Community Inequality Is Biggest Economic Obstacle in RI

The biggest problem affecting Rhode Island’s economy is not high taxes, pension benefits or special interests. Not even close. It’s the income inequality that exists between the affluent suburbs and the depressed urban areas.

An extremely important post in Pacific Standard today highlights this, in part, by pointing out that while Providence is closing schools and libraries Barrington is increasing funding for both.

In Providence, where I live, the median household income is about $37,000. In Barrington, it is more than $90,000. Housing values mirror the money residents have at their disposal, and as a result Barrington can afford to invest heavily in all sorts of programs that benefit residents and the local (and national) economy. Providence, on the other hand, is facing a dire revenue shortfall and has taken drastic measures to save money, providing only basic services to those in need.

But wealthy or poor, people always seem to think that governments serving poor populations are somehow screwing up; few recognize that communities that are poor or have significant economic inequality (like Providence) are simply being screwed.

I made a similar sort of comparison last year in noting that East Greenwich, the other educationally superior affluent suburb, is considering getting iPads for all of its high school students while in Central Falls, Woonsocket and Pawtucket many students are sharing textbooks.

Much of this inequality is due to Rhode Island’s over-reliance on regressive property taxes and years of using a failed education funding formula. But the problem was inextricably exacerbated when former Gov. Don Carcieri cut state aid to cities and towns in his 2008 budget proposal. It’s literally bankrupting the state’s most struggling communities.

Sam Bell did an excellent seven-part series that dealt a lot with this dynamic in December, and Tom Sgouros has frequently touched upon this issue in RI Future posts. Last year, Libby Kimzey did a public presentation about it. Even RIPEC alluded to it in a report released in April:

Policy choices made by the state – specifically without accompanying mandate relief, and a provision for increasing state intervention for fiscally-stressed communities – increased the responsibility of municipalities to make changes to their fiscal structure. In some cases, municipalities were able to effectively balance their budgets despite cuts to local aid. In other cases, however, municipalities made policy decisions to bridge budgetary gaps that did not result in long-term structural change.

Gov. Chafee is one of the few Rhode Island politicians to pay much attention to this systemic failure. In March, he told me, “It’s no wonder Providence is in trouble, it’s no wonder Pawtucket is having a trouble making payroll, it’s no wonder Central Falls went into bankruptcy. They just couldn’t sustain those kinds of cuts. There is no property tax base to transfer those kinds of cuts onto.”

Last year, he wanted to address the issue by giving struggling cities exemptions from some state mandates. This year, I suspect he will try to affect this problem in a different, more comprehensive manner.

Additionally, it seems to me that state legislators from urban areas could easily form a pretty powerful caucus to advocate for their shared self interest, which in this case amounts to a little less inequality.