Governor’s BOND & TOLL plan will waste over $650 million

PAY-AS-YOU-GO a Superior Approach.

The plan under consideration would more than double the cost of the project and would enrich special-interests without any added benefit for Rhode Islanders. The Center’s new report shows how to make RhodeWorks “work” for Rhode Island.

[button url=”http://rifreedom.org/2015/07/making-rhodeworks-work-for-rhode-islanders/” target=”_self” size=”medium” style=”royalblue” ] Read the PayGo Report here [/button]

2015 Legislator Scorecard – Now Live!

HOW DOES YOUR REPRESENTATIVE OR SENATOR RANK?

Preliminary ratings show RI General Assembly turns state in the wrong direction once again!

[button url=”http://rifreedom.org/rifreedomindex/” target=”_self” size=”medium” style=”royalblue” ] Interactive Scorecard Here [/button]

Statement: Open And Contentious Debate Being Stifled By The Status Quo

STATEMENT
June 17, 2015

Open And Contentious Debate Being Stifled By the Status Quo
Budget The Culmination Of Months Of Back-Room Negotiations And Special Deals

The floor session addressing the state’s budget in the Rhode Island House of Representatives was short, pervasively unanimous, and light on opposition action. The momentum of the evening – the culmination of months of back-room negotiations and special deals – was so strong that Republicans did not even put forward a plan that their caucus had developed as an alternative for funding infrastructure without debt.

The Rhode Island Center for Freedom & Prosperity has already released a statement on the budget, itself, and the details are largely unchanged. On the day after the vote, however, Rhode Islanders should find it shocking that insiders and special interests have our government so locked up that neither conservatives nor progressives can muster sustained political opposition to a budget that claims so much authority for the government and spends so much of the people’s money.

Providing an alternative to the status quo thinking about government is core to the Center’s mission. Now more than ever, the people of Rhode Island must work independently of their government to change minds, to change the debate, and to change the direction in which the Ocean State is headed.

Only a well-informed, passionate electorate can put Rhode Islanders back at the center of their state’s decision-making process and foster freedom and prosperity. If there is no open and contentious debate inside the State House, then it is only more critical for there to be open and contentious debate outside of it.

Media Contact:
Mike Stenhouse, CEO
401.429.6115 | info@rifreedom.org
About the Center
The nonpartisan RI Center for Freedom & Prosperity is Rhode Island’s premiere free-enterprise think tank. The mission of the 501c3 nonprofit organization is to return government to the people by opposing special-interest politics and advancing proven free-market solutions that can transform lives by restoring economic competitiveness, increasing educational opportunities, and protecting individual freedoms.

STATEMENT: General Assembly Budget – More of the Same

STATEMENT
FOR IMMEDIATE RELEASE
June 10, 2015

2016 Budget Has No Broad-based Reforms

No Game Changing Economic Ideas
Continued Special-Interest Spending

Providence, RI — The General Assembly’s proposed FY-2016 budget plan, consistent with recent annual budgets, and despite the positive spin from lawmakers, includes no broad-based plan to boost Rhode Island’s stagnant jobs market, according to the nonpartisan Rhode Island Center for Freedom & Prosperity. The Center maintains that the budget gives government more power in attempting to orchestrate economic development and represents a further departure from proven free-market principles

While the budget does include a number of positive elements, there are off-setting negative elements that will largely serve to maintain the Ocean State’s stagnant status quo. In fact, in its initial ratings of 151 bills on its annual Legislative Scorecard, the Center scored 92 bills as having a negative impact, with only 59 bills rated as positive.

“Our state levies high taxes, spends at high levels, and has amassed high debt … yet when you look at our business climate, infrastructure and education, it is obvious that taxpayers are receiving low value for their hard-earned tax dollars,” said Mike Stenhouse, CEO for the Center. “Once again special-interest insiders will benefit at the expense of average Rhode Islanders.”

The plan’s government-centric approach toward economic development that favors unions and targeted industries is merely an extension of the same, failed public policy approach that is responsible for sinking 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, as have been highly successful in North Carolina.

Among the minor, positive elements in the budget are the elimination of income tax on social security and the sales tax on commercial energy; the reduction of the corporate tax; the minimal Medicaid reforms; and the exclusion of the Taylor Swift tax and the trucker tolls.

On the negative side, are new taxes on health insurance premiums and on vacation home rentals, and higher taxes on cigarettes; union hand-outs such as spending for all day kindergarten and construction jobs; and multiple corporate welfare programs such as the real estate development tax credit, the vendor relocation tax credit, and the I-195 redevelopment fund.

Other major issues are still outstanding, some that will impact municipal budgets and local governmental sovereignty:

  • A realistic plan to address the state’s crumbling roads and bridges
  • The pro firefighter and municipal employee collective bargaining bills
  • Bills to reduce the negative impacts of RhodeMap RI
  • The Pawtucket Red Sox stadium deal

Media Contact:
Mike Stenhouse, CEO
401.429.6115 | info@rifreedom.org

About the Center
The nonpartisan RI Center for Freedom & Prosperity is Rhode Island’s premiere free-enterprise think tank. The mission of the 501c3 nonprofit organization is to return government to the people by opposing special-interest politics and advancing proven free-market solutions that can transform lives by restoring economic competitiveness, increasing educational opportunities, and protecting individual freedoms.

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

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.

POLICY BRIEF: Welfare Reform in Rhode Island

POLICY RECOMMENDATIONS: In tandem with plans to realign the institutional incentives of Rhode Island’s welfare services, the RI Center for Freedom and Prosperity recommends the following specific reforms:

  • Implement a cash diversion program for new enrollees. Thirty-three other states have such measures to provide lump-sum cash assistance in lieu of full enrollment in the state’s welfare program.
  • Decrease the lifetime limit for assistance through the state’s Temporary Assistance for Needy Families (TANF) program from its current 48-month limit.
  • Enforcement. Increase accountability by implementing stricter sanctions for noncompliance with work requirements. In Rhode Island, only 11% of TANF recipients are actively engaged in work-related activities, the second-worst rate in the nation. Strengthening the sanctions for failure to participate in work activities would likely increase work participation substantially in Rhode Island.

Download the PDF here

RI’s Poor Welfare Reform Performance

For the Ocean State, perhaps the most shocking finding in the Heartland Institute’s 2015 update to its “Welfare Reform Report Card” is that only 11.0% of Rhode Islanders receiving welfare payments through the Temporary Assistance for Needy Families (TANF) program are “working.” In this case, “working” would even include such activities as attending classes, doing community service, and receiving therapy to improve “work readiness.”

Nationally, TANF work participation ranges from 7.3% in Massachusetts to 68.7% in Wyoming, with a national average of 29.5%, according to the study. In the original 2008 version of the report card, Rhode Island ranked 43rd, with a work participation rate of 24.9%.

In that one statistics, Rhode Islanders can see the results of their state’s welfare-to-work policies, which Heartland graded an F and ranked 45th in the country. That grade and rank are given based on the Ocean State’s overall weakness in five areas of reform that should serve to draw people facing hard times toward work and self-sufficiency.

The Center recommends that lawmakers seriously consider implementing stronger reforms in areas of weakness. Legislators should be careful, however, to craft policies that take account of their state’s actual and unique circumstances.

Work Requirements

The requirement to work is the only area in which RI grades above a C, according to Heartland. As the state’s abysmal 11% work participation rate shows, however, it would be wrong to see the A grade as an indication that nothing can be done.

One consideration is that Heartland only applies three grades to this section: A for immediate work requirement, C for up to a three-month delay, and F for more than that. In Rhode Island, the immediate requirement isn’t so much working as having an “employment plan.”

A second consideration is, as mentioned above, that a wide variety of activities that might be better termed “work preparedness” count for the plan, and the General Assembly is moving in the wrong direction. In their 2014 session, for example, legislators removed the six-month limit that work-readiness education programs could be used to fulfill the requirement (2014 H7242 and S2476).

The third consideration is that Rhode Island’s statutes allow for a wide variety of exemptions, especially for single-parent families (60% of families receiving payments). So, while welfare recipients may technically be required to follow through on an employment plan, the requirement is easily waived and easily answered with activities that aren’t actually work.

Cash Diversion

Cash diversion is one of the two areas in which Rhode Island receives an F, because it has no such policy in place, according to Heartland, although the General Assembly has authorized it. The program would allow social workers to give those in need one-time payments that are relatively large, typically with a stipulation that they cannot receive TANF payments for a period afterward. The idea is to help cover one-time costs, like car repairs, that help family members keep working, rather than ushering them onto welfare.

In this area, the Center would caution that an additional cash diversion program should only be implemented as part of a strong welfare-to-work reform initiative, preferably with bureaucratic reforms that better align agencies’ incentives with the goal of reduced welfare rolls. In an agency without such a culture, or in which cash diversion programs are simply added to other benefits, they could make existing problems worse.

Regardless of whether such a program is created, the General Assembly should remove or limit the blanket authority that currently exists in law.

Integration of Services

Another area in which the Center would advise caution is integration of services, for which Heartland gave Rhode Island its second F.

On paper, the idea is sound. People toward the bottom of Rhode Island’s economic ladder probably don’t only need some money and a soft push into a job search. They also need various forms of therapy (e.g., for substance abuse) and other government services, including childcare, healthcare, heating assistance, and so on.

It makes a sort of intuitive sense to secure services that will help them market themselves as employees. Specifically, Heartland recommends reforms like locating all offices in one building and increasing the ability of case workers to sign their clients up for the full array of services.

The Center’s concern, which it has been expressing for years, is that activists seem to have something more insidious in mind, which we’ve dubbed a “Dependency Portal.” With all welfare programs integrated, and even automated, the emphasis could become on ensuring not that people have access to the programs that they need, but that the government is able to provide as many benefits as people may be eligible for.

Rhode Island is currently engaged in a Unified Health Infrastructure Project (UHIP) that Governor Raimondo’s budget projects to cost $229 million. As the Center understands UHIPs intended design, it will increase the risk without necessarily capturing the efficiencies that Heartland suggests. If the General Assembly remains intent on funding the project, it should move quickly to develop and implement reforms to safeguard against the development of a Dependency Portal.

Lifetime Eligibility Limits

As a state that provides welfare benefits to individuals for up to four years, Rhode Island receives a C from Heartland in this category.

Arguably, the Ocean State actually should receive a little more credit, here, because welfare recipients can only receive benefits for two years within a five-year period. On the other hand, the law does allow for “hardship exceptions,” which would seem to be broadly applicable to families eligible for welfare in the first place.

Moreover, the relevant statute contains potentially contradictory sections that muddy the waters of Rhode Island policy. This leaves the door open for the annual attempts at legislation that wears away at the requirement.

Not only should the General Assembly lower the lifetime limit, but it should also clarify the language of the law to be clearer. Clarity would ensure that regulatory interpretation cannot change the policy and that future legislative changes would have to be unambiguous.

Sanctions

Rhode Island’s second C grade comes in the area of sanctions, or the penalties that the state imposes when recipients don’t comply with the requirements of the program. Heartland notes that Rhode Island’s penalty is full elimination of monthly payments, but marks the state down because the payments are reinstated immediately upon compliance. A longer term penalty would give the requirement more force.

Institutional Reforms

As the above analysis makes clear, the Center does not dispute the value of some degree of safety net for Rhode Islanders who fall on hard times. The overriding goal of such policies, however, should be to guide our neighbors toward self-sufficiency and productive participation in the state’s economy.

The Heartland Institute lays out policy suggestions that would improve Rhode Island’s abysmal performance, but they require institutional incentives about which the Center is skeptical. Ensuring that Rhode Islanders can have full trust in their government to work toward the goals that give welfare programs their moral justification is a prior necessity for full, effective reform of the system itself.

Toward that end, the Center recommends developing institutional reforms to realign incentives for state employees so that individual case workers and agencies overall are motivated to move people off of public assistance and toward work. Such reforms are beyond the scope of this brief and would require additional research, consideration, and discussion.

They might include renegotiated employment contracts that shift the weight of compensation packages to reward success offloading beneficiaries. On an agency scale, they could also include pilot programs involving longer-term block grants.

In undertaking to reform Rhode Island’s public safety net — or in deciding not to do so — legislators must give full consideration not only to the needs of beneficiaries, but also the capacity of a struggling, fading private sector to support them. Legislators must also be constantly aware of the unintended consequences that their program can have, whether in terms of increasing dependency, of fostering a special interest culture within the bureaucracy, or of distorting the state’s economy.

CENTER’s STATEMENT on GOVERNOR’s 2016 BUDGET PLAN

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

New Study: higher tax burden reduces state economic growth & population

August, 2014 – We consistently hear Rhode Island lawmakers claim that citizens or the wealthy can “afford” some minor, new tax to pay for some new government project. That may be true in some cases.

But what is also true, in almost all cases, is that OUR STATE’S ECONOMY CANNOT AFFORD THE TAX HIKES.

A new study by the nationally renowned Mercatus Center explains this cause and effect.

***

Read below or go to the Mercatus page here; http://mercatus.org/publication/state-economic-prosperity-and-taxation

State Economic Prosperity and Taxation

Pavel A. Yakovlev | Jul 10, 2014

Policymakers frequently debate how different methods of taxation affect their states’ economies. While most economists agree that higher taxes result in reduced investment and innovation, previous studies have not found overwhelming evidence that higher tax rates lead to lower eco­nomic growth.

To untangle this paradox, new research by economist Pavel Yakovlev for the Mercatus Center at George Mason University examines the effects of taxation on states’ economic performance, busi­nesses growth, and net migration rates. The study finds that higher state taxes correlate with lower economic performance, even when controlling for various factors. The magnitude and sig­nificance of this effect varies depending on the type of taxes and the type of economic activity in question. The study analyzes the relationship between states’ economic performance and tax variables including effective average tax rates, the personal income tax, and personal income tax progressivity.

To read the study in its entirety, please see “State Economic Prosperity and Taxation.”

KEY FINDINGS

  • A higher average tax burden reduces state economic growth. Dividing total tax revenue by gross state product (GSP) shows that a 1 percent increase in a state’s average tax rate is associated with a decrease of 1.9 percent in the growth rate of its GSP.
  • Taxes impact migration patterns. If higher state taxes lead to lower economic activity and employment, it is conceivable that people will move to states with better economic pro­spects. Of the nine states with no personal income tax, four—Florida, Nevada, Washington, and Tennessee—are among the states with the highest population growth rates in the country in recent decades. Also, data show that a higher personal income tax rate is associ­ated with a higher probability of residents migrating to a state with a lower tax rates.
  • Income tax progressivity affects the number of new firms. The number of new firms open­ing in a state is a key indicator of beneficial creative destruction and innovation that will improve living standards for the state’s residents over time. Other studies have found that new firm entry accounts for 20–50 percent of a state’s overall productivity growth. The lat­est economic data show that the rate of start-up creation is sensitive to personal income tax progressivity. A 1 percent increase in personal income tax progressivity is associated with a reduction of 1.2 percent in the growth rate of the number of firms.
  • While the data show an important relationship between GSP growth and average tax rates, the impact of average tax rates on per capita income is less clear. A 1 percent increase in a state’s average tax rate can be expected to decrease per capita income by 0.07 percent.
  • As previous studies have also noted, these findings can be sensitive to the time period, statisti­cal methods, and variables used. Nevertheless, the results still lead to a general con­clusion: not all tax variables exhibit a significant correlation with the selected measures of economic activity, but when they do, the relationship is usually negative.

CONCLUSION

Higher state taxes generally reduce state economic growth, GSP, and even population. It is clear that people produce or consume less, or even move to a different state, in response to higher taxes. Not all types of tax increases can be expected to significantly harm economic outcomes, but higher taxes are generally correlated with lower standards of living.

Read Publication PDF

House Budget Adopts 25% of Spotlight on $pending Recommendations

But Leaves $168 Million of RI Taxpayer Dollars on the Table

 

The budget unveiled in the Rhode Island House Finance Committee, last week, showed a $13.3 million decrease in state spending, compared with the governor’s proposed budget.  Approximately $3.1 million of the reductions overlap with the Spotlight on $pending report that the RI Center for Freedom & Prosperity released in March, after a review of the governor’s proposal.

Another $52.9 million in Spotlight on $pending suggestions were in the budget, but were either not counted as a line item or amounted to transfers to federal funds.

“The legislature clearly has different priorities than the Center, but the fact that some of our suggestions found their way into the budget shows how important it is to have alternative voices,” says Justin Katz, who is the research director for the free-market think tank and a coauthor of the Spotlight on $pending report.  At a State House press conference promoting Spotlight on $pending on April 2, Katz had told reporters that the Center hoped legislators would look to their analysis for ideas no matter what fiscal goals they were trying to reach.

Specific areas of agreement between the Center and the House were as follows (note that reductions are from the governor’s proposal, not from current spending):

  • A $1 million reduction in local funding for the State Council on the Arts.
  • Savings of $834,512 in “inmate population-related operating expenditures.”
  • Eliminating a $500,000 increase in workforce training programs.
  • Over $323,973 in savings by not adding new employees to a consolidated Diversity, Equity and Opportunity office.
  • Ending $159,585 in Public Utilities Commission personnel previously funded by the federal American Recovery and Reinvestment Act (ARRA), rather than absorbing them into state spending.
  • Saving $145,303 by running a new certificate of good conduct program for parolees with existing personnel.
  • A $100,000 reduction in payroll within the governor’s office.
  • Not adding a $75,000 per year Creative and Cultural Economy Coordinator to the state’s payroll.

The House also agreed with the $50 million in savings the Center recommended by not expanding the historic tax credit program as the governor wanted.  However, neither the governor nor the House included those costs or savings anywhere in the budget.

Another area of partial overlap came with the Unified Health Infrastructure Program (UHIP), which will make it easier to enroll people in multiple government programs when they apply for any one of them.  The Center expects this program, operated using the state’s health benefits exchange (HealthSource RI), to amplify the cost of social service programs and called for it to be ended.  Instead, the House budget managed to transfer $2.9 million in near-term spending on the project from general revenue to federal sources.

“It’s going to take more feedback from Rhode Islanders to change way the state government operates,” says Katz, who would prefer the savings to be used to reduce the state sales tax rate to 3%, creating over 13,000 private-sector jobs.  “Still, counting the tax credits and UHIP, the House budget includes 25% of the savings that we identified in Spotlight on $pending.”

The Spotlight on $pending report was produced in cooperation with the Taxpayers Protection Alliance and coauthored by Drew Johnson and Justin Katz.

Without Sales Tax Reform, 2-out-of-3 Ain’t Good Enough

RI’s 2015 includes corporate and estate tax reforms for big biz and the wealthy, but provides no relief for average family or worker. Read this unique commentary that takes a holistic look at the 3 phases of the economic cycle.

[button url=”http://www.rifreedom.org/?p=11208″ target=”_self” size=”medium” style=”royalblue” ] Commentary: 3 Legs of a Stool[/button]