6/22/12

Grading the New Budget

The way in which the General Assembly passes the new fiscal year’s budget and legislative package for the state is always a perplexing affair, and this year’s experience is no different. Last minute introductions and deletions to bills, frantic huddles and confabs, grinding late night sessions, feigned displays of frustration and outrage on the part of junior members and the republican opposition, all make for a confusing, exhausting close to the year’s session. And what do we get out of all this sausage making? Budgets with one-term fixes, bills with hidden time bombs and other unintended consequences, special interest deals, solid reform initiatives that go nowhere, and policy making lurches back and forth that all add up to chronic disappointment and misdirection.


In none of this is there any committed focus on restructuring government, holding down government spending, or relieving taxpayers of the structural debt problem that plagues Rhode Island and is only going to get worse. That’s why sane observers like URI economist Leonard Lardaro shake their heads and ask, “Why do we keep doing things this way?”

It takes days for the true extent of the work accomplished – or not – to emerge from the fog left over from all the legislative fuss n’ feathers and hot air. As one small example, did the legislature pass the $2.5 million pension relief package for Central Falls retirees? And does this budget close the $100 + million deficit the state is facing for next fiscal year? Again, who knows?

As always with these things, there are a lot of intangibles and projections built into the numbers, prompting reasonable questions such as: Will the state continue to see enhanced tax revenues in the coming year or, should the economy slow down further, will those revenues fall below the built-in projections; will departments of state government contain their spending and hew to their budgets or will they overspend as some of them almost always do; will adding table games at Twin River and Newport Grand meet projections, and for how long? How many more bailouts might we have, forcing the state to rush payments? How much will we have to pay back for the 38 Studios demise?

These are all legitimate questions that could affect the budget and next year’s structural deficit. There were calls, as there have always been when windfalls happen (like the tobacco settlement or two major RI lottery wins in the space of a month) to be careful with the money and use it wisely. But, again, it would appear that legislators largely used the extra revenues to plug holes in the deficit as a one-time fix. These are like potholes in the road that keep getting filled only to reappear again.

They also increased state spending, at a time of great economic uncertainty. In contrast, neighboring Massachusetts, which is in pretty good shape with hundreds of millions due to come in from casino licensing fees and eventual gaming revenues, pretty much kept spending at its present level, mindful of the economy. That seems very prudent, so what were our people thinking?

Legislators, perhaps fearing a labor backlash at the polls in November, refused to embrace Governor Chafee’s municipal relief proposals. By not acting they have left cities and towns in the lurch. Now they have to either claw back concessions from their unions or legislate the claw backs, which puts them on shaky legal ground when those moves are challenged in court. In the meantime their annual pension obligations are soaring.

I do applaud a number of things the legislature accomplished, from more educational funding and the homeless bill of rights to not messing with the tax code. Raising selected sales taxes, like on expensive clothing and shoes, is something that everyone should be able to live with. Allowing the entry of for-profit hospital chains in RI is also a good thing when one considers the state that several of our community-based non-profits are in financially. And adding some flexibility for businesses with regard to fire code adherence is also a positive step, considering the onerous nature of the rewritten code after the Station Nightclub disaster.

Overall, due to the unresolved questions about the deficit and the lack of support for the Governor’s municipal relief proposals, I’d give them a C.









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