HOUSE POSTPONES HARD DECISIONS IN NEW BUDGET, BUT MAKES A FEW 'RIGHT' CALLS.
The Good, the (not so) Bad, and the Ugly
Of the budget approved by the House last night, Gordon Fox told Channel 10 "people like to say they think we're moving to the right, but I think we're just doing things right"
The majority leader's seems to have overstated how much the House got 'right', but he deserves credit for walking rather than running away from the right leaning label.
What do folks on the right think of the result?
The Good:
The legislature turned back efforts by state employee unions to prevent the most modest down payment on pension reform from passing. Although, representatives also rebuffed attempts to raise the retirement age to 65, a move that would have saved more money than the chosen reform of age 62. There is a long way to go, and the hard decisions in the battle to gain control of pension obligations have just begun. Especially if this is an indication of things to come, we offer credit where credit is due.
The [not so] Bad
The House voted to restore a modest grant from federal educational stimulus funds (amounting to just 1% of that pie) to begin operation of a mayoral academy championed by Cumberland Mayor Dan McKee. To the extent that the Mayor's efforts at creating more responsive, flexible and effective educational environments can proceed in the face of union opposition, this move can be considered another step of the legislature from under the thumb of labor union direction.
But the planning and execution of these mayoral academies must sunset this excess expenditure. Otherwise we are faced with a repeat of the 100,000 cop deal: The feds gave the money to hire them for a couple years, and then suddenly they were line items in municipal budgets. What we need in education is a funding formula where the money follows the child, to mayoral academies, to charter schools, even to a private school. Otherwise, when the federal money runs out, the state will be forced to choose between its educational innovations and ingrained traditions.
The legislature declined one invitation to class warfare offered by its more progressive members who wanted to eliminate the flat tax option for a relatively few wealthy individuals. There seems to be a growing recognition by even Democrats in the state legislature that taking punitive tax measures against financially successful people simply encourages them to leave the state, or not locate their businesses here, and leaves the state no better off, probably worse.
And the Ugly
Unfortunately, Rhode Island's historic enmity for wealth took a lurch forward, nonetheless, as the House raised capital gains taxes by up to 400% -- discouraging private investment in our state at a time it is most needed.
This horrible choice on capital gains was made even while the legislature increased spending 12%. And very little of this increase appears to be short term spending -- see Mayoral academies above. Our structural deficit continues even as our tax competitiveness stalls.
The cigarette tax. Sure, it's a slow-pitch political softball easily hit out of the park. Who stands up for smokers? Well, we do. How many times over are smokers going to be asked to pay their own health care costs? We cannot celebrate that seventy one percent of smokers make less than $35,000 per year and thus see this as a tax that falls less on the wealthy. Basically both the cigarette tax and the capital gains tax are economically insupportable sin taxes. You are being taxed for the sin of smoking and the sin of making money on your investment.
The Final Results
With $226m in short term "stimulus" revenues plugging the gap, legislators were 'business as usual' and increased spending by 12%. This bodes very poorly for next year's budget process. We will have an even larger structural deficit, but the capital gains tax especially will impede economic recovery and make finding revenues even more difficult. Perhaps 2010 will be the year of the spending cut.
About OSPRI:
Created in 2007, our work is focused on crafting sound public policy based on the principles of free enterprise, limited government, and traditional American values. We offer timely research and analysis on important issues to be shared with elected officials, the media, business leaders, community organizations and individual citizens. In recent months, we have been responsible for such successful projects as the Transparency Train - A public financial and legislative information repository, as well as regular updates published and available on our website and companion blog.
About The Transparency Train:
The Transparency Train Web Portal (www.transparencytrain.org) provides access to a variety of websites designed to present public information in a Google-style searchable format. These sites include:
RI Data which contains every budget, payroll, public employee contract and monthly check register for all cities, towns and school districts in Rhode Island.
RI Votes which is an online database of legislation and voting records.
LRB Watch provides analysis and information on the State Labor Relations Board.
RI Schools is an interactive website that allows viewers to create comparative graphs of school districts plotting various metrics such as cost per student, test scores and the number of employees (coming Spring 2009).
RI Donors will contain a "connect the dots" approach to viewing political and lobbying finances (coming Fall 2009).
Take Action, a "how-to" manual that shows citizens how to file Freedom Of Information Act requests for public information and what to do if they don't comply.
About OSPRI:
Created in 2007, our work is focused on crafting sound public policy based on the principles of free enterprise, limited government, and traditional American values. We offer timely research and analysis on important issues to be shared with elected officials, the media, business leaders, community organizations and individual citizens. In recent months, we have been responsible for such successful projects as the Transparency Train - A public financial and legislative information repository, as well as regular updates published and available on our website and companion blog.
About The Transparency Train:
The Transparency Train Web Portal (www.transparencytrain.org) provides access to a variety of websites designed to provide public information in a Google-style searchable format. These sites include:
RI Data which contains every budget, payroll, public employee contract and monthly check register for all cities, towns and school districts in Rhode Island.
RI Votes which is an online database of legislation and voting records.
RI Schools is an interactive website that allows viewers to create comparative graphs of school districts plotting various metrics such as cost per student, test scores and the number of employees (coming Spring 2009).
RI Donors will contain a "connect the dots" approach to viewing political and lobbying finances (coming Fall 2009).
Take Action, a "how-to" manual that shows citizens how to file Freedom Of Information Act requests for public information and what to do if they don't comply.
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