Little State, Big Spending

In yet more news to file under thank-god-for-pension-reform-but, the Providence Business News reports that while Rhode Island public sector spending is surprisingly lower than the U.S. average, medicare costs are significantly above national averages.

Medicaid-related vendor payments accounted for more than 20 percent of state and local government spending in Rhode Island from 1999 to 2009, significantly more than the rest of the country, according to a new report from the Rhode Island Public Expenditure Council.

“The report from the budget watchdog group found public-sector spending – by both state and municipal government – in the Ocean State rose 68.9 percent over the 10-year period to $8.9 billion per year, a smaller increase than the 77 percent jump nationally.”

While the somewhat slower growth than the national average is welcome, it’s hardly good news. It goes without saying that there aren’t 68.9 percent more Rhode Islanders today compared to ten years ago, and it’s probably fair to say that the Ocean State isn’t 68.9 percent — or half of that? — better or more efficient than it was in 2001. So what justifies the public sector explosion?

And the faster-than-national-average expansion of Medicaid-related payments is definitely a worrying sign. Controlling Medicare and Medicaid cost growth is a major issue nationally anyway, so for Rhode Island to be spending a significantly greater proportion of public funding than the rest of the country – especially in light of the flexibility that was supposed to come with the first in the nation Medicaid global waiver and block grant – indicates that the system here is particularly broken.

Pension reform was a major and necessary step, but it’s becoming clearer day by day that there’s still so much more to be done. Rhode Island may have averted one major crisis in the making, but it doesn’t mean that we’re anywhere out of the woods. Beyond Pensions, Rhode Island still must grapple with its systemic uncompetitiveness.