rights or benefits.

Rhode Island State Senate Majority Whip, Dominick Ruggerio is the lead sponsor of S-2384, the Public Officers and Employees Retirement System Act. The bill will be taken up by the Senate Labor Committee this week ( week of May 16th). Like earlier efforts by these "FRIENDS" to impose binding arbitration on the cities, towns, and school committees, the unions are seeking a poison pill, golden parachute for themselves which is unsustainable.

If they succeed, they will be rewarding their older loyalists members at the expense of their younger members. This is a common union practice conducted every year through the bumping process which places seniority over competency in filling open positions. The future generation of teachers will have to pick up the future bill as tax payers and as dues paying union members.

But for the moment the school crisis seems to be under control. Out of the frying pan.

But according to the Providence Business News and the Providence Journal Central Falls has jumped into the cauldron of potential municipal bankruptcy. This is uncharted territory hundreds of communities and several states around the country are facing.

Receivership is a step away from bankruptcy. If Central Falls goes bankrupt, all contracts will be voided. The city may be required to unincorporate and to merge with a neighboring jurisdiction. These are the lessons we have learned from the failure of the banks, auto industry, among others in the recent national economic crisis.

It is no wonder that the Rhode Island Federation of Teachers and Health Professionals has reversed it position regarding Rhode Island's application for Race to the Top grants. This was a "no started" last week. Now it may be the only hope for some districts, such as Central Falls.

This afternoon the Providence Business News online published the following story, State law bars Central Falls bankruptcy. Because of state law, the GA will be called upon to help resolve the issue. This should be interesting to see how the politicians solve this one.

This is the legacy of years of greed and short term thinking that seems to be a characteristic of Rhode Islanders and the people they elect to public, union, and corporate offices.

Stay tuned while we keep track of the temperature

Can we afford the best?

In a time of economic crisis, when unemployment is at 12.9%, the State of Rhode island threatened to lay off a 1,000 of employees back in September, and is still facing a $200 million deficit the State has decided to hire a new Executive Director for the RI Economic Development Corporation for 1.5 times the salary of the former Executive Director.

According to the Providence Business News story

The board voted to give Morfessis a three-year contract that will pay her $250,000 a year plus benefits. The state also will cover her relocation costs and provide her with an automobile.

And according to Providence Journal, when asked about the high salary Governor Carcieri is quoted as saying.

“You want to do a national search? You want to recruit the best candidate you can find? Then you’re going to have to pay for that,”

The Journal article points out that Rhode Island has recently hired several key senior level administrative personnel. These include the President of URI, Director of Education, and now the Director of EDC at a cost of well over $1 million in salary and benefits annually.

The trend seems to be to look beyond the State for talent to bring about "needed" changes in the way we operate the State government. The big question is

Will these highly paid experts actually be able to produce value for the tax payers of Rhode Island, or are we just hiring carpetbaggers to replace the state's more traditional bag men?

In 04-30-2003 the Governor's office issued the following press release

CARCIERI ADMINISTRATION MAKES CASE FOR REINING IN COST OF STATE GOVERNMENT Administration Official Testifies that Escalating State Benefit Package Costs "Out of Whack" with Private Sector & Neighboring States

Rhode Island government is NOT a private sector company, government is PUBLIC SERVICE not PRIVATE SERVICE. Government is supposed to do the "People's or the Stakeholder's business", not the private Stockholders.

Nor is Rhode Island like Massachusetts or Connecticut. Rhode Island is more like the city of Detroit, than it is like the state of Michigan to which we have been so often compared lately. If the State Benefit package is out of whack, how does paying higher private sector salaries and benefits to a select few change this?

Are we missing something here?

Cut costs by reducing the number of $5.00/hr employee who could produce (35 hr/wk x 3 workers) 105 person hours and replacing them with one $15.00/hr person who can only produce 35 hours of work seems counter-intuitive. Will those 35 hours create greater value for the tax payer's of Rhode Island? I wonder when we read that "R.I. to close jobless benefits call center some days to catch up on claims>"

Three workers pay three tax bills, live in three homes that are taxed by their communities, support three family/households in those communities.

The leaders of this state seem to think that if you drive a 2010 BMW rather than a 2000 FORD 150 somehow or other you can have a BMW life style.

I seriously pray (and that is the right word) that these new hired guns can produce the value their inflated (in RI terms) salary and benefit packages are costing the tax payers of Rhode Island.

Can we afford the best, or is what we really need the most competent?