The Great Ocean State Debate – Registration Now Open

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ATTEND THIS ONE-OF-A-KIND DEBATE on April 26 @ URI with some of the nation’s leading policy experts!

Are we better off with more or less government in our lives? Are some public policies ‘immoral’?

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PolitiFact Should Fact-Check Itself in Bogus Ruling

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Update: PolitiFact acknowledges that the major elements of my statement were indeed true, before RULING that the statement was “Mostly False”. Read their twisted logic here … 

Read the full story – what the PolitiFact article did not tell you – below.

Commentary, April 4, 2014

Earlier this week our Center published its Spotlight On Spending report. That same day the Providence Journal published a related OpEd piece that I co-authored along with David Williams of the Taxpayers Protection Alliance, which partnered with the Center in creating and publishing the report.

PolitiFact, the Journal’s fact-checking unit, noticed a slight discrepancy in the description of a the same item that was referred in both my opinion piece and in the report. PolitiFact believes this semantic discrepancy is of significant enough public value to warrant an investigation; I do not. It completely misses the material reason why this item was included our report.

As it turns out, it was PolitiFact that made a significant error in mis-characterizing my original statement. See below for the explanation.

Sometime next week, PolitiFact will rule on the truth-fullness of my statement in the OpEd. Our Center believes in government transparency and applies that belief to our exchange with PolitiFact. It is important that interested readers know the whole story.

Questions and Clarifications Posed by PolitiFact’s Gene Emery

THREE SEPARATE EMAILS:

1) Hi Mike,I want to fact-check the statement in your commentary, “A grant for $5,000 went to teach an employee at a company that makes ornamental business card holders how to use Facebook and Twitter.” That seems to be referencing the part of the report that talks about “$5,000 to provide social media training for employees at Ahler’s Designs.” So it is one employee or several employees? And did the $5,000 just for teaching someone to use Facebook and Twitter, or was there more involved? If you could point me to your sources, that would useful. Thanks, — Gene Emery

2) That factoid was featured in your Journal commentary. Not only was it repeated in the Journal story the next day, it was played up prominently by Channel 10 and GoLocalProv.I asked you about it because you are the lead author of the commentary, and paying $5,000 to teach one person how to sign up for Facebook and Twitter, which millions have figured out for themselves, seems pretty outrageous. However the report, and the footnoted document, seems to tell a slightly different story: more than one employee and broader training in social media. Actually, according to the reference document in your own report, it’s 3 employees trained at $2,500 and 1 student trained at the same price. So is the report in error, did you misstate the facts in your commentary, or is your commentary referencing something else? –Gene
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3) In the interim, I spoke to the company. They say 3 employees and 2 students received 32 hours of training over eight weeks, making the argument that it’s important for today’s businesses to know the ins and outs of social media, and being a business using social media involves a lot more than setting up a personal Facebook account. I mention this because you might want to react to that argument. — Gene
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Full Response by Mike Stenhouse

We agree with PolitiFact that taxpayer dollars being spent on something that millions have figured out for themselves is outrageous. We question, however, the public service value of fact-checking the semantic difference between “an employee” and “employees’ when a much larger public policy question is at the core of the issue.

There was no mistake in either statement. However there was a mistake in PolitiFact’s characterization of my commentary piece in an email that asked me to respond to the alleged statement –  “‘$5,000 to teach one person how to sign up for Facebook and Twitter’, which millions have figured out for themselves, seems pretty outrageous.” In my commentary, I never made that statement; I never used the term ‘sign-up’, but instead used ‘how to use’; nor did I say ‘one person’; I said ‘an employee’. For a fact-checking organization to call a statement I never made “outrageous”, is outrageous in and of itself.

Both statements accurately identify the same material finding: that $5000 in taxpayer money went to a private company for social media training.[http://www.gwb.ri.gov/pdfs/FY13ExpressGrantAwards.pdf]

The more superfluous descriptions of how that funding was used vary only in that the statement from the OpEd describes a subset of the broader and more inclusive statement from the report.

  • It is true that “an employee” received training, even if others received training as well

  • It is true that the Ahler’s Designs makes business card holders

  • It is presumably true that Facebook and Twitter were part of the larger social media training

The reason we included this item in our report, is not because of the amount of money spent per employee, as PolitiFact appears to be concerned with, but rather that any taxpayer dollars were spent in this regard in the first place. This spending was outrageous, regardless of whether or not the business owner feels that it was important for her business.

Either way, this scenario where many companies pay into a fund that gets re-distributed to just a few, is itself unfair, while also creating potential for cronyism and insider politics. In fact, an additional GWB post notes that in 2013, this same company, “Ahlers Design received $8,150 to train three employees; it also received $8,150 in youth bonus funding.” [http://www.rihric.com/news/news062013.htm] .

The lack of transparency and specificity in the GWB’s reporting apparently also has confused someone at Ahler’s or at GWB. The referenced source in our report indicates that four employees received training; yet Ahler’s stated to PolitiFact that five employees received training. Will this discrepancy be PolitiFact checked? Is this even an important distinction? Like the original premise of this PolitiFact investigation … I think not.

Rhode Island Employment Snapshot, February 2014: Still Last

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Rhode Island’s employment picture for February gives a positive impression, on first look. Put in the contexts of the past and of the country, however, it’s not quite as sunny.

On the first count, the numbers show a boom in employment, out of nowhere. We’ve seen such results every year for the past several, and they’ve always been followed by significant downward revisions.

On the second count, although Rhode Island was second strongest (after Virginia), the significant increase occurred almost universally across the country — both in states that had been experiencing growth and in states (like Rhode Island) that had been on the downswing.

The first chart below illustrates why a healthy skepticism is in order. After many years of general stagnation, February 2014 arrives as a sudden ramp, both in employment and in labor force.

The second chart provides a longer-term sense of the results. Rhode Island is still below its employment level just before the jobs-crash of the recession and still lags both of its neighbors dramatically when it comes to reclaiming jobs.

The third chart compares Rhode Island’s unemployment rate with what it would have been if the state’s labor force had held steady. It shows that unemployment never got as low as Rhode Island officials had claimed, and the growth in the gap between the two lines is steadier and more dramatic, with the exception of the peculiar results this past month.

The chart makes clear that the Ocean State’s unemployment rate would have been much higher, over the past few years, had people not given up looking for work… almost reaching 14% in 2011. It also emphasizes the disturbing trend that the only reason the unemployment rate seems to have been stagnant, rather than increasing, throughout 2013 is that fewer Rhode Islanders are counted at all.

RI-laborforceandemp-0107-0214

RIMACT-laborforceandemp-0214perc0107

RI-unemploymentrate-steadyLF-0107-0214

The Economic Impact of the Above-Market Deepwater Contract

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Download report (PDF)

Published in Cooperation with the Beacon Hill Institute

Deepwater Impact

On December 13th, National Grid supplied new details about its contract with Deepwater Wind to purchase power produced by its proposed offshore wind farm. The contract calls for above-market rates, with the total cost estimated in the response along with other details.[1] Based on the underlying assumptions that the project will produce 125,000 MWh of electricity, requiring an annual capacity of 47.8%, the paper predicts a total of $474.3 million above market costs over the expected 20-year lifetime of the project.

We simulated the annual “Above Market Cost” predicted by National Grid in the Rhode Island STAMP® model as a percentage price increase on electricity to measure the dynamic effects on the state economy. The model provided estimates of the project’s impact on employment, wages, and income. Each estimate represents the change that would take place in the indicated variable against a “baseline” assumption of what it would have been in the absence of the Deepwater contract.

The agreement to pay above-market prices for the power produced by Deepwater will have negative economic effects on the state of Rhode Island. The touted job effect of a wind farm is true to a degree; some jobs will be created, such as those that maintain the turbines. But the model shows that the net effect is negative. Individuals and companies forced to pay more for electricity will consume less in other areas, leading to job losses across all sectors. There will be a net job loss of 75 jobs in 2020. Job losses and price increases, due to higher costs for commercial and industrial electricity consumers, will reduce real incomes as firms, households, and governments spend more of their budgets on electricity and less on other items.

deepwater-table1

In 2020, real disposable income will fall by an expected $23.4 million. Net investment will fall by $2.3 million, compared to a baseline of no Deepwater contract. In 2020, the “higher than market” electricity contract is expected to cost families $10 per year; commercial businesses $125 per year; and industrial businesses $1,050 per year.

Renewable Energy Standard Impact

Last month, Beacon Hill and the RI Center for Freedom & Prosperity released a similar analysis of Rhode Island’s Clean Energy Act Renewable Energy Standards (RES).2 These effects would be in addition to the Deepwater contract.

deepwater-table2

Rhode Island’s renewable energy standard mandate and Deepwater Wind cost $36.4 million annually by 2020.

 

[1] Docket 4371: National Grid’s Responses the Division’s Second Set of Post Hearing Data Requests. Rhode Island Public Utilities Commission. Available at: www.ripuc.org/eventsactions/docket/4371-NGrid-PHDR-DPU2_12-13-13.pdf (Accessed March 26, 2014.)

Rhode Island Employment Snapshot, January 2014: Dead Last

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Rhode Island’s 9.2% unemployment rate is worst in the nation by a half-percentage-point margin.  No other state really comes close.  Worse yet, for the first time since we started tracking these numbers, the Ocean State is the farthest in the union from its pre-recession employment peak.

The first chart below illustrates the story pretty well.  After two years of employment free-fall, Rhode Island experience a little bit of a rebound.  Within six months, however, there began to be no fuel in the recovery, and the labor force responded by beginning its long trend of giving up.  All reduction in the state’s unemployment rate during this period is attributable to people exiting Rhode Island’s economy as workers.

The second chart gives a view of the state’s great distance from peak employment. Both of our neighbors, Massachusetts and Connecticut have seen labor force increases since the beginning of the jobs recession, and both have maintained significantly higher employment

The third chart compares Rhode Island’s unemployment rate with what it would have been if the state’s labor force had held steady. The Bureau of Labor Statistics (BLS) has revised its numbers since the last time we published this chart, but the main differences are that unemployment never got as low as Rhode Island officials had claimed, and the growth in the gap between the two lines is steadier and more dramatic.

The chart makes clear that the Ocean State’s unemployment rate would have been much higher, over the past few years, had people not given up looking for work… almost reaching 14% in 2011. It also emphasizes the disturbing trend that the only reason the unemployment rate seems to have been stagnant, rather than increasing, throughout 2013 is that fewer Rhode Islanders are counted at all.

RI-laborforceandemp-0107-0114

RIMACT-laborforceandemp-0114perc0107

RI-unemploymentrate-steadyLF-0107-1114

 

RI Health Benefits Exchange Costs Exceeding Even Center’s Projections

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Implementation of the Affordable Care Act (ACA) in Rhode Island, with both the health benefits exchange (called HealthSource RI) and the expansion of Medicaid to cover able-bodied low-income adults, has been a lesson in government operation. The policies were put into place — and over $100 million in federal tax dollars were spent — without significant public discussion and with no plan to cover the costs, and we’re now learning that projections of costs were wrong in several critical aspects.

The total cost to the state in fiscal year 2015 (FY15) could be as much as $100 million.

Enrollment

When the General Assembly declined to create a health benefits exchange through legislation, now-Democrat Governor Lincoln Chafee did so by executive order. In the text of that order, issued September 2011, the governor explicitly decreed that “No state general revenues shall be used for purposes of the [exchange], and no liability incurred by the [exchange] or any of its employees may be satisfied using state general revenues.”

The order mentions the possibility that funds would come from “insurers or other entities,” so it’s probable that the governor’s office expected the exchange to be self-sustaining, as a government-run start-up company.

A grant application to the federal government in March 2011, by Deb Faulkner, the state’s Exchange Project Coordinator, projects that 2014 would find 127,000 Rhode Islanders enrolled in private health plans through the exchange, with 32,000 of them paying the full cost of their coverage, with no state or federal subsidies. Another 77,000 people were expected to be enrolled through the business-focused component of the exchange, called the Small Business Health Options Program (SHOP).

Under those circumstances, the governor may have expected small transaction fees to be sufficient to cover the cost of the exchange.

In May 2013, another grant application, this one from HealthSource RI director Christine Ferguson, cites a projection developed in cooperation with MIT economics professor Jonathan Gruber. Five months before the launch of the exchange, the state was still expecting 64,000 private enrollees, with 20,000 of them paying the full cost, plus 17,000 in SHOP.

Local news reports cite an “unofficial” memo from the U.S. Centers for Medicaid and Medicare to say that actual enrollment is “far above federal targets.” However, the results are well below the more-official expectations in the applications. As of March 8 of this year, the exchange had enrolled 19,690 people (17% of whom had not yet paid and arguably should not be included until they do), with only 2,284 paying the full cost, plus 795 in SHOP.

The following chart compares the May 2013 projections with HealthSource RI’s results thus far.

healthsourceri-enrollment-projectedvactual-011314

In total, the projection was almost four times higher than the results that the exchange had achieved by March 8. Looking at just the full-cost individual plans, the projections were overly optimistic almost by a factor of nine times. This leaves the exchange’s annual budget of nearly $25 million up in the air.

Medicaid

As if the failure of the exchange’s cost structure weren’t bad news enough, the results from the Medicaid portion of the ACA make matters worse.

According to a report by Philip Marcelo, in today’s Providence Journal, the state had expected 51,000 people to enroll in Medicaid within the first 18 months after the introduction of the Medicaid expansion and the health benefits exchange. In actuality, six months into that period, Medicaid enrollment is already up by 48,602.

The following chart shows the trends in each category of enrollee, as HealthSource RI has reported them (roughly month to month). The dark red area represents Medicaid recipients.

healthsourceri-enrollment-trends-011314

After an initial surge leading up to the deadline to receive coverage starting January 1st, enrollment in paid programs has tapered off considerably, while growth in the Medicaid population has remained strong.

The number of people enrolling in paid insurance plans may experience another boost during this month, as the open-enrollment period comes to a close at the end of the month. The flip side of that possibility, however, is that there is no enrollment deadline for Medicaid, so costs may continue to balloon beyond what the RI House Fiscal staff projects.

Multiple calls and emails to various parties for clarification of House Fiscal’s findings have received no reply, as of this writing, but the circumstances may be more dire than is being reported.

According to Marcelo, the House Fiscal staff expects the cost of the Medicaid expansion — which the state government appears to have accepted as an administrative decision, with no public debate at all — to affect the state’s general fund budget for the first time in fiscal year FY17, with an expense of $14.2 million (on a total cost of the expansion of $570 million that year). That amount grows each year, as the state’s contribution phases up to 10% of the $719 million total, or $71.9 million, in 2021.

That isn’t the whole story, however.

Secretary of Health and Human Services Steven Costantino credits the state’s taxpayer-funded public awareness campaign with the high number of Medicaid enrollees. As individuals visit the HealthSource RI Web site, the system tells them whether or not they are eligible for Medicaid. Many of them would have been eligible without the expansion.

According to a HealthSource spokesperson, 33.3% of all Medicaid enrollments through the exchange as of February 8 (or 11,916) would already have been eligible for the public welfare program without the expansion. The federal government only picks up 50-55% of the cost for these Medicaid recipients.

It isn’t clear how (or whether) these enrollees factored into the House Fiscal staff’s analysis, but their cost in FY15 — the budget under consideration right now — could be around $74 million.

In a press conference announcing the Medicaid expansion on the day the Supreme Court ruled the ACA constitutional, in 2012, Costantino estimated that the expansion would only apply to 6,000 to 7,000 people. Even less optimistic estimates made by the RI Center for Freedom & Prosperity at the time put the total cost of the ACA much lower than now appears probable.

As Costantino acknowledges, although insisting it’s an outcome of which to be “proud,” as the state engages in an aggressive campaign to bring in new paying customer’s, it’s not attracting them, but rather new recipients of government handouts.

The people of Rhode Island were never given a chance to fully debate, much less vote on, these changes to government policy. Even now the layers of government spin and incomplete reportage leave them — even their elected representatives — with little understanding of how significant the costs are going to be, especially in comparison with the program they were sold.

 

Featured image: Stephen Costantino, Lt. Gov. Elizabeth Roberts, and Christine Ferguson at the June 28, 2012, press conference concerning the exchange and the Medicaid expansion.

Providence Journal article confirms that Center operates in a nonpartisan manner, and in full-compliance with federal law.

The “full” story about our Center

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The recent front-page Providence Journal story about our Center did not tell the whole story. You deserve to know. Click on …

[button url=”http://www.rifreedom.org/?p=10326″ target=”_self” size=”medium” style=”royalblue” ] See the full story here [/button]

Commentary: The Full Story, What the ProJo Did Not Tell You About Our Center

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Read the subsequent OpEd in the Providence Journal here … 

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 “Is it so unimaginable to our critics that there are indeed many people who volunteer their support to our Center, and who also believe that a limited, transparent government is the best interests of the average Rhode Islander?” …  Mike Stenhouse, CEO.

THE FULL STORY

In recent months, a national smear campaign was launched by left-leaning groups such as Progress Now and the Center for Media and Democracy to attempt to call into question the increasingly effective work of state-based think tanks like our RI Center for Freedom & Prosperity.

There have been dozens of unfounded allegations from the left, including our own U.S. Senator Sheldon Whitehouse, falsely claiming that the groups like ours are “phony” and engaged in “dirty business” and “dirty tricks” in advancing the agenda of out-of-state rich people who supposedly fund our operations and determine the issues we promote. Since then our Center has occasionally been asked about these baseless accusations.

Providence Journal article confirms that Center operates in a nonpartisan manner, and in full-compliance with federal law.

Providence Journal article confirms that Center operates in a nonpartisan manner, and in full-compliance with federal law.

The Providence Journal published a related front-page story this week, after recently requesting that our Center to respond to a number of questions regarding the funding sources of our Center, and whether or not our agenda is influenced by out of state interests. As a Cranston native, and founder and CEO for the Center, I welcome this opportunity to discuss the mission and operation of our organization, and to set the record straight.

As the ProJo article confirms, our Center works in a nonpartisan manner and maintains the privacy of our donors as provided by the IRS and federal law, and as affirmed by the U.S. Supreme Court. Other clarification points from the article:

  • Our Center never accepts public funds or taxpayer dollars. Unlike the Economic Progress Institute, one of the local groups compared to us, which has accepted funds from the state and is housed at RI College.
  • Senator Whitehouse’s spokesman was INCORRECT in asserting that our Center makes ‘efforts to influence elections …”. This against IRS rules and our Center has never engaged in such activity.

While our work is often viewed as disruptive to the ‘establishment’, it is an unfounded accusation and a typical ploy of those we challenge to aver that the work of our Center is influenced by any out-of-state interest. Our Center’s staff and Board are comprised of Rhode Island residents, who all believe in the power of free markets and the capacity of free people to create a healthy, prosperous Ocean State.

As supporters and friends of our Center, you deserve to know the full story, not just a portion of it. The ProJo article does not tell the whole story. All of the questions submitted to us by the Journal and all of the responses our Center provided to them are shown below. You can decide for yourself if they purposely omitted certain information.

We are not surprised that just as our Center is establishing itself as an alternative strong and consistent voice in the Ocean State, that our opponents predictably trot out such intellectually dishonest questions, in an attempt to discredit our work, and that certain members of the media oblige them.

Even a recent New York Times article confirms that such smear attacks stem from a national, partisan effort. In fact, in parroting the same false talking points across the nation, the left is once again creating myths: http://m.washingtonexaminer.com/it-turns-out-the-evil-koch-bros-are-only-the-59th-biggest-donors-in-american-politics.-can-you-guess-who-is-number-one/article/2544025?

Also note that our Center operates in stark contrast to groups like Progress Now and the Center for Media and Democracy who receive hefty gifts from unions, who in turn use coercive tactics to force their members to donate to political causes with which they may not agree.

PROJO QUESTIONS, RESPONSES by the Center

Below are the questions submitted to us by the Providence Journal, along with our complete replies. As you will see, the published story in the Providence Journal omitted most of our comments. 

*  (ProJo) Can you say how much the center received during 2013 in contributions and grants?

(Center) In accordance with IRS rules, our Center will make this information available when we file our annual 990 report in the coming months. Now in our third year of operation, our 2011 and 2012 reports are also publicly available.

* With regard to your donors, your stance is that you cannot reveal them?

 The Center – like almost all IRS designated 501-C-3 nonprofit organizations, including the Red Cross, the liberal Tides Foundation, and Rhode Island’s Economic Progress Institute, and as affirmed by the U.S. Supreme Court – respects the privacy wishes of its donors, who give freely and voluntarily to support our mission to enhance the lives of all Rhode Islanders. Should individuals choose to make known their gifts to our Center, our Center also respects their right to do so.

* What do you say about the center being an affiliate of the Franklin Center for Government and Public Integrity, which according to the Center for Public Integrity gets most of its money from Donors Trust. The Center for Public Integrity calls Donors Trust “a vehicle for tax-exempt giving from wealthy conservatives such as billionaire industrialist Charles Koch.” In light of this, is the center largely funded by the Koch brothers and other very wealthy individuals?

 The Center worked with the Franklin Center in identifying and securing a journalist for our online blog and journalism website, The Ocean State Current, in 2012. That employee relationship lasted for six months, ending in December of 2012. Our Center is not aware of the funding sources of the Franklin Center. The Ocean State Current remains in operation because of the voluntary work of a team of in-state bloggers.

 The concept of donor directed granting organizations such as Donors Trust are not endemic to conservatives or liberals, or billionaires or millionaires. They are numerous and diverse in nature, throughout the country, accepting charitable donations from individuals at virtually all income levels to support thousands of charitable causes and nonprofit groups. Organizations such as the United Way and the Rhode Island Foundation serve the same function for a diverse array of donors who wish to maintain their anonymity for any number of reasons.

 I can categorically answer “no” to the question about whether or not our Center is largely funded by Charles Koch, or any out-of-state wealthy individuals. Depending on how you define wealthy individuals, I can confirm that our Center does solicit and accept funding from individuals in Rhode Island who agree with our free-market principles and who have the means to support our mission to enhance the well-being and prosperity of the average Rhode Islander through responsible public policy reform.

 * Some people and groups say organizations such as the RI Center for Freedom and Prosperity are simply fronts for the very wealthy who want to avoid paying their share of taxes. What is your response to this?

 I can also categorically state that 100% of the policy decisions our Center makes are determined by our own Board and staff, based on Rhode Island’s unique circumstances, without any influence from any outside group or individual.

 Regarding our policy advocacy, consider the top three issues in which our Center is engaged:

 Our Sales Tax Repeal idea would eliminate a highly regressive tax that will most benefit low-income families, by keeping more of their hard-earned money in their own pockets and providing new job opportunities to enhance chances for upward mobility.

 Similarly, our School Choice campaign will benefit inner-city families most, especially those who have children who are condemned to attend failed schools simply because of their zip code

 Finally, the ideas in our Healthcare Freedom Act provide solutions to many Rhode Islanders who are concerned about access to affordable, quality care. As it is now obvious that tens of thousands of Rhode Islanders will remain uninsured, even after full implementation of the President’s healthcare law and our state’s exchange, our Center recommended multiple solutions that will make access to healthcare a more viable option for the average Rhode Islander.

 Clearly, this is not a tax-break-for-the-rich agenda, but rather, an agenda that will provide renewed opportunities for most Rhode Island families and also provide a boost to our state’s broken economy.

 * Is it appropriate for an advocacy group that won’t disclose its donors to be preparing testimony and research reports to a legislative commission that is considering major changes in state tax policy?

 It is entirely appropriate for our Center, and all similar state-based organizations, to advocate for policies that will help our state, as we best determine ourselves. Virtually all IRS approved C3 and C4 groups also choose to respect the privacy of their donors; there is nothing new or suspicious about this. 

Like virtually all nonprofits, our Center conducts multiple fundraising activities to support our activities, including direct mail solicitations, personal networking with citizens in our state, and competitive grant applications to national and local foundations. Our Center employs a full-time Development Director to manage these efforts. Currently, the Center has almost 300 distinct donors, almost all of whom are Rhode Island citizens who share our belief in economic and educational freedom.

 Is it so unimaginable to our critics that there are indeed many people who volunteer their support to our Center, and who also believe in a limited, transparent government?

* Any other comments welcome.

 It is obvious that those who defend the status quo are not at ease with the work of our Center, which challenges the policy culture that has created the unacceptable economic and educational conditions from which far too many Rhode Islanders are currently suffering.  It is important for Rhode Islanders to know that any implication that our Center’s work is influenced by outside sources is completely unfounded.

Has the Providence Journal asked the same questions of those groups who have raised questions about our Center?

* Is it fair/accurate to say that the center wanted to provide a different voice/perspective than people might have been hearing state policy debates? If yes, can you elaborate?

 Yes. In fact, it is the primary mission of our Center is to attempt to balance and stimulate public policy debates. Through research, analysis, and advocacy our Center provides new and alternative views on important issues for our state. In some cases our views challenge the entrenched status quo mindset, while at other times our ideas are in direct opposition to the highly restrictive progressive/union agenda, which has dominated our state – virtually unopposed – for recent decades.

 It is our opinion that “free market” policies are indeed in the best interest of all Rhode Islanders. Clearly, the big government, special interest approach has failed this state. Our recommended policies offer a fresh, new path forward, based on principles that have a proven record of prosperity and that served as the basis for the founding of our nation.

 * Did the center contact Rep. Malik about sponsoring the no sales tax bill last year, or did he contact the center?

 Representative Malik first approached the Center following testimony we provided at a 2012 House Finance Committee hearing: Around that time we had published our first sales tax report, and he expressed general interest in the issue to me. In November 2012, House Minority Leader Newberry publicly stated that sales tax reform would be one of his caucus’ platforms for 2013. I approached the Leader to offer access to our research, and he suggested that I contact Representative Malik who, as a retailer himself, had been interested in sales tax issues for years. It was following the Massachusetts’ State of the State address in January of 2013, when Governor Patrick proposed to lower his state’s sales tax, that I re-established contact with Representative Malik. He indicated that he was interested in submitting a bill to repeal the Rhode Island sales tax and inquired if our Center would further educate him on the issue, based on our prior reports, and if there was additional research that could be conducted to advance the public debate.

 This is precisely the role our Center is designed play: Injecting new ideas and research into the market and then aggressively supporting debate when related legislative or other advocacy efforts are initiated. We are happy to work with any interested lawmaker from any party.

 Our Center is not a lobbying entity, and had no part in securing any sponsors for the bill. I’m sure that Representative Malik would confirm these details, if you choose to contact him.

 * You mentioned that school choice will be the center’s next big issue. Can you say why the center chose that one?

 Economic and educational reforms are the two issues our board determined should be our Center’s top priorities. Without economic growth that brings new job and career opportunities, and without a properly educated citizenry to fill those positions, Rhode Island will not be able to break out of its stagnancy.

 In selecting major issues to advance, we look beyond policies that nibble around the edges of the massive problems facing our state, and seek to inject well-researched, game-changing ideas into the public policy debate; ideas that can provide immediate and broad benefits to Rhode Islanders. Also, we seek policy ideas that are not only needed, but which have a legitimate chance to advance, given our state’s unique and current political orientation.

 School choice reforms, whether through expanded charter school or tax credit programs, or through a voucher system, would provide immediate relief for families with children condemned to attend a failed school simply because of their zip code. Further, the competition created between public and private schools will likely lead to a higher educational achievement across our entire state. We are working in cooperation with Speaker Pro Tem Elaine Coderre and her son’s new organization, RI Families for School Choice. This organization approached our Center in late 2012 to ask if our Center was interested in helping to raise awareness on school choice. As this issue fit our mission, we have not only engaged, but have since decided to make it a priority for this year.

 Similarly, significant sales tax reform would immediately put money back in the pocket of every family and business in the state, create economic growth, and provide new job opportunities for tens of thousands of Rhode Islanders.

 There are dozens of additional reforms that our state must consider in the years ahead, many of which our Center will also attempt to advance. However, we believe that sales tax and school choice reforms are an important first step in putting our state on a new policy path.

Governor’s Corporate Tax Cut Plan Not a Game Changer

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Based on analysis by the Rhode Island Center for Freedom & Prosperity, Governor Chafee’s proposed reduction in the corporate tax rate from 9% to 6%, if implemented as a stand-alone policy, would have a very modest positive impact on the Rhode Island economy, despite having a more notable effect on the state’s national rankings*. When this tax reform is then offset by an increase in a national internet tax, the results are likely to become negligible or even negative.

At face value, according the Center’s RI-STAMP tax modeling tool, the proposed corporate tax cut would result in a loss of $72 million in general revenues and produce only 240 private sector jobs. With the stated objective of paying for the corporate tax cut with revenues from a new internet sales tax**, which could mean up to an additional $70 million tax on Rhode Island shoppers, the combined effect means the state could actually lose jobs and still see a substantial revenue loss.

“The internet tax – a new tax on top of already burdensome tax levels in the Ocean State – is a highly regressive tax that will hit virtually all Rhode Islanders directly in their pockets, and is likely to reduce economic activity far more than a corporate tax cut might increase it. Do we want to simply improve our state ranking or do we want to provide real jobs for our residents,” questioned Mike Stenhouse, CEO for the Center. “This habit of taking a step forward only when we also take a step backward gets us nowhere. To produce game changing results for our state, revenue-neutral ideas will not get the job done; significant revenue and spending cuts must be implemented.”

The Center’s sales tax reform recommendations, conversely, could produce tens of thousands of new jobs with a lower budget impact.

* http://www.providencejournal.com/breaking-news/content/20140205-chafee-plan-to-reduce-states-corporate-tax-rate-gets-mixed-response.ece

** The RI-STAMP modeling tool does not directly allow for calculation of a national internet sales tax, therefor specific revenue and jobs projections were not included in this portion of the post. With the best simulation we could conduct, RI-STAMP projected a combined effect of these two tax reforms to produce a net loss of $56 million in state revenues and a loss of 879 private sector jobs. For reasons described below, our Center does not anticipate the negative effects to reach these levels, although it is highly probably that the positive effects of a reduction in the corporate tax could be more than offset by the negative effect of the new internet sales tax.

The high-end figure of $70 million in ‘new’ internet sales tax revenues for the state was used and, given that that money has to come from somewhere, that figure was “added” as an additional tax burden to the general state sales tax category in the RI-STAMP modeling tool. It was further assumed that the Internet sales taxes paid by Rhode Islanders to out-of-state retailers and those sales taxes paid by out-of-state shoppers to Rhode Island retailers would level out; meaning that the new revenues to the state would in essence be paid by Rhode Islanders. Also, given that a national internet sales tax would not provide Rhode Island with a competitive advantage or disadvantage, the negative impact on its economy would likely be less than the STAMP projection, which is designed to be  comparative modeling tool.