Task Force Report used to create Municipal Pension & Debt Map

Based in-part on the work of the Mercatus Center, which published a detailed report on the true scope of the unfunded pension liabilities facing Rhode Island municipalities as part of the national pension Task Force that our RI Center for Freedom formed, a local organization created an online, interactive map that allows you to click on each of Rhode Island’s cities and town to view information about their finances, people, government, and taxes.

Thanks to Richard C Young and EJ Smith for this compelling tool.

Government Edges into Preschool… Expensively

As part of government’s effort to edge its way into the preschool market, and the federal government’s slow usurpation of education more generally, Rhode Island will be receiving $12.5 million annually over the next four years.  As it typically goes with government, proponents begin with the positive objective that they seek to pursue and give the impression that the money simply appears for the purpose.  Not surprisingly, though, much of the money won’t go toward services actually provided to children.  According to the Providence Journal:

The grant requires that states adopt an ambitious plan to expand access for disadvantaged students and to develop high-quality standards across the fragmented early childhood education landscape. A significant portion of the grant will be used to train early childhood educators in these more rigorous standards.

That is, taxpayer dollars will be funding bureaucrats’ plans for how government can claim ownership of preschool and adult-education providers’ services for to teachers (for which, one can speculate, the latter will be compensated, as well).  Never mentioned in such stories is any sort of cost-benefit analysis.

Journalist Jennifer Jordan provides some context for government spending on preschool in a subsequent description of a program already existing in Rhode Island:

This year, 108 students are being served. The state’s education-financing formula calls for $1 million to be added each year for 10 years. Next year, the Board of Regents has re quested $1.45 million for six classrooms of 18 students.

A little bit of math shows that to be $242,000 per classroom and $13,426 per student.  For a “pre-kindergarten program for 4-year-olds.”  Speaking from experience, that’s roughly double the cost to parents of excellent programs available from private providers.  One can drape all variety of good intentions around specific programs, but from an economic-theory perspective, inexplicably high costs are about what one would expect when an organization is able to pay itself for services using money confiscated under force of law.

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.


RI’s Problem Remains: Attracting Jobs (Sunday ProJo Op Ed)

In passing historic pension reforms in November, Rhode Island took a significant step in dealing with one threat to our state’s economic well-being. However, as if on cue, new issues are now coming to light. A waiting list of critical new challenges is quickly forming: municipal pension reform, unfunded health-insurance and benefit costs, Massachusetts casinos, T.F. Green airport expansion, rising Medicaid costs, and structural state budget deficits for as far as the eye can see.How we deal with these issues will impact the future prosperity of all Rhode Islanders. However, dealing with these issues on a one-off basis will not help our state improve its standing, but can only help not worsen it.  

Currently, the Ocean State ranks at or near the bottom in a number of important national and regional indexes: last in America in overall business climate; highest unemployment rate, by far, in New England; highest corporate tax rate in New England; lowest population growth in the nation (behind only Michigan, which lost population); the list goes on.

Even if we do the yeoman’s work of addressing each of the issues above, Rhode Island will still be left in the same place: last. For example, even if we balance our forever-increasing state budget by somehow finding new revenue sources, how will that make Rhode Island more competitive ? It will not; it will only keep us where we are. We must do better.

It is time for a dose of reality. What is missing from any serious debate is the more substantial issue: How does Rhode Island regain its competitive status in New England and across the nation? Multiple studies and reports have documented how our state is losing both capital and human resources to other, more tax-friendly and business-friendly states. We cannot expect to have a vibrant economy, good jobs for our citizens, and the resources to help those in need if we do not reverse this trend.

Consider the casino issue. Recent actions by Massachusetts will put greater competitive pressure on the Ocean State, reducing tax revenues that fund core government functions. Dealing with this in a typical myopic fashion, as a one-off issue, would require us to react in-kind, by responding with some form of expanded gambling in Rhode Island, where the debate has been, and will be, fierce.

Such a solution would be reactive and would promise a magic bullet, typically resulting in a rushed plan that generally benefits the corporate special interests that drive the process.

Imagine, instead, that we consider a more comprehensive, pro-active approach, such as simplifying and reducing taxes that will spur broader economic growth by attracting human and financial capital to Rhode Island and away from Massachusetts and Connecticut. If the Yankees sign a star left-handed pitcher, must the Red Sox do the same? Or might they choose to better compete by signing a right-handed hitter, or by improving their bullpen or team speed?

To put the Ocean State on a proven path to prosperity will require a massive departure from the current culture of dependency on government and a return to taxpayer- and business-friendly policies. Special deals and one-off solutions are not the answer.

The reality is that we have spent too much, taxed too much, regulated too much, promised too much, and borrowed too much. The wreckage from this failed special-interest culture is now painfully obvious to all Rhode Islanders.

The Rhode Island Center for Freedom and Prosperity, in early 2012, will present a vision of renewal for our state. We’ll do our best to present a different path — a better path — and to stimulate debate. We’ll do so because many of us believe that Rhode Island can once again be great, and that our citizens can have hope of prospering.

But one small think tank can’t go it alone. Unexpected leadership emerged in 2011 to drive the crucial pension debate. Who will acknowledge the true realities we face as a state, and choose to step forward to lead this even more vital discussion in 2012?

Mike Stenhouse is chief executive of the Rhode Island Center for  Freedom and Prosperity, a conservative think tank.

See the actual ProJo piece here …