budget – Page 3 – RI Future

June 5, 2012June 5, 2012

Budgeting for Disaster: Like What We’ve Got? Good

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As has been amply reported by other writers here and in other places, the state budget has emerged from the mists of the Finance Committee, and will likely be voted on and passed this week. It contains no broad-based tax changes, though there are small increases in cigarette taxes, and small expansions of the sales tax, and tolls, to cover restoring 40% of the money cut from care to the developmentally disabled, and to fund the state’s education funding formula — the one that the legislature’s own study shows is inadequate. Due to more encouraging revenue projections than were the case last fall, some money has been restored to important places, but it’s just a bit here and there.

This graph is still the policy of the state:

That lower line is the effective tax rate on the median taxpayer. The blue line is the rate on the top 1%, and the red line is just thrown in there to show there is no relationship between taxes and unemployment.

The message overall from the legislature is that the cities and towns be damned. There seems no willingness to acknowledge that the fiscal crisis in the cities is largely the result of state policies. Tremendous cuts in state aid in 2008-2010 to both the municipal and education sides of city and town budgets brought fiscal havoc everywhere, and last week we had the spectacle of Lisa Baldelli-Hunt, a representative from Woonsocket, begging her colleagues in the legislature not to allow Woonsocket to fix the problems caused by her colleagues. Oddly enough, they complied, and now we have two more cities half a step from joining Central Falls in bankruptcy.

The sad fact is that by and large the people in charge of our cities and towns have actually been more fiscally responsible than legislators in the General Assembly, but they have less power, and so the Assembly leadership can pretend otherwise.

That’s quite a claim, isn’t it? How to back it up? How about this: as of 1990, Rhode Island cities and towns collected about $1.3 billion, between state aid, property taxes and various municipal fees. In 2008 — before the worst of the state aid cuts — they took in a bit less than $3 billion. This does not count the car tax payments from the state, which only offset taxes that towns would have collected from their residents. If you’re keeping score, that’s growth of about 1.9% per year — after correcting for inflation. This is troubling, but it’s not necessarily evidence of mismanagement. Inflation measures the price of goods and a few services, while towns spend their money on services and a few goods.

So how best to measure this if not against the inflation rate? If you want a yardstick with which to measure a service-oriented enterprise like a town, how about a private-sector service like Federal Express? Fedex is fiercely competitive, I hear, and non-union, to boot. How did they do? In 1990, it cost $11 to send an overnight letter across the country, and today it’s about $25.50 for the same service. After correcting for inflation, that’s up about 2% a year.

What about the state? After accounting for inflation in the same way, the state’s general revenue has gone up 2.4% per year since 1990, and overall expenses are up even more. (That’s the structural deficit and the rise in state debt you’re smelling.)

So who is being more responsible with tax dollars? The General Assembly, with members like Baldelli-Hunt who give lectures to municipalities, or the towns, who have controlled costs not only better than the state, but better than Fedex. But it’s the towns who get cut while the state basks in the adulation of business leaders who praise legislators for their tax cuts.

The main message of this budget bill is continuity. This is a budget motivated by policy choices virtually identical to the ones of the previous year, the year before that, the year before that, and so on. The idea is to squeak through another year with minimal pain to everyone, especially the wealthy. But it was to a large extent that very set of policies that brought us to the status quo: high unemployment, bankrupt cities, ever-rising tuitions at the state colleges, and lower taxes on rich people.

Do you like the way things are going around here? Hope you do, because the legislature is voting this week to give you more of the same.

June 1, 2012June 2, 2012

Better Government, or Just Cheaper Government?

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One of the great things about sophistry is that in any argument there is always enough dust around to throw in people’s eyes. Whatever the argument, the dirt at your feet is always at hand.

One of the great things about intellectual honesty is that you don’t take positions without multiple sources of support. It helps you see through the dust, too.

A week ago I wrote about how spending under Obama has not been nearly as profligate as is widely thought. Marc Comtois, one of the dedicated soldiers of the right who daily lays waste to armies of straw men over at Anchor Rising, thinks he’s found a nut, and complains that an article I used in support of that essay had been amply refuted. (You can find his links in the comments over there.)

What he doesn’t get is that those refutations are just dust. One can go into the weeds of the refutations to show that they are just as tendentious as the original article they critique, but why bother? Even if you pretend the article I cited was all wet, there is ample other support for the assertion that if you really care about responsible spending, you shouldn’t vote for people who promise cheaper government.

So, for example, if you don’t like Mr. Nutting and marketwatch.com, how about the Center for Budget and Policy Priorities? Here’s what they say:

“By themselves, in fact, the Bush tax cuts and the wars in Iraq and Afghanistan will account for almost half of the $20 trillion in debt that, under current policies, the nation will owe by 2019. The stimulus law and financial rescues will account for less than 10 percent of the debt at that time. “

Oh, wait. You say CBPP is a partisan organization. Well then how about the Cato Institute? Its director, the late Bill Niskanen had a reputation for unyielding libertarianism, and also a reputation for intellectual honesty, part of what has made Cato a source of actually useful data over the years. He wrote an article some years ago pointing out that the “Starve the Beast” strategy of cutting taxes to force spending cuts did not work. In short, Republicans made deficits bigger and Democrats made them smaller. (Original article, recent follow-up.) I wrote a follow-up to Niskanen’s original article pointing out that the situation was even worse than he wrote (page 2 at the link).

In other words, pretty much any way you turn, evidence says that if you care about responsible spending, vote for the people who don’t focus on spending. Vote for the people who are talking about what government should do — they’re the ones who care enough about the enterprise to do it responsibly. And yes, any given article or set of numbers can be showered with dust, obscuring its meaning. But dust is for brushing aside.

Now, all that said, what do I think about this? In basic economics classes, we’re taught that the Great Depression was ended by demand-side spending — the spending necessary to fight a World War was of the scale necessary to bring our nation out of the economic funk of the 1930s. I believe that 50 years from now, students in basic economics classes will ask impertinent questions of their professors when they wonder why, with that example to go by, the world acted in precisely the opposite way when faced with the challenges of the Bush depression. The fact is that the last three years have seen ample confirmation of the theory behind Keynesian stimulus, but it’s all been in the wrong direction. We’re doing the opposite of stimulus, so we get the opposite of prosperity.

Which is all to say that I’m not defending the Obama austerity. I’m simply stating the fact that if you want responsible spending, the record — stretching over decades — says that voting for people who simply promise to make government cheaper is the wrong way to get it.

May 31, 2012June 1, 2012

Budget Bill Restores Previous Cuts, Adds Sales Taxes

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It’s been called the year of restoration, in part because this year’s proposed budget will restore cuts made last year to programs for the developmentally disabled and low-income dental insurance.

The “education funding formula will be fully funded for the second straight year,” House Finance Committee Chairman Helio Melo said, noting that $22 million is appropriated in the proposal.

The House’s proposal is $156.4 million more than the governor’s proposal and almost $400 million more than last year’s enacted budget.

Increases will be paid for by Chafee’s proposed luxury clothing tax, but instead of kicking in at articles that cost more than $175 as the governor proposed the House budget calls for taxing items that cost more than $250. This tax is expected to raise about $5.9 million. The governor’s proposal would have raised more than $11 million. A $.04 per pack cigarette tax is also called for and would raise an estimated $1.8 million.

Melo there will be $9.6 million for the developmentally disabled programs in this year’s budget, about half of which will come from the federal government in matching funds. Last year, $24 million was cut which resulted in some program cuts and pay cuts for low wage workers.

May 30, 2012May 31, 2012

Clothing, Cigarette Taxes Considered for Budget

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With the proposed budget expected to restore some funds cut last year, several revenue sources first identified in Gov. Chafee’s budget proposal may be used to pay for them.

House Finance Committee Chairman Helio Melo, who has been tight-lipped about the budget he has been crafting with staff for the last several weeks, said, “Revenues are always a good way to pay for expenditures.”

He added, “We’re still working on it.”

But lawmakers from both the House and Senate said ideas being strongly considered include: a new tax on expensive clothing, an increase in the cigarette tax and a tax amnesty proposal. All three proposals were first identified in Chafee’s budget proposal released much earlier this year.

The proposed tobacco tax increase of $.04 per tax could generate more than $4 million, according to Chafee’s budget. A tax amnesty is when people who owe back taxes are allowed to pay their delinquent bills without penalty.

Chafee proposed the tax on high-end clothing kick in at any item over $175 and is expected to generate more than $11 million. The House is inclined to start the tax at $175 or $200. Senators would rather see it start higher; one mentioned $250.

After a meeting with Speaker Gordon Fox late in the day Wednesday, Senate President Teresa Paiva Weed said a clothing tax would benefit big box stores that could avoid paying it. She also said it would take away Rhode Island’s competitive advatage over Massachusetts, which already taxes clothing more expensive than $175.

“Whatever we do in the budget on any area of revenue needs to maintain our competitive advantage,” she said. “It’s important that we remain competitive with our neighbors in Massachusetts.”

May 29, 2012May 30, 2012

House Democrats Offer Clues About Budget

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As House Democrats emerged from a closed-door caucus on Tuesday afternoon concerning the budget proposal, a picture began to develop of what might be included in the annual spending bill which will be released Thursday.

“There’s probably not going to be tax increases,” said Frank Ferri, a progressive Democrat from Warwick.

But he and other lawmakers said restoring funds cut last year for the developmentally disabled, DCYF and to nursing homes are being considered. One House member said in the closed-door caucus this year’s budget proposal was referred to as “the year of restoration.”

The big debate of this year’s budget meeting could be $2.6 million the governor’s office requested as part of the final settlement with Central Falls retirees. Part of the deal receiver Bob Flanders negotiated with the retirees called for the General Assembly to contribute to their retirement costs.

“My concern is it could be a slippery slope,” said Jamestown Democrat Deb Ruggerio. Several legislators told me they worry that it could set a precedent for other struggling communities to ask the state to appropriate funds as part of a deal with pensioners.

House Democrats also hope to include more money for public education, a Chafee initiative, to help expedite the new school funding formula. “It’s been a priority of the governor’s since Day One,” said Director of Administration Richard Licht.

It doesn’t seem like it will be funded by an increase in the meals tax, as was proposed by Chafee. “I’d say that’s dead,” one legislator told me after the caucus meeting.

Public transportation supporters made a big push for more operational money this year, but it seems, if anything, there will only be money for new buses.

Finance Committee Chairman Helio Melo, who has been logging long hours as of late putting together the budget proposal with staff, said this year’s bottom line will be helped by a one-time windfall from this year’s Poweball winners, which will inject an additional $15 million into state coffers for the next fiscal year.

The House Finance Committee will consider the budget on Thursday at the rise of the House. A summary of the proposal will be released earlier in the day.

May 25, 2012May 25, 2012

Paiva Weed Pushes for Reversing Cuts to Disabled

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Senate President Teresa Paiva Weed said she is pushing for restoring funds to programs for the developmentally disabled in this year’s budget.

“From an overall policy perspective we believe decisions in last year’s budget resulted in a negative impact on the community,” she said. “The senate has consistently made restoration of funding for the developmentally disabled a priority.”

Last year, funding for the developmentally disabled were cut by $24 million. Only about $12 million was cut from the state budget; the other half comes in federal matching funds.

Paiva Weed said Senate Finance Committee Chair Daniel DaPonte and House Finance Committee Chair Helio Melo, both East Providence Democrats, are working together to see how much of the approximately $12 million in local cuts can be restored.

“At this point finance chairs have been negotiating,” she said. “Hopefully they will resolve it all soon.”

During the last week or so, the finance committee chairs, among others, have been busy putting together the budget proposal behind closed doors. When I caught Melo opening the door of his office (after his secretary told me he wasn’t in there) he was tight-lipped about what might be in the much-anticipated proposal. “We are looking at it,” he said. “We are looking at everything.”

As a result of the cuts last year, programs were scaled back, even though they weren’t supposed to be, and several hundred low-income wage earners had their hours cut.

House Finance Committee member Rep. Larry Valencia, a progressive Democrat from Richmond, said, “It’s important to see what we can do about reversing the cuts from last year,” he said, noting that pay cuts to low-wage employees has a significant effect on the state’s economy.

Sen. Lou DiPalma, a Middletown Democrat who is the deputy chair of both the finance committee and the human services committee, is also pushing for funds to be reinstated.

“We need to see how to move needle from where it was last year,” he said. “The cuts last year went much too far.”

Advocates for what’s known as DD funding were successful this session at drawing attention to the cuts. The biggest crowd at the State House this session was for a rally to raise awareness to the cuts – it drew close to a 1,000 people I would estimate. And several labor unions affected by the wage cuts either staged one-day strikes earlier in the session.

May 25, 2012May 28, 2012

President Obama and the Imaginary Spending Binge

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Recently, I did something I shouldn’t have done, and I’d like to confess here.

Someone I don’t know wrote me a nice note about some things I have written and some banking issues I’m working on (more on this someday). In the process of the note, he described himself as moderate Republican, “fiscally conservative and socially liberal.” This, it turns out, is one of my buttons because it implies that usually liberals aren’t fiscally conservative.

The idea that liberals are spendthrift is little more than an insult that has stuck over time due to incessant repetition rather than evidence. It wasn’t liberals who brought our nation to the brink of financial ruin in 2008. It wasn’t liberals who doubled Rhode Island’s debt 2003-2009 for no good reason. It wasn’t liberals who created the fiscal crisis that has bankrupted one Rhode Island city and threatens several more. In all of these cases, it was either soi-disant fiscal conservatives or crony insiders who did all of it and I, for one, am completely sick of having to feel apologetic about my policy preferences. Medicaid is a money-saving program, as is welfare, early childhood education programs, environmental protection, and a lot more like those. The fact is that every progressive I’ve ever had a policy conversation with should be described as fiscally conservative, and yet the stereotypes persist, due to lazy reporters and politicians who benefit by perpetuating it.

So I was pleased to notice this article yesterday that pointed out the grim reality. You know that Obama spending binge you read about, when he came charging into office with a mandate and a Democratic Congress? Never happened. The article points out that on an annualized basis, spending under Obama is up about 0.4% per year. Of course it’s true that the 2009 fiscal year included Obama’s stimulus package, even though he took office part way through that year, with the budget already passed. But even if you count the stimulus, spending is up 1.4% per year under this president. Compare that to 7.3% per year in Bush’s first term, and 8.1% per year in his second.

The article has a great bar chart comparing the fiscal records of the last few Presidents. Because I think he’s unjustly maligned, I checked out Carter’s numbers, too, and after adjusting for inflation, spending increased less under his administration than under Reagan’s.

Why is the federal deficit such a huge problem? Because of tax and spending decisions made under George W. Bush. Why are cities and towns in Rhode Island either bankrupt or flirting with it? Because of spending decisions made under Don Carcieri. Obviously Congress and the General Assembly have had a lot to do with this, too, but it wasn’t liberals in Congress who voted for the Bush tax cuts, the Medicare drug benefit, or even the Iraq War resolution. And it wasn’t liberals who doubled the state’s debt (mostly without voter approval), loaned $75 million to Curt Schilling, and came up with all the different tax cuts for rich people passed over the past 15 years. Some liberal members of the General Assembly cast votes for budgets containing those tax cuts, but that’s the way this Assembly is run, and many have supported floor amendments to the budget to overcome those cuts. (Of course the current Speaker of the House has been known to describe himself as liberal, but the public record hardly supports that, and I notice he’s stopped doing that, at least to the reporters whose work I read.)

Is there spending I support that isn’t getting done? Of course there is. I support actually doing maintenance on our assets — because it’s cheaper than not doing it. I support health care reform — because it’s cheaper. I support early childhood education — because it’s cheaper. I support a cleaner environment — because it’s cheaper. I support taxing enough so our governments don’t require short-term borrowing — because it’s cheaper. Get the picture?

Obviously this isn’t the only reason to spend money. Helping support the poor and disabled is not necessarily cheaper than letting them die on the streets, but bodies lying about would damage the feng shui of our cities. Government has a role in counter-cyclical spending, to keep the economy moving during a downturn. You actually can make cost-benefit arguments about both of these, but they rest on shakier numbers, so why not just go with the alleviating human suffering angle? Parks and beaches are cool, historically the arts have never thrived without government patronage, and I wouldn’t try to justify the Smithsonian on cost/benefit grounds, either. But overall the picture of spendthrift liberals is little more than a libel, perpetuated because fulfills some rough conceptual framework, and because some people imagine that being fiscally conservative means you don’t have to pay for stuff.

Which is all to say that I apologize to my correspondent for snapping at him for what was otherwise a perfectly pleasant note.

May 10, 2012May 10, 2012

RI Progress Report: Chafee and Political Principles, Paying for Public Education, Gemma on Marriage Equality

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In a surprising move that really shouldn’t surprise anyone who knows him, Gov Chafee has decided to take the Jason Pleau case all the way to the US Supreme Court, if they will hear it. While talk radio, and even the Pleau family, may not agree with this decision, taking a case to the SCOTUS is not about either politics or individuals – it’s about interpreting the law, and in this case the relationship between states and the federal government. We love the way this case has right wing talk radio hosts arguing against state’s rights … so much for the conservative principles of our on air personalities. Chafee, on the other hand, has such principles in spades, and often to his political detriment.

By the way, the New York Times editorial board, far superior constitutional scholars than this state’s on air shock jocks, argues Chafee has a strong case in a piece titled Rhode Island’s Principled Stand.

With state budget season just around the corner (legislators are starting to talk about how certain bills are serving as tea leaves for the impending spending proposal) Ted Nesi posts on the Center on Budget and Policy Priorities guidelines for state budget during a down economy. Many good ideas in there.

The line of the day comes from Linda Borg, of the Projo, who writes: “Now you can buy a Barrington education.” (Though you always could, if you could afford real estate there) Her article is about how the town with the best test scores in the state will now allow a small amount of students to pay tuition to go to school there. This will prove to be disastrous public policy for Rhode Island. Instead of allowing the affluent to pay for a top tier public education, the state should step in to ensure that all students get a good education regardless of how much money their parent’s home costs.

Like Senator Reed, Anthony Gemma now supports marriage equality, too. Even more so than Reed, Gemma’s announcement reeks of political opportunism -he’s a socially conservative Catholic who happens to be running against an openly gay incumbent. But we enjoyed his statement: “This is not a question of being a liberal, a progressive, or a conservative.” Well, yes it is, but as the old saying goes, where you stand depends on where you sit.

April 30, 2012April 29, 2012

Carcieri Passes Buck for Stiffing Cities and Towns

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With former Gov. Don Carcieri now being blamed for the fiscal mess Rhode Island’s poorest communities find themselves in because of his starve the beast policy towards state aid to cities an towns, the retired Republican took to the friendly airwaves of WPRO recently to defend his decisions.

“You said it very well,” he said to Steve Kass – the former full-time-now-fill-in talk radio host who gave Carcieri such favorable attention at the time that the governor finally just dropped the pretense and made Kassman his communication director in 2005. Seriously, that’s who was conducting the interview – the guy’s former communications director.

“Every business person I knew was looking at their business an seeing sales decline and figuring out how they could reduce their costs and be more efficient and it was pretty obvious government needed to do the same,” Carcieri continued. “We couldn’t say we need the same amount of money or more when all of our citizens and all of our businesses are hurting.”

Kass’ probing follow up question? “And also deliver quality services as well,” he tacked on to Carcieri’s defense. To which the former governor added, “Well of course that goes without saying.”

Riveting radio, indeed. Nothing more interesting than listening to a politician make unchallenged talking points.

But then it got, if not interesting, at least bizarre when Kass actually blamed the legislature for his former boss’ crowning fiscal legacy. Carcieri, knowing he would be tossed only softballs, played right along.

“You kind of get painted with whatever happens out of the legislature it’s something you have to live with,” he said.

Yeah, you especially get painted with that brush when it’s your legislative proposal that the General Assembly passes. Never mind that later in the conversation, when Kass tried to blame Congress for the nation’s deficit, Carcieri kept the onus on the executive at the helm.

“It takes leadership,” he said. “You know that.”

Kassman knew that, of course, after Carcieri told him he did.

April 12, 2012April 12, 2012

Gov. Chafee Makes Case for Muni Relief; Unions Retort

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grebien chafee — Pawtucket Mayor Don Grebien pleads for the municipal aid package as Gov. Chafee listens.

Governor Chafee, testifying before the Senate Finance Committee, made his plea for his legislative package aimed at helping cities and towns stave off the impacts of the sustained recession and steep state cuts by his predecessor to local municipalities.

The legislation would allow the cities hit hardest by these untimely events and actions – Providence, Pawtucket, Woonsocket and West Warwick – to cut disability pensions, suspend automatic teacher raises and do away with state mandates such as school bus monitors.

According to Chafee, those four communities lost a combined $94.7 million in state aid between 2008 and 2011. Providence lost $54 million, and more than $25 million in 2009 alone. Pawtucket lost almost $20 million, Woonsocket more than $12 million and West Warwick lost $6 million.

Paul Valletta, a union representative for local fire fighters, said given the extreme loss in revenue recently it’s unfair to ask municipal employees to carry so much of the burden as communities attempt to adjust to the situation.

April 3, 2012April 26, 2012

Budgeting for Disaster: Cutting the Buddha

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Our budget tour continues with a visit to the Behavioral Healthcare, Developmental Disabilities and Hospitals. The acronym is BHDDH and I’m told by insiders it’s pronounced “buddha.”

BHDDH is spending more time than usual in the news. This is largely because last year they cut $26 million from the budget that would have gone to private providers of care for disabled adults. You can see the cut on page 153 of Volume II of the budget (or page 17 of this excerpt), second line, where $206 million in 2011 went down to $180 million in 2012.

This is a cut about three times as big as Governor Chafee proposed. But if you remember, the General Assembly rejected Chafee’s sales tax changes, so they had to cut much deeper than he’d suggested.

Some background: Rhode Island provides services to these people in two ways. About 220 get services through Rhode Island Community Living and Supports (RICLAS), a state program, and a bit more than 3,000 others get services through private agencies who bill the state for their service. These agencies are almost wholly dependent on those bills.

BHDDH recently commissioned a big study of the matter and determined that the state actually doesn’t pay very much for this service. Over the last few years, the population under care grew slower than any northeast state besides Massachusetts, and we reduced the per capita expense from $76,803 in 2009 to $63,013 in 2011. This is despite being one of only nine states (out of 44 where data was available) without a waiting list for services. In other words, we appear to be getting pretty good service for our money.

There is another side, though. We get this great value by paying people very little. The going rate for direct support staff at the private facilities appears to be between $9 and $11 per hour, even for the unionized folks. Remember, these are the people who are bathing, feeding, teaching, and otherwise caring for highly disabled individuals. By contrast, direct care staff at RICLAS are paid about twice as much. (Representative Scott Slater has sponsored a bill in to set a minimum wage for direct support staff at these residences.)

Conversely—and somewhat unfortunately—some of the executives at the private organizations are paid far more than their counterparts in the state. David Jordan, the CEO of Seven Hills, who runs homes in Massachusetts, too, was paid $533,214 in 2009. ($265k in salary and the rest in pension contributions.) This year he has responded to the budget cuts by cutting support staff pay by 5% and ending most of their benefits. Executive pay was cut 3%, according to UNAP, the union representing workers there.

So what happens when the administration makes a plan to cut costs and the Assembly says that’s great, but please cut three times as much? Answer: some pretty dumb things.

For example, the state will only pay a fee for service provided, as opposed to a per-person “capitation” rate. This sounds fair, but if an employee shows up an hour late to work, the agency gets docked not only that employee’s pay, but also the overhead costs allocated to that hour of pay. It’s not as if the agency wasn’t responsible for that care, or the heat and electricity didn’t have to be paid for that hour.

The state also changed the way they assess the level of disability for each resident. This affects the amount the state pays for their care. We had been using a four-step measure, but it was changed to a seven-step “Supports Intensity Scale” (SIS). The SIS is probably a better measure, but the four-step scale doesn’t exactly translate over to the seven-step one and the staff to do re-assessments simply doesn’t exist. Result: BHDDH simply decided which levels of the old scale corresponded to which levels of the new scale, and voila, they had to pay less to support the residents.

Actually, what BHDDH says is this:

If SIS has not been performed and client is receiving services then, the resource allocation is based on previously approved level of service cross walked to the new levels effective 7/1/11.

So what do we learn from this? That there isn’t much deference to department plans in the Assembly, for better and worse. If you’re a department director with a plan to cut costs, you should probably only present a fraction of those costs, or risk having your department turned upside down by a demand to cut much more. The promise of cuts is like blood in the water; the sharks don’t care where they bite, and presto you have people mobilizing marches against you. Under these conditions, which director is going to volunteer cuts again?

And we also learn about the downside of privatization. Through aggressive use of private group homes and community-based care, Rhode Island has kept costs low, much lower than most northeast states. But part of the reason we could do that is that the private operators of those homes didn’t have to pay their employees well (and could pay their executives too well). Though I’m sure it would help (at some of the agencies), slashing executive pay won’t make up for the cuts; there simply aren’t enough executives with egregious salaries to make up $26 million.

Overall, administrative costs at the private agencies (about 10%) seem comparable to the RICLAS costs, as far as one can tell from the personnel lists in the budget. More important, because these are private agencies, we have only limited control over them. As some will recall, that was part of the point of the whole privatization push. We were to give up control of services so the invisible hand of the private market could work its magic. Well it has, and here’s the result.

None of this is to say it isn’t possible to squeeze costs down over time, but how much less do we want care-givers to be paid? Though we would like to be able to slowly reduce administrative overhead, the sudden cuts of this past year will not have that effect. More likely they’ll bankrupt one or two of the providers, and that will be a lesson to…someone.

Full disclosure: I have recently done some software consulting work for West Bay Residential Services, one of the DD residential care providers, and may do so again someday.

Update: Clarified the makeup of David Jordan’s 2009 compensation.

Read previous posts from this series

March 30, 2012March 30, 2012

Cicilline Comes Out Strong Against GOP Budget Bill

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On the Huffington Post and on the House floor, Congressman David Cicilline has come out strong against the House GOP budget proposal.

Today, after voting against it yesterday, he penned an op/ed for the Huffington Post today critical of the bill writing, “less than a year after a similar proposal was defeated, the House Republican leadership held a vote on a budget proposal that would extend tax cuts for the wealthiest Americans, make deep cuts to programs that serve middle class families and end the Medicare guarantee for our seniors.”

Cicilline spoke out against the bill earlier in the week saying, “My home state of Rhode Island has one of the highest unemployment rates in the country. My constituents need common-sense solutions that will create jobs and get our country back on the right track not another extreme proposal from the House Republican leadership.”

He said the bill would give the richest Americans an average tax break of $150,000 a year.

The top-down budget proposal passed the Republican-controlled House largely along party lines. Politco said of the bill:

“Just 10 Republicans defected, and the 228-191 vote gives the embattled GOP leadership what it most wanted: a show of party unity behind a bold election-year vision that includes new private options for Medicare and a simplified Tax Code. But the price paid by Congress will be big: wrecking havoc with hard-fought bargains under the Budget Control Act and inviting another shutdown fight with Senate Democrats and Obama unless the House again reverses course.”

March 19, 2012March 19, 2012

Budgeting for Disaster Part VII: Quasi-appropriate?

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Trick question: Why is Rhode Island’s housing policy not made by the state government? How about economic policy? Why do we have two environmental agencies? Two elections agencies?

The questions sound unrelated, but they have very similar answers, and they’re all related to the state’s bevy of “quasi-public” agencies—whose budgets are in Volume I of the budget.

The Airport Corporation is here, who runs all the state’s airports, including Green. The Economic Development Corporation is also here, along with Rhode Island Housing, RIPTA, the Narragansett Bay Commission (sewers in Providence and Pawtucket), the Resource Recovery Corporation (runs the central landfill), and several others.

Truthfully, it’s more correct to say the outlines of their budgets are in Volume I [B1-331-366]. There isn’t much information there about some very important agencies, and in some cases this was part of the point of keeping them separate from the regular parts of the state government.

Some of the quasi-publics were formed when the state took over existing private corporations. RIPTA, for example, was formed to save the last private bus company. Others have a separate existence for legal reasons. The Turnpike and Bridge Authority, which maintains the Pell and Mt Hope Bridge, was formed to issue bonds against the toll revenue collected at those bridges. But many quasi-publics—along with some other agencies less quasi and more public—were formed out of power struggles between the legislature and the governor.

The Coastal Resources Management Council, for example, our extra environmental agency, was originally formed in the 1970s so that powerful members of the legislature could circumvent new DEM coastal regulations on behalf of their friends who owned waterfront property. Rhode Island Housing (technically the RI Housing and Mortgage Finance Corp.) may have originally formed to access some federal HUD funding, but it was also a creature of the legislature, witness the mortgage scandals of the 1980s. Later, under a stronger Governor, the Economic Development Corporation was created out of the Department of Economic Development to give the Governor Lincoln Almond more control over economic policy (and to pay its executives more like the corporate executives they lunch with).

EDC has another distinction. When it was spun out of the government into a quasi-public, it took over the shell of the RI Port Authority. Why? Because after Bruce Sundlun effectively put the Public Building Authority out of business (it was a campaign promise), the Port Authority was the only agency with unlimited authority to borrow money without voter approval. And boy have they used that authority. EDC now owes debt used for the Fidelity campus in Smithfield, the Shepard’s building in Providence, the Masonic Temple hotel across from the state house, the I-Way boondoggle, the Sakonnet River Bridge, and much more. Subsidiaries owe the debt used to build the airport and renovate Quonset.

Under Ed DiPrete, the PBA’s record of borrowing without voter approval was considered a minor scandal and contributed to his election loss in 1990. But none of these subsequent projects got voter approval. Don Carcieri managed to double the state’s debt, and almost all of it was unapproved borrowing, so it’s difficult to remember why it was such a problem for DiPrete.

There will be more to say about this borrowing when we look at the Capital Budget document. For now, let’s look at one of the quasi-publics that spends a lot of time in the news lately over its budget.

RIPTA

The state’s public transit authority was formed when the private bus company that ran transit in Providence and vicinity went under in the 1960s. It wouldn’t be correct to say it has had an untroubled existence until recently, but it did not always have the persistent deficit it has now.

What’s happened to the agency in recent years is a few things. First, like the rest of the state, it is a victim of our crazy health care system. Ten years ago, employee benefits were $10.5 million for a $28.7 million payroll. (For union employees, pension payments are a fraction of the health care costs, though their growth has tracked the health care costs fairly well.) In 2013, we’re looking at $24.8 million in benefits for a $45.8 million payroll [B1-355]. The cost of health care is going up almost two and a half times faster than payroll costs.

Second, transit for disabled people has taken a tremendous number of resources. Paratransit services between 2001 and 2011 more than quintupled, from a cost of $1.8 million to $9.1 million, and there are other categories of service that provide more or less the same function.

Finally, the gas tax has been a problem of its own. A portion of the gas tax is dedicated to RIPTA. The problem is that the gas tax is constituted as a number of pennies per gallon of gas. When gas prices rise, the gas tax actually falls, as people buy less gas. But when gas prices rise, RIPTA’s cost for fuel also rises. In other words, as gas prices rise, RIPTA’s ridership rises, and so do its costs, at exactly the same time that its gas tax revenue falls. Why does it seem that RIPTA is permanently in trouble? Because its funding system makes no sense, and provides falling revenue when expenses rise.

And for those who wonder what is the value of RIPTA to Rhode Island, take it from me that it’s actually pretty hard to get a seat on several of the lines I use frequently. High gas prices mean lots of riders, and also mean service cutbacks.

Unfortunately, pretty much none of the people who make funding decisions about RIPTA—its board, legislators, the Governor or his staff—actually use the system, so it turns out that RIPTA’s funding problems are thoroughly unaddressed in Governor Chafee’s budget. The documents cheerfully predict a $10 million operating deficit by June 2013 so we’ll be seeing lots of RIPTA headlines in the coming year.

March 12, 2012March 12, 2012

Budgeting for Disaster Part V: Granting a Problem

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Our tour of the state budget documents continues. We leave the Executive Summary for the time being (we’ll be back for the all-important schedules and for the invaluable predictions of the future), and move into Volume I.

Volume I covers “General Government”, which includes the offices of all the elected officials, and the departments of Revenue, Business Regulation, and Labor and Training. Plus the Department of Administration which holds all the central functions. It’s also got all the quasi-public agencies like the Economic Development Corporation, RIPTA, the Airport Corporation, and Resource Recovery, who runs the state Central Landfill. For each department and agency, there is a summary page, and then a page for each of the major divisions. This is the part of the tour where the guide is supposed to tell funny jokes to fill up the travel time as you cruise from one interesting locale to the next.

The legislature’s budget is in this volume, so let’s look there first. The overall budget for the Assembly is about $41 million this year, and the Governor is proposing to cut it by a little more than $1 million, about half from supplies and expenses and the rest from the grants budget. There’s no change in the number of personnel, and it looks like they’re anticipating a 3% raise for most everyone, and — what’s this? — it’s the rising cost of health care, just like everywhere else. Remember, no matter what you’ve been told, it’s rising health care costs that are pushing up the cost of your government more than anything else.

Legislative grants

Oh, wait, did you want to hear about the infamous grants budget? This is the source of the legislative grants, random bits of money awarded by the leadership to reward this or that legislator for helping out around the place. It mostly goes to non-profits in the legislator’s home district, like say, Dan Doyle’s Institute for International Sport that we’re hearing so much about these days. They apparently got $575,000 in 2007 for a fabulous building on the URI campus that remains unfinished today.

There are also plenty of excellent, well-run non-profits who get support this way. The problem is that the way these grants are awarded has a lot to do with ring-kissing and begging and maybe not so much to do with merit. Lots of ring-kissers have other merits, but when merit isn’t the main criteria, you’ll undoubtedly get some who are better at the kissing than the service. (This makes the occasional screw-up like the Institute into the fault of some specific person, though no one seems to be saying who just yet.)

How much does it cost? On paper, you’ll see a grant budget line item of $2.8 million in the current year, and the Governor is proposing to cut it back to $2.3 million. The way the system works, though, there is much more than that available. The way it works is that lots of the dollars will wind up as line items on the budget of some agency whose mission is vaguely related to the non-profit’s. So a theatre might get a grant and it would come directly from the RISCA budget, not from this line item. This is a problem both because it provides less money for the agency mission, something that you can’t see from the budget documents, and because counting all those grants isn’t possible from the outside.

What else? One can’t help but notice that despite the modest cut Governor Chafee has proposed, the legislature’s budget is up a healthy 42% in ten years, 2003-2012, about 3.5% per year. This is somewhat less than overall state expenses, which are up 48%, but it’s embarrassingly close to the 42% rise over that time in the statewide property tax levy. One thing you’ll hear if you wander around the halls of the State House and talk to legislators is complaints about out-of-control municipal budgets. What those legislators don’t seem to understand is that the town councils and mayors are doing pretty much as good a job as the legislators.

It’s easy to understand legislators not noticing this. What’s less forgivable is the way they keep voting to cut taxes without cutting their own budget. Over that decade 2003-2012, we saw a capital gains tax cut, an income tax cut for rich people, and several high-profile tax credits pass the Assembly. At none of those times did anyone propose a proportional cut in the Assembly’s own budget. Cuts for thee and not for me. If you care about controlling costs in government, this is the kind of behavior that has to be rendered embarrassing (or at least politically dangerous) for elected officials.

Time to move on. Next stop: DMV!
Read the previous posts in this series.

February 23, 2012February 23, 2012

Cutting low income dental care costs as much as it saves

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linda katz — LInda Katz, the executive director of the Economic Progress Institute, at a recent conference.

Making budget cuts to low income dental care may sound like a good way to save money but it will actually cost the state slightly more than it will save, says Linda Katz, the executive director of the newly named Economic Progress Institute.

That’s because, she said, for every dollar the state spends on low income medical assistance the federal government provides matching funds.

So while the state would save $2.6 million by cutting low income dental care for the tens of thousands of Rhode Islanders who make use of this program, the Department of Human Services would actually lose more than $5.2 million in funding. More than $5.2 million because the feds actually match $.52 on the dollar, Katz said.

“It’s easy to talk about raw numbers,” she said. “But you have to understand what is behind those numbers.”

At a presentation last week, Katz said for the last few budget cycles those on the right have talked about making cuts health and human services spending because it has gone up 72 percent over the past decade while the overall state budget has only increase by about 40 percent.

While that’s true, much of that increase to health and human services comes in the form of federal dollars.

Consider food stamps, for example. Yes, the state distributes some $298 million worth of food stamps, but 99 percent of those dollars comes from the federal government, Katz said.

Given that food stamp spending has gone up some 368.5 percent over the past ten years, according to her presentation, it accounts for a significant increase in the health and human services spending in Rhode Island, but almost all of it comes from the federal government, rather than directly from Rhode Island taxes.

Of course, the vast majority of the increases to health service spending has been in providing medical benefits. But this increase has mirrored the increases in the private sector, Katz said. Citing a Kaiser study, she said family medical coverage has increased 11 percent over the past ten years.

“The same factors that are driving up costs in the private sector are driving up costs in the public sector as well,” she said.

These increased costs should be something that Rhode Island is willing to absorb.

“Certainly everybody should have access to high quality affordable health care,” she said.

February 21, 2012February 23, 2012

Brown can and should pay Providence more

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While it was the hospitals Mayor Angel Taveras met with late last week, the focus again this week will likely be a new deal with Brown University.

After all, the hospital industry in Rhode Island is struggling, reports Megan Hall of Rhode Island Public Radio. The hospitals here lost a combined $4 million last year, the Hospital Association of Rhode Island said. Six of the 11 lost money, but the lobby group wasn’t saying which ones.

Brown University, on the other hand, is doing quite well.

It’s endowment is worth $2.5 billion this year, an increase of 19 percent from the year before. That’s the money the Ivy League School has in the bank. While the endowment invested some $100 million in offsetting the university’s costs last year, a mere 14 percent of the school’s overall budget, its nest egg grew more by more than $400 million.

Taveras expected to get about $4 million a year from Brown – or about 1 percent of what the school earned on its investment last year. That’s not a big slice of the profits.

It’s true, Brown may have lost much more than that in the 2009 crash, but over the last ten years it’s endowment has gone up by a comfortable 7.7 percent. It’s also true that Brown has the smallest endowment in the Ivy League, but that’s a little bit like being the biggest city in Wyoming: Cheyenne is no more urban than Brown is poor. This Wikipedia list ranks it as the 28th richest college or university in the country.

Brown may be the single best influence on the city of Providence – its employs thousands of people, the commercial districts on Wickenden and Thayer streets owe their very existence to the students and staff there and its cultural offerings are a boon to the entire community.

But Providence is a pretty good thing for Brown, too. And it’s very safe to assume that the best and brightest will think twice about spending $50,000 a year to attend the prestigious university if its located in a financially destitute city.

Brown should pay up not only because it can afford to do so, but also because it’s in its best interest to do so.

February 19, 2012February 19, 2012

A Different Tax Exemption for Brown

It was Saturday night, I was reading through Providence’s 2012 fiscal year budget, and I came across an expenditure that caught my attention.

We’re all pretty familiar by now with the gist of this table, even if the numbers are dizzying:

Between the variations of public property, the “meds and eds,” and other tax-exempt properties, Providence is not collecting property taxes on $6.7 billion of assessed value [cue any criticisms you may have about the assessment process]. All this is determined by statute.

But just up the page are the tax exemptions determined by personal qualities, such as being a veteran, a widow, blind, or “Brown Professor.” I can only assume the latter refers to individuals who are employed at Brown University as professors and are then eligible for exemptions on the taxes on both their real property and their motor vehicles.

The total assessed value that comes out of this is only $68,362, which means its impact on the city budget is no more than $3,000. But still, what is going on with this exemption? Does anyone know the back story?

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