STATEMENT: Serious Questions for House Oversight Committee Hearing on RhodeMap RI

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FOR IMMEDIATE RELEASE
April 9, 2015


Critical Questions About Controversial RhodeMap RI
Plan Must Be Addressed

How did a legitimate economic development plan request get hijacked and transformed into a radical social equity agenda?

Providence, RI — Critical questions must be asked and answered when Kevin Flynn, Associate Director of the state Division of Planning, testifies in front of the House Committee on Oversight at 4:30 pm this afternoon in Room 101 at the State House, suggests the RI Center for Freedom & Prosperity, a leading critic of the controversial RhodeMap RI plan, which will be the topic of the hearing.

The so-called economic development plan, which the Center argues is a radical social equity experiment in disguise, was adopted into Rhode Island’s official “Guide Plan” in December of 2014 by un-elected bureaucrats, without any significant public debate. Last fall, the Center challenged the Chafee administration and the RI Foundation, major supporters of the plan, to conduct an open and public debate on the matter, however, the requests were rejected or unanswered.

“Finally, the public will hear from the architect of this scheme, who, to date, has not been publicly questioned or held accountable for his actions,” commented Mike Stenhouse, CEO for the Center. “We know that in other states, similar plans have resulted in the infringement of individual property rights and the sovereignty of municipal governments. Mr. Flynn must be questioned as to what specific assurances he can point to that would preclude these same violations from happening in Rhode Island.”

The Center recommends that committee members
focus questions on a few critical areas:

  • How did a low-level, unelected bureaucrat receive the authority to sign-off on a document committing the entire state of Rhode Island and its 39 municipalities to adopt the six “livability principles” defined by HUD, a federal agency (U.S. Department of Housing and Urban Development)?

  • Was the 2013 legislative process manipulated, in a bait-and-switch maneuver, to corrupt a legitimate economic planning process by transforming it into a radical social-engineering experiment?

  • Are land seizures or private property development restrictions likely to become more prevalent under aggressive eminent domain or transfer of development rights mandates?

  • Given the devastating effects on the tax base in the city of Woonsocket, a poster child for HUD programs, why should every Rhode Island municipality be mandated to adopt similar programs, which invariably result in inequitable levies of property taxes?

  • Should Rhode Island risk its future economic viability on the notion that racial and income quota mandates, when it comes to residential compositions in neighborhoods, are a driver of economic growth?

Concerned citizens who value the concept of individual property rights are encouraged to attend the hearing.

The Center also commends the bi-partisan legislative sponsors of multiple legislative bills that would weaken or repeal many provisions of the RhodeMap RI plan, especially those that would create new mandates on municipalities. The Center has listed descriptions of a number of pro and anti RhodeMap RI pieces of legislation on its website.

To GOVERNOR’S MEDICAID WORKING GROUP: A Proven Policy Idea to Save Money

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A proven and bi-partisan cost saving measure that has produced significant savings in other states has been recommended to state officials by the RI Center for Freedom & Prosperity and its national partner, the Foundation for Government Accountability (FGA).

It is well-known that fraud, abuse, and lack of enforcement plague many state and federal welfare programs, often resulting in wasteful spending and a potential lack of funds for the truly needy.

FGA’s recent “Stop the Scam” report discusses how many states are not conducting detailed enough Medicaid eligibility and verification procedures for new and existing enrollees.

From issuing Medicaid and welfare payments to dead people, to lottery winners, to enrollees who did not provide proper documentation, and to people under-reporting their incomes, a process that provides for more detailed screening and periodic check-ups can result in significant cost savings for states.

According to FGA, “Illinois and Pennsylvania instituted proactive audit reforms with bipartisan support, and together they have saved hundreds of millions of dollars. Pennsylvania discovered thousands of ineligible individuals receiving benefits, removing 160,000 individuals in just the first 10 months of the audit, saving $300 million. Illinois quickly followed suit and removed 300,000 individuals in the first year, 400,000 more in the second, with expected taxpayer saving of $350 million per year in Medicaid alone.”

As with many states, Rhode Island has its own screening and verification process. However, according to FGA, rarely do they have the capacity to conduct the deep-diving to search the federal and state databases necessary to root out more subtle cases of ineligibility. 

The Center recommends legislative action or an executive order requiring Rhode Island to utilize third-party vendors that specialize in determining if enrollees have retained eligibility in Medicaid.

A thorough examination of FGA’s recommended “best practices to stop welfare fraud” should be conducted by Rhode Island  health officials to determine if the vendors suggested by FGA may be able to help the state identify additional cases of ineligibility.

STATEMENT: Pension Settlement Leaves Critical Constitutionality Issue Unresolved

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FOR IMMEDIATE RELEASE
April 3, 2015

Pension Settlement Avoids Most Critial Issue
Providence Journal Incorrectly Reports on Constitutionality
Legality of Pension Reform Still an Open Question
Providence, RI — Regardless of the details of the negotiated settlement of the state’s 2011 pension-cutting law, Rhode Island lawmakers and taxpayers will be left in limbo as to whether or not future pension reforms at the state and local level can be legally conducted.”We don’t need a backward looking pension deal, we need a forward looking pension ruling on its constitutionality,” commented Mike Stenhouse, CEO for the Center. “We all know that the 2011 law was just a band-aid and that massive reforms are still required at the state level, and especially in municipalities.”Can responsible lawmakers constitutionally undertake such vital reforms down the road? The Providence Journal incorrectly reported that the deal addresses this issue. The Center believes that the proposed settlement would leave this critical question unanswered.

“The only thing ‘awesome’ about this deal, is how easily unions have been able to manipulate the process to win yet another major victory,” continued Stenhouse. “They understand that clouding the legality of future pension reforms is in their best interests. Once again taxpayers lose.”

According to the Center, supporting this settlement is a near-sighted, path of least resistance approach. The unions understand the long-term implications of a settlement, which will be to largely perpetuate the status quo.

Rhode Island Employment Snapshot, February 2015: The Darker Way to Improve the Unemployment Rate

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[Click here for the printable one-page PDF of this post.]

If Rhode Islanders haven’t completely tuned out reports about the state’s unemployment rate, they may have heard the triumphant call, this week, that not only has their state climbed out of the lonely pit in the bottom three of the national ranking, but it’s no longer even last in New England. Looking at the data, however, shows how inapplicable a metaphor like “climbed out” is.

According to the federal Bureau of Labor Statistics (BLS), in February, a net 1,725 Rhode Islanders gained employment, while 659 joined the labor force. Those two variables are the basis for the unemployment rate, and as the first chart below shows, the lines are generally moving toward each other. That has the effect of reducing the unemployment rate more quickly than the modest increases in employment would generally suggest.

The second chart shows how ridiculous it is to portray Rhode Island as doing better than Connecticut. The Nutmeg State has a higher unemployment rate because, despite its much stronger increases in employment, even more people have decided to look for work, there. In other words, its higher unemployment rate is ultimately an indication of its better economic health.

The final chart illustrates the condition that the Ocean State would be in if its residents weren’t giving up their quest for work. Even with recent improvements in employment, the unemployment would still be 10.4% if as many people were looking for work as were doing so in January 2007.

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Rhode Island Employment Snapshot, January 2015: After Revision, Still in Decline

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[Click here for the printable one-page PDF of this post.]

The headline that people invested in Rhode Island’s status quo would like to see, based on the latest employment numbers for the state, is that the unemployment rate is now 6.5% — the best since early 2008 and fully eight slots from worst in the country. As the charts below show, such a headline would be misleadingly sunny.

According to the federal Bureau of Labor Statistics (BLS), in January, a net 1,489 Rhode Islanders gained employment, while 19 left the labor force. The first number is positive, but the second one illustrates how trumpeting the unemployment rate misses the point. As the first chart shows, the number of people either working or looking for work continues on a long-term decline. In fact, Rhode Island’s labor force hasn’t been this small for thirteen years, in 2002.

As for the one-month improvement in Rhode Island, the second chart shows it to be a mere drop in the bucket compared with the neighboring states of Massachusetts and Connecticut. (Experience also suggests that it will be revised down in the months and years to come.)

The final chart illustrates the condition that the Ocean State would be in if its residents weren’t giving up their quest for work. Unemployment would still be well above 10% if as many people were looking for work as in January 2007.

Indeed, the best news that Rhode Island could receive would arguably be that it’s unemployment rate is going up because more people were returning to the labor force than the economy could supply with jobs.

RIemploymentsnapshot-0115 RI-laborforceandemp-0107-0115

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COMMENTARY: State Property Tax Proposal Right out of RHODEMAP RI Playbook

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By Mike Stenhouse

We warned you about RhodeMap RI.

While Gov. Gina Raimondo’s proposed new statewide property tax has already inspired arguments among various constituent groups, there are much larger, more fundamental issues to be concerned about.

Disguised as a wealth tax, the “Taylor Swift tax” is really an assault on private property rights and an infringement on municipal sovereignty, all part of a national agenda. Sound familiar? This tax idea is right out of the RhodeMap RI playbook, and it was probably designed by a nationally prominent sustainable-living, urban-planning advocate.

The month before the governor introduced this controversial new tax, a Feb. 18 WPRI-12 report confirmed that the Raimondo administration was bringing Brookings Institution scholar Bruce Katz to Rhode Island for private meetings and hinted that the state should find a role for him. Also, in 2013, Ms. Raimondo, in conjunction with the Rhode Island Foundation, brought Mr. Katz, a prominent national expert on urban economic development, to the Ocean State. Mr. Katz also has a relationship with Grow Smart RI, the primary architect for RhodeMap RI.

Like RhodeMap RI, the proposed state property tax targets wealthy property owners.

As our center informed the public during last fall’s RhodeMap RI debate, the underlying philosophy of the sustainable living and urban planning movement is that suburban sprawl, manifested largely through development of private single-family homes, is an unsustainable and inequitable ailment in our world.

In their view, such prime real estate would be more beneficial to society by being turned into “common,” “open space” or “high density” use. The goal of these central planners is to make it incrementally less attractive to own private property by making it more expensive (via tax policy) and by limiting development rights (through regulatory policy).

Since this would be politically unpopular at the local level, the strategy of the central planners is to supersede the authority and ordinances of local town governments by creating new regional authorities and statewide laws, such as the governor’s.

This strategy is clearly represented in the language of the governor’s proposed tax scheme, which describes property ownership as a “privilege.” It then takes the extraordinary step of taxing those properties, much like a “sin” tax.

Home and property ownership is not a privilege, nor is it a sin; it is a cornerstone of the American Dream, of our free-enterprise system, and the foundation of our constitutional rights. By demoting private property ownership to a mere privilege, sustainable living radicals can justify eventually restricting or removing that privilege.

Further, with the state exerting control over property taxes, local governments would find themselves with diminished sovereignty to manage real-estate issues. Cities and towns will have less authority to ensure that they remain attractive to in- or out-of-state homeowners and landlords, which are vital to their local economies.

A March 17 Providence Journal article described even more of the rationale, via familiar “sustainable” terms such as “fair share,” property “deterioration” and “stock of … real estate.” Urban planning advocates such as Bruce Katz believe it is not fair that some have the “privilege” of living in exclusive neighborhoods. Property deterioration, or blight, is a common rationale for governments to justify eminent domain seizures to increase the stock of available real estate for open space or high density developments.

Given the timing of Bruce Katz’ visit and the familiar language, there is little doubt in my mind that this ill-founded state property tax concept was originally devised by Mr. Katz. If he were to assume a role in the Raimondo administration, Rhode Island would become the model test-tube state for the sustainable development movement. Last year saw RhodeMap RI’s adoption; with Bruce Katz on board, RhodeMap RI will be on a fast-track for its implementation.

It’s one thing if this tax plan was merely about the Taylor Swifts in Rhode Island. If so, the discussion would be about whether or not it drives real-estate investors to other states and whether your home might be taxed next.

It’s a completely different and alarming matter if this tax is the first-step in a highly coordinated federal-state scheme to diminish municipal sovereignty and encroach on the property rights of Rhode Islanders — a scheme like RhodeMap RI.

Mike Stenhouse is CEO for the Rhode Island Center for Freedom & Prosperity, a nonprofit free-market think tank.

Center Issues Statement on Governor’s Proposed Healthcare Tax

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Summary: Explanations by the Raimondo administration about the Governor’s proposed surcharge on health insurance premiums appear to be misleading. The truth about the new tax expose four major concerns about how it is NOT comparable to the would-be federal exchange tax.
 
FOR IMMEDIATE RELEASE
March 17, 2015
Truth about the proposed HealthSource RI Tax
Is Not Commensurate in Scope to Federal Exchange Tax:
Tax Base, Tax Levy, Tax Certainty, and Next Steps are Considerably Different

Providence, RI — Explanations by the Raimondo administration about the Governor’s proposed surcharge on health insurance premiums appear to be misleading. Designed to raise money to partially fund continued state operation of the controversial HealthSource RI exchange, the tax is being positioned by administration officials as comparable to the fees that would be charged if the exchange were to be returned to the federal government.

However, as broached in a recent post in The Ocean State Current, there are a number of major differences between the federal tax and Governor Raimondo’s proposed tax:
First, who gets taxed? Under a federally run exchange, only those who purchase a policy through the exchange, or who purchase an identical policy outside of the exchange, would be taxed. But, as the Center has been projecting for years, because of Rhode Island’s small size and low enrollment numbers, not enough revenue can be raised without charging exorbitant per policy fees.
Under Raimondo’s plan to pay for HealthSource RI’s high projected costs, there would be an assessment on ALL individual and small business policies in the state, whether purchased inside or outside of the exchange.
Also of note, vocal special interest groups, such large corporations and union shops, would appear to be exempt from the tax; yet another special interest handout?
Second, how much tax? Under the federal plan, it was estimated that the 3.5% federal rate assessment based on the 30,000 or so who are currently purchasing insurance through the exchange, would result in about $5-6 million in fees. The Governor’s tax is projected to raise an ‘initial’ $6.2 million in half a year, or about $12 million in annual revenues, making it at least twice as expensive for Ocean State policyholders as the federal option.
Additionally, the proposed 3.8% and 1% tax on individuals and small employers, respectively, is significantly higher than similar 1.35% and 2.5%-3% taxes in Connecticut and Massachusetts, which can afford the lower rates, as they can be spread across a significantly higher number of policy holders.
Third, a fixed tax rate? Use of the term ‘initial premium assessment’ indicates a potential slippery slope. In fact, if HealthSource RI’s expenses rise, or when federal funds disappear, the health and human services secretary is empowered to raise rates for this tax in future years, while the federal plan is statutorily fixed.
Fourth, a stepping stone to state control? Maintaining the exchange under state operation also maintains the threat of further state control over Rhode Island’s healthcare industry, with separate legislation in 2014 (H7819) and 2015 (H5387) already seeking to give government unprecedented new powers. A single-payer system, such as that advocated for by the new HealthSource RI Director, has long been a goal of progressive lawmakers. Under a federal exchange, this threat is virtually eliminated

CENTER’s STATEMENT on GOVERNOR’s 2016 BUDGET PLAN

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FOR IMMEDIATE RELEASE
March 13, 2015

2016 Proposed Budget Does Not Address Major Problems

No Game Changing Economic Ideas
Does Not Address Long Term Structural Deficits
Continued Special-Interest Spending

Providence, RI — Governor Gina Raimondo’s proposed FY-2016 budget plan provides no game-changing ideas to boost Rhode Island’s stagnant jobs market and overall economy and does little to improve the state’s poor-rated business climate or to address long-term structural budget deficits.

By shifting money from certain side funds to the general fund and by borrowing money from the future via risky re-financing schemes, the Center rates the plan as a temporary band-aid approach, instead of major steps towards a long-term solution.

“Despite years of Rhode Island experiencing negative results, this budget continues and expands the state’s practice of assuming that government knows best, and that a few insiders in back rooms can solve our problems better than the rest of us can,” said Justin Katz, research director for the Center. “From tens of millions of dollars in phantom ‘trust us’ savings to millions more poured into slush funds for centralized economic development to a scary new ‘statewide property tax,’ several back-flips backwards overwhelm the few positive policy steps forward.”

The plan’s government-centric approach toward economic development that favors specific industries is merely an extension of the same, failed public policy approach that is responsible for putting Rhode Island into its current economic rut. The Center, instead, recommends broad based tax and spending reductions as the primary means to boost the economy.

Other than vague goals to reduce Medicaid and state personnel costs, multi-hundred million dollar deficits are still projected in future out years.

OTHER OBSERVATIONS. The Center soon plans to publish a policy brief that will povide a more detailed analysis of the budget plan, but today also makes the following observations:

  • The plan gives government more power in attempting to orchestrate economic development, and is a further departure from proven free-market principles
  • The plan continues the practice of new special interest spending programs at the expense of the average Rhode Islander
  • The new state property tax fee is a slippery slope that could lead to this tax being applied to lower valued properties in the future
  • The increased hospital fee and health insurance premium fees will likely result in more costs being passed down to consumers and will likely also lead to health insurance premium hikes
  • The vendor/supplier corporate tax credit idea is a handout to special interest big corporations
  • New pre-K, full-day K, and construction spending ideas are handouts to special interest unions
  • The new rental taxes will be a drag on our state’s vital tourism industry, especially harming smaller entrepreneurs
  • The higher cigarette tax will likely lead to even greater “black market” activity, with the state is unlikely to meet the increased $7+million revenue expectations
  • The increased town tipping fees to RI Resource Recovery could lead to increased property taxes in those towns

Governor’s Minimum Wage Policy Based on Untruths; Union Connection?

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FOR IMMEDIATE RELEASE
March 9, 2015

Minimum Wage Hike Does Not Mostly Benefit Low Income Families 

Most RI minimum wage workers were white, middle-class. Only 14% were sole family income earners.

Providence, RI — Governor Gina Raimondo’s press conference today to promote a hike in the state’s minimum wage will create a negative drag on her own goal to increase jobs in Rhode Island. Further, most of the higher wages will likely go to white, middle-income workers, while potentially harming many of the very families the Governor’s plan seeks to assist.

This according to the nonpartisan RI Center for Freedom & Prosperity, which re-published findings from prior research reports.

The strong union support of the plan, with today’s press conference to be conducted at a union hall, raises significant additional questions. According to a 2013 Wall Street Journal article, it is common that many union contracts peg their base-line wages to the minimum wage.

“It is disappointing that one of the first major acts of our new Governor is to perpetuate policies that are harmful to our state’s job market and that bend to special interest demands,”said Mike Stenhouse, CEO for the Center. “The great irony here is that this policy will mostly benefit middle-class whites and union workers, as opposed to low-income minority families. The image put forth – that most minimum wage workers are minority family breadwinners – is simply not true.”
FAST FACTS. According to research by the Center, based on 2012 data, of minimum wage earners in Rhode Island:
  • Over 80% were white
  • $61,299 was the average family income
  • Over 71% were part-time workers less than 35 hrs/wk; 30% less than 20 hrs/wk
  • Only 6% were married, as sole earner
  • Only 8% were single parents
  • Almost 60% lived with their parents or some other primary breadwinner
  • About 60% were 25 years old or younger; over 40% 21 or younger
ADVERSE JOBS IMPACT. The Center’s 2013 report also found, that based on the minimum wage and jobs market at that time, a hike to the same $10.10 per hour level now being promoted by the Governor, would:
  • Destroy almost 3500 jobs, including breadwinners from low-income families
  • Be a continuing assault of the state’s economy
  • Be especially harmful to low-income workers who need upward mobility in a robust jobs market
Read the entire 2013 report here, Read other minimum wage studies by the Center.

 

Policy Brief: 2015 Educational Choice Legislation

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Read the full Policy Brief here

Watch the full legislative press conference introducing the bi-partisan legislation

The Way of the Future in Rhode Island

2015 Legislation: The Bright Today Scholarship and Open Enrollment Educational Act

Policy Brief: Executive Summary

Representative Ray Hull - Bright Today Press Conference

Representative Ray Hull (D, Providence) is the primary sponsor of the Bright Today Educational Scholarship Act

LEGISLATIVE OBJECTIVES: The Bright Today Scholarship legislation not only creates new educational opportunities for families, but does so without adversely impacting public schools. The top-10 policy objectives met by this legislation:

  1. Establish RI as a national leader in education reform
  2. Empower all RI parents with immediate choices to obtain an adequate education for their children
  3. Meet the documented demand for school choice by increasing the supply of available options
  4. Create an environment in which public schools are likely to improve academic outcomes
  5. Increase or maintain current per pupil funding levels in district schools
  6. Save money for school districts that could be used to repair crumbling schools or for property tax cuts
  7. Keep 100% of locally raised tax funding for use in local district schools
  8. Cost nothing to implement – zero increase in any local or state tax or fee
  9. Provide higher return value for taxpayer dollars
  10. Improve overall statewide educational performance so as to be a boost to economic development

BILL FEATURES: Bright Today Scholarships are a form of Education Savings Accounts (ESAs). This innovative and cutting-edge educational choice bill, modeled after the ground-breaking Arizona ESA legislation of 2011, includes these features:

  • ESA scholarships are different from vouchers. 1) Funds flow directly into a debit account controlled by parents, instead of directly to a private school, 2) Funds can be spent on tuition or other educational services, 3) Unspent funds can be rolled over for future K-12 expenses
  • Universal Eligibility. Every RI K-12 student would be eligible (includes grandfathering of current private/home schoolers)
  • Approved educational expenses include: private school tuition, required textbooks, home school curriculum, fees for online or post-secondary learning programs, educational therapies for special-ed students
  • Scholarships are paid from the State portion of ed funding
  • Income Adjusted Scholarship awards, with $6,000 cap
  • Funding Formula. Scholarship students are still counted towards the public school district’s enrollment
  • Detail Admin. & Academic Accountability Standards
  • Fraud and Criminal Prosecution Provisions
  • Prohibition of Gov’t Control over private/home schools
  • Separate Open Enrollment provision allows transfers to other public schools

PROJECTED OUTCOMES: A WIN-WIN policy solution.

Participation rate in the early years is expected to be 2.77% of the current public school population, or 3,682 students.

More budget friendly than charter schools. The math and budget implications of Bright Today Scholarships are very different than that of charter schools, and much more budget friendly to public school districts.

Simultaneous reductions in district revenues and district expenses. If the outflow of scholarship funds is less than the cost burdens associated with educating those students, then districts will actually save money.

Not including grandfathering, the Center’s RI District Impact Model for Educational Scholarships (RI-DIMES), projects the following fiscal outcomes:

  • Statewide scholarship of $5,016. $18.5 million total
  • Higher per student funding of in all public school districts; $299 statewide average
  • Net district fiscal savings in all but 3 smallest public school districts, $16 million cumulatively in savings statewide
  • Increase in statewide educational funding, public and private; public funding levels remain constant, with $17.25 million in “new” private monies spent on education
  • No new taxes. All scholarships and administration are paid for via existing education funding levels.

District savings can be used to repair crumbling schools or to reduce local property taxes.

Per the 2015 legislation, grandfathering would mean higher near-term revenue reductions for districts, resulting in most districts seeing net fiscal losses in the early years, cumulatively statewide of -$2.6 million.

Public schools also benefit from higher parental accountability. National research clearly demonstrates that because of higher parental accountability standards and the competitive forces introduced through increased competition, that academic outcomes at public schools is likely to increase. No major national empirical study shows an adverse impact.