Tax hikes will cause a loss in jobs

Governor’s proposed Tax Hikes will Harm already Fragile Economy

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Tax Increases Will Cost Jobs and Return Far Less than expected

Tax Plan Analysis

Download the entire Policy Analysis here … including detailed tables and additional information.

In late January 2012,Rhode Island’s Governor proposed a new budget that included a number of tax and fee increases, with the goal of balancing the state’s chronic budget deficits. In order to properly assess the impact of such hikes on the state’s economy, the RI Center for Freedom & Prosperity conducted a detailed, economic analysis, utilizing the Center’s dynamic tax modeling tool, RI-STAMP.

The Governor’s plan attempts to address the perpetual budget deficit by cutting some spending and raising some taxes. As demonstrated by RI-STAMP, this path will produce negative consequences.

 Analysis

To best simulate the Governor’s tax proposal, the following revenue targets were entered into RI-STAMP.

  •  $69.7 million increase in Sales Tax revenues via expansion of the base, with tax increases in some sectors
  • * $13.6 million increase in motor vehicle registration fees was input as a Fuel Tax increase
  • $7 million increase in revenues from smoking products and other items entered as a Cigarette Tax
  • $3.8 million in other misc. taxes & fees were not included in the projection

After running these inputs through the RI-STAMP algorithm, the negative economic consequences of the proposed tax and fee increases become clear. Full details can be found in the table on the following page, but in summary:

  •  The expected total revenue increases of $95 million are not attained, as tax increases depress overall economic activity … the state will see only a $35 million increase in revenues.
  • Over 1400 private sector jobs will be lost
  • Municipalities will lose $9.75 million in revenues due to lower commercial property taxes, as a consequence of lower overall economic activity
  • The State will lose almost 1% in overall Gross State Product
  • Investment in the State will drop by $27 Million

Because a sales tax increase would makeRhode Islandeven less competitive with its regional neighbors, and nationally overall, consumer and entrepreneurial behavior would be significantly altered, resulting in lower economic activity and actually worsening the state’s economic plight. Municipalities, all too often overlooked, will also suffer a loss in revenues from this unintended consequence.

 Balancing the budget is the wrong goal; and tax increases are precisely the wrong solution!

 Recommendation:

Conversely, if the OceanStatewas to cut its sales tax to 5%, a very different scenario is projected to occur, because our state would suddenly become a more attractive place to purchase goods and services, meaning economic activity would increase. (See the Policy Brief, Dynamic Effects of Tax Policy)

 If instead,Rhode Islandwants to address the larger economic picture, by looking to produce more jobs and a brighter economic future for our citizens …

 … cutting taxes and cutting spending will produce a more vigorous economy!

Download the entire Policy Analysis here … including detailed tables and additional information.

Media Coverage of this Analysis:

Warwick Beacon: Chewing over a 10% meal tax

Providence Business News – URI Professor Lardaro supports RI-STAMP economic modeling tool

630WPRO – Conservative think tank says new taxes will hurt RI

Boston.com – Think tank criticizes RI Gov.’s tax plan

Collective Bargaining Reform could Save R.I. $252 million per year

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Collective Bargaining CostsExcessive Government Worker Compensation Doubles the State Budget Shortfall, Reform would Disrupt the Union-Policymaker quid pro quo.

A study released this week by the Goldwater Institute details the crippling financial impact of public-sector unionization. The study projects that a ban on collective bargaining and contracts could save Ocean State taxpayers $252 million per year in excessive government worker compensation. These savings are more than double the estimated state budget shortfall currently facing Rhode Island.

The Goldwater study cites information from the U.S. Bureau of Labor Statistics that shows, on average, state employee wages are 44% higher than private sector wages. Further, the study shows that unionized state employees nationwide earn 42% more than state employees that don’t belong to a union. Following the Virginia model, the first state to ban collective bargaining and collectively bargained contracts for government workers, savings for taxpayers nationwide could reach over $49 billion annually, and $252 million in Rhode Island alone.

“The ever-increasing total cost of employment for unionized government labor – annual compensation plus benefits – is a cost item we simply we may not be able to afford. The recent state pension reform crisis, along with our municipal pension disasters, make it clear that Ocean State taxpayers have been squeezed dry by public-sector unions”, said Mike Stenhouse, CEO of The Rhode Island Center for Freedom and Prosperity. “This study reinforces what Franklin Roosevelt told us more than 70 years ago – that the concept of public-sector unions is ‘unthinkable and intolerable’. It is disturbing that the very money taken from the pockets of working Rhode Islanders is used to reinforce the political power of many unions, which gives them added influence so that they can fleece even more money from taxpayers. If policymakers seek to address the long-term structural deficits in our budget, this is one area that must now be considered before we cut into social services.”

“The citizens of Rhode Island have always expressed a strong desire to help the least-fortunate among us; but do government workers fall in that category?” Stenhouse questioned. “With the threat of tax increases and cuts to our social safety net, the idea of paying bloated union wages and benefits is especially poignant. It’s time to face the facts: public-sector unions drain precious resources away from Rhode Island’s sick, elderly, and poor. We’re at the point where we cannot continue our current spending levels; as a state, we’re going to have to prioritize. Difficult decisions must be made; the possibilities from this study add compelling information to the debate.”

More than money is at stake, according to Nick Dranius from the Goldwater Institute, who went on to say that “collective bargaining for public unions is particularly problematic because government sector unions help elect their employers, and their employers often return the favor by raising taxes to pay for the benefits the unions then demand. A ban on government sector collective bargaining helps disrupt this all-too-common quid pro quo. To solve this problem, more than a ban on collective bargaining and collectively bargained contracts is needed. Statesmen must restore and enforce the ideal that the American form of government is a public trust. Reform should be rooted in a legal framework that underscores government officers and employees are public servants, who owe undivided loyalty to the public.”

The study also notes a study from the Kennedy School at Harvard University, showing an increase in interest costs to states with high public-sector union membership:

“The study’s authors note that union strength in a particular level of government…can indicate to bond markets that those governments may not be able to overcome the political pressure to implement budget-conscious measures when necessary.  “Those states with a more heavily unionized government sector tended to have higher borrowing costs relative to other states with a less unionized government sector.”

 The full study is available here: http://goldwaterinstitute.org/sites/default/files/12-01%20Collective%20Bargaining%20PDF.pdf

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Scholarship Program Recommended for Special-Needs RI Students

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Senators Ciccone and Walaska are called upon to take action to back up their own “School Choice Week” Resolution. Read the full Policy Brief here … with charts and end notes.

Stephen Hopkins Center supports our Center’s call for the Bright Today Scholarship Program

MEDIA RELEASE:

Bright Today Scholarship Program

Empowering Rhode Island’s Most Vulnerable Children with a Quality Education

Senators Ciccone and Walaska are called upon to take action to back up their own “School Choice Week” Resolution

January 26, 2012, Providence, RI — In recognition of National School Choice Week, the Rhode Island Center for Freedom and Prosperity urges policymakers to adopt a school choice scholarship program for special-needs students. In light of the recent resolution co-sponsored by state Senators Ciccone and Walaska recognizing School Choice Week, the RI Center for Freedom calls upon the senators to follow up their welcome recognition with firm action, and respectfully requests that they provide the leadership necessary to see that legislation is adopted that provides a school choice scholarship program for disabled students in Rhode Island.

As follow up to its recently published education report, Closing The Gap, which demonstrated how recent Florida-style school reforms could aid disadvantaged students in the Ocean State, the Rhode Island Center for Freedom today issued a Policy Brief detailing how adoption of one, particular Florida reform – the McKay Scholarship Program – could empower Rhode Island’s most vulnerable and under-achieving students with new choices to receive a quality education.

As part of its “Bright Today” set of recommended school policy reforms, the RI Center for Freedom recommends that the Ocean State develop a scholarship program of its own, which would allow families with special-needs children to utilize public funding, in the form of a voucher – based cost of education in the school district they are leaving – to attend a private school of their choice. This recommendation is consistent with RI Department of Education’s (RIDE) strategic recommendations and can be implemented into law by the Rhode Island General Assembly.

The Policy Brief entitled the Bright Today Scholarship Program cites details from Closing The Gap that shows how Rhode Island students with disabilities are declining in achievement and have lost approximately (5) grade levels of learning to their peers in Florida since the Sunshine State implemented its school voucher system for such students, the McKay Scholarship Program, over 12 years ago. The Brief provides information about this program, including national perspectives, implementation details, and fiscal and academic impacts, as well as a summary of how other states have followed Florida’s lead in this area.

Earlier this month the Rhode Island Senate passed a resolution (#2064) recognizing National School Choice Week, citing that ” … Citizens across Rhode Island agree that improving the quality of education and expanding access to highly effective schools should be an issue of importance to our state’s leaders …”. The RI Center for Freedom calls upon the sponsors of this resolution, and all those who supported it, to take active and concrete steps to back-up their own resolution by developing and passing a Bright Today Scholarship Program bill for the Ocean State.

“The freedom to choose is a staple of almost every component of life in America except perhaps the most important area – education. With all the talk about providing for our state’s neediest residents, we challenge our public officials to actually do something about it”, said Mike Stenhouse, CEO for the RI Center for Freedom. “How can we not act to provide a ‘bright today’ for these families who have been left behind by our educational system? With public demand and leadership, by next fall, hundreds or thousands of our most disadvantaged students could be attending a better school”, added Stenhouse.

The non-partisan Rhode Island Center for Freedom and Prosperity is the state’s leading free-enterprise public policy think tank. Firm in its belief that freedom is indispensable to citizens’ well-being and prosperity, the Center for Freedom’s mission is to restore competitiveness to Rhode Island through the advancement of market-based reform solutions.

Read the full Policy Brief here … with charts and end notes.

 

What others are saying about our “Closing The Gap” Educational study

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Visit the Closing The Gap home page here …

Our Closing The Gap study has struck a cord with parents and students, as well as organizations either supporting or resisting comprehensive educational reform in Rhode Island.  Below is a sampling:

SUPPORTERS

Rhode Island Statewide Coaltion (RISC) commends our think tank for bringing forth a significant education study

The RI Statewide Coalition (RISC) is commending the RI Center for Freedom and Prosperity, a locally run reform-oriented think tank, for bringing forth the results of a wide ranging education study of Florida public schools which shows significant education gains can be made by non-English speaking, lower income urban students if the right curriculum reforms are enacted. RISC is also citing the study as evidence that the proposal to site two charter run Mayoral Academy schools in Providence deserves the chance to go forward.

“This study reveals that low income and minority students in our own state attending low performing schools in certain urban areas have a true chance at improving if aggressive reforms are supported and alternative options are allowed to grow,” states RISC Executive Director Harriet Lloyd. “If the jumps in test scores and overall performance improvements in key areas can occur for the most disadvantaged students in Florida’s public schools, why can’t they occur here? Improvements are slowly taking hold here under Commissioner Gist but she needs continued support and alternative school options need to be expanded.”

The study, called “Closing the Gap”, traced the gains made by overall low income students and by specific groups of Hispanic students in Florida public schools over the period of a decade starting in the year 2000. A wide ranging series of reforms which brought results included improved teacher performance and accountability; a transparent A to F grading system for individual public schools for better parental awareness; strong support for charter school options; and a ban on social promotion; among other policies. Test scores in core subjects like reading and math improved over the decade by up to 25%. By contrast, according to the study, overall test scores for Rhode Island students improved just 5% during the same time period.

Among other findings, the study’s authors say the gains made by the low income and minority students serve to debunk the conventional view that the socioeconomic backgrounds of students is the central factor in chronically low performing urban schools.

 Rhode Island Tea Party

Our children are our future–are we valuing them properly?

If the essential goal of educating our young children is to help them think more clearly and logically at a young age, to give them a strong foundation in reading, writing and math–and more, to help them attain a love of learning, then why are we failing so many in RI? Why are their reading scores so low, especially when we are pouring money into educating them? Is it because of poverty, or the inability of some students to learn, or lack of parent involvement, or lack of “resources”, or language barriers? Or is there something more insidious and fundamental at play? Is our system based on protecting special interests (e.g., tenured teachers, union bosses, legislators) at the cost of a stellar education?

By contrasting Florida’s free market oriented reforms with RI’s entrenched statist system, “Closing the Gap” offers striking evidence that that RI has failed. And more importantly, it offers specific solutions: a move toward freer markets in education (e.g., school choice), justice and transparency (grading schools and school districts from A-F, rewarding better teachers–merit pay, not seniority, i.e., incentivizing success), a ban on faking success (no social promotion, no automatic tenure), cutting bureaucratic red-tape in teacher credentialing, exploring virtual education, raising academic expectations by setting more rigorous standards.

In the future, we have the opportunity to read newspaper stories about more and more of our children succeeding in school. We can make that happen if parents and concerned citizens and politicians are willing to challenge the current system, which fails so many young children, and learn from the Florida situation. The facts tell an encouraging story.

OPPONENTS

 National Education Association of Rhode Island (Larry Purtell, President)

“We do need to continue in Rhode Island to diligently work to reach out and make sure all children are educated to the highest level possible, but this is nothing more than the same rhetoric from the same people with the same agenda.”

 Examiner.com; Alexander M. Sidorkin, Education Reform Examiner

 http://www.examiner.com/education-reform-in-national/the-florida-miracle-review

 

 

CLOSING THE GAP Education Study Released

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Go to: CLOSING THE GAP Home Page

Testimony of Giovanni D. Cicione, Esq., Senor Policy Advisor, to The Board of Regents of Elementary and Secondary Education. Preview of CLOSING THE GAP education study released on January 9. The RI Center for Freedom & Prosperity submitted written testimony to the Board of Regents at their January 5 meeting regarding elementary and secondary eduacation. Giovanni Cicione, senior policy advisor to the Center, expects to be able to testify verbally at the next meeting of the Regents on Janauary 19.

The full testimony (below), also served as a preview of a major study the Center for Freedom, entitled, Closing The Gap. Visit the Closing The Gap home page here.

***

Testimony of Giovanni D. Cicione, Esq., Senor Policy Advisor, Rhode Island Center for Freedom & Prosperity

To The Board of Regents of Elementary and Secondary Education (submitted January 5, 2012)

Good Afternoon. My name is Giovanni Cicione and I am the Senior Policy Advisor for the Rhode Island Center for Freedom & Prosperity. The Center is a nonprofit, nonpartisan organization, dedicated to providing concerned citizens, the media, and public officials with policy research and data, and advancing free-market solutions to public policy issues in the state.

Or intent in coming before you today was not specifically to weigh in on the debate regarding Achievement First. Rather, we intended to preview and share a study we will be releasing next week entitled “Closing the Gap.” This study, which I will reference n more detail in a moment, looks at reforms made in the state of Florida over 10 years ago that led to dramatic gains in educational achievement for some of the most challenged student populations in that state.

What is interesting from the perspective of today’s debate, is that much of the success in Florida over the last decade can be directly tied to the type of approaches advocated by Achievement First and similar organizations. And while I’m sure you will hear many criticisms of the mayoral academy model from the special interests who oppose these reforms, what our study demonstrates is that when these and other related reforms are put in place not only do you see overall gains, but that those gains are strongest amongst those students who are the most disadvantaged.

Non-English speakers, students who rely on free or reduced lunch support, and students with disabilities saw the most dramatic gains under the Florida reform model.

Our study will provide more detail and specific data when it’s released next week, but I’d like to highlight the key findings and recommendations.

Closing the Gap shows, for example, that Florida’s fourth-grade Hispanic students have improved so dramatically that they now perform at the same achievement as the average for all Rhode Island fourth-graders. Both states started out equally far behind, but Rhode Island students’ average score has improved by only (5) points since 1998, while Florida’s Hispanic students have improved by (25) points; equivalent to two-and-a-half grade levels’ of progress.

Imagine the impact if we had taken the same route ten years ago, when our own Hispanic children now preparing to graduate were just starting their grade school careers. Hispanics are the largest minority group in Rhode Island and represent 11 percent of the total population and 19 percent of the public school population. Unfortunately, Rhode Island Hispanic students have among the lowest (NAEP) scores in the nation in both math and reading. Closing the Gap shows the way to improve this ranking.

Closing the Gap cites reforms in evaluations and accountability for teachers and schools in the areas of transparency and parental choice. The study documents how the latest NAEP results strengthen the argument that Florida-style reforms should be considered for Rhode Island.

Closing the Gap explains in some detail why Florida’s reforms, while benefiting all students, have been especially beneficial to disadvantaged students. The study details the key components of Florida’s K-12 education reform strategy and makes specific policy recommendations that will provide more young Rhode Islanders with an opportunity to succeed in school and enhance their chance of pursuing and achieving their dreams.

Florida’s reform model includes:

• Public-school choice for students in low-performing public schools.

• Private-school choice for students with special-needs.

• An open door for new charter schools.

• Selective and effective se of virtual education.

• Performance pay to reward teachers who achieve student gains.

• Alternative teacher certification.

• A through F grading of all public schools; and

• A ban on social promotion.

These reforms were passed by a bi-partisan group of political leaders who faced many of the same criticisms you will hear today. They did it without empirical evidence that it would work, but they also new that to do nothing would be to condemn students to failure.

Your choice is a much easier one. I’d like to ask you to consider something – think for a moment about what you will say to a first grade student today who comes back here in a dozen years if you don’t adopt these types of reforms? What will you tell that student who asks why she is graduating with a 9th grade education after twelve years of instruction? Today you could perhaps claim that you didn’t’ know if the reforms would work, but Florida has shown us that they do – we cannot plead ignorance or even uncertainty when that child stands before you.

Why does Rhode Island suffer from the largest achievement gap among Hispanic students and other with unique challenges? Is it failing schools, a lack of funding, or is it something much worse … the soft bigotry of low expectations?

The Rhode Island Center for Freedom & Prosperity believes that every student can succeed, and that the only true disadvantage or disability is a rigid and moribund system that stacks the deck against them.

Thank you for the opportunity to be here today.

***

Income Inequality should not “Occupy” our Public Policy Planning

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Republished as an OpEd in Providence Business News (January 2, 2012 edition) under the title “Public policy shouldn’t worry about ‘solving’ inequality.”

***

As we observe the “Occupy” phenomenon, and as our local chapter prepares to hibernate for the winter, the issue of income inequality has become a national debate. Even as our President talks about fairness we need only look to the very recent past to understand what government should not do in reaction.

Other than alienating some progressive notion of fairness, I have not heard a cogent argument as to how the condition of income inequality negatively affects our economy. Yet many believe that, by addressing the symptom, we will solve the underlying economic malady. This thinking is naively upside down. Free-market theory would instead suggest that income inequality is the result of economic bust periods and not the cause of downturns, which are an expected part of the normal boom-bust cycle.

During difficult economic times the rich will disproportionately be able to protect their wealth because they have the means and because they steer the wheels of industry. To keep profits high they can down-size, reduce wages, and eliminate capital purchases or investments in new technologies. As uncomfortable as this might be to some, this is just “business” … a natural reaction; not evil. Profits are why they risked their wealth in the first place.

Conversely, during boom times, as competition for labor intensifies, the wealthy, via their companies, will offer higher wages and equity positions to more people and will also invest in growth via myriad other purchases. During these periods the lower and middle classes will gain more proportionately from the fruits of industry.

If not income inequality, what then was the cause of the recent recession? While the Occupiers claim that it was the failure of capitalism, I would contend that the real problem was the monkey-wrench of big-government within the gears of capitalism, motivated by the false notion that the government should legislate fair outcomes.

Think about it … what were the three major industries that failed? Housing, Banking/Finance, and Auto: three of the most heavily regulated industries in America. These industries have become anything but true examples of capitalism or free markets.

As for the “1%”, or millionaires, a recent CATO survey found that 80% of them are first-generation rich, meaning they earned their wealth on their own and didn’t have it handed down from their families. Today, that same 1% pays about 37% of all federal income taxes, while earning just 16% of all income. Isn’t this inequality?

Interestingly, it may not even be true that there are more rich people. The non-partisan Tax Foundation found that since 2007, there has been a 39 percent decline in the number of millionaires, and that the top 1% earned 20% of all income just a few years ago.

But, either way, so what? If we are to prosper as a nation, there necessarily must be prosperous people … get over it! Who else is going to invest capital in new growth ventures, in expanding businesses, in hiring people, and in spurring innovation?

Our nation was originally formed with the principle that citizens are equal in the eyes of the law; later we justly added equality with regard to freedom and voting; inalienable rights. Absolutely nothing in our constitution about equal outcomes.

In the 1990s, concerns were raised about inequalities in the housing market. So, for politically created ‘fairness’ reasons, the government intervened, requiring mortgages be granted to individuals who had not yet earned the privilege of being able to pay for a house. The resulting housing bubble and the current wreckage in the housing market is a predictable outcome of government interference in the free-market system.

This self-induced housing wound bled into the financial markets in the form of mortgage derivatives, a futile and destructive attempt to make profits from the non-profitable mortgage practices the government mandated upon the market. Making matters even worse, because of their connections to government, the banks and financial institutions knew that they would be bailed out by the taxpayers; so they took even more reckless risks. This is a point the Occupiers also make, if not for different reasons.

Taxpayer funded bailouts are yet another form of government interference and are not part of the capitalist system. The ‘risk-reward’ and the ‘never too big to fail’ principles were violated … and we are paying for it today.

This unintended chain-reaction of harmful events in the housing market was caused by well-intended, yet imprudent, government intervention in the name of fairness.

The Occupiers now seem to suggest that public policy should be crafted to mete out incomes. If interference in the housing market was bad for America, imagine what the unintended consequences will be to the business sector if government intervenes with the basic incentives of our nation’s entire economic system!

Capitalism is not a dirty word. In fact, we need more of it … via less government intervention. This is what will naturally reduce income inequalities and lead to growth in our economy. Attempting to solve income inequality through government intervention should not occupy any measure of our public policy planning.

Mike Stenhouse is CEO of the Rhode Island Center for Freedom and Prosperity, a public policy think tank, and earned an Economics Degree from Harvard University.

 

Task Force Report used to create Municipal Pension & Debt Map

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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

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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

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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)

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by MIKE STENHOUSE
 
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 …