Mon, 30 Mar 2009

Deep six the supplemental budget

The House rewrite of the Governor's supplemental budget could hardly be a worse document than the original budget, but it is just as bad. On balance, you have to say it's slightly more realistic in its assumptions, but it is crueler to the cities and towns. So take your pick: a bad budget, based on unrealistic assumptions (from the Governor) or a worse budget, based on realistic assumptions (from the House).

The budget ends general revenue sharing for the cities and towns. This is a pot of about $55 million that is shared with all the municipalities, and which they were all counting on in order to fill out this year's budget. This is cut to zero in the House version. Let's be clear about what's happening. Three-quarters of the way through the fiscal year, cities and towns are being told they have to suck it up and make up a whole year's worth of state aid. Providence will lose $15 million under this budget. For comparison, the police and fire departments are both about $43 million departments, and the rest of the municipal government is about the same. So they'll have to cut about 13% of their annual expenses in three months. In other words, if everyone took six weeks off and went home, they might make it. This doesn't consider the cuts to education aid, but there are some of those, too, despite the addition of federal stimulus money.

To pick a random suburban town, in North Kingstown the loss appears to be about 4-5% of the general municipal budget. So they'll only need to give everyone two and a half weeks off, or otherwise find a way to cut 20% of the budget for three months.

According to my understanding of the ARRA (stimulus) money, the House budget front-loads the money more than the Governor had. The Governor appeared to be saving some of the ARRA money for the next fiscal year, which is sort of counter to the spirit of the stimulus. On the other hand, the House budget scoops more of this money, giving less of it to the towns, so that's counter to the spirit of the stimulus, too.

A big part of the fiscal stimulus money was an increase in the Medicaid match, which means the federal government's split of medicaid costs would change from 52/48 to 55/45 or so. The legislature scooped that money, too, cutting Medicaid expenses and keeping the additional Medicaid money for the general revenue budget.

The good parts of the House changes are they scotched the idea of selling state buildings to RI Housing as a way to loot that agency, and they put off the Governor's weird pension savings, which weren't really supported. But they didn't reject the pension cuts. They just said we're not going to make any pension payments between April 2 and June 30, while we await more documentation. I'm sure that on June 30, they'll be happy to pony up.

And let's not forget that there is still a multi-million-dollar tax cut in this budget. The flat tax is still due to go down a half-percent this year, providing a huge break for a small number of lucky people. While the rest of us watch the state crumble, those folks will continue to fly first class.

There's much more; almost every page has a new outrage. This budget is a disgrace to the people who wrote it and an affront to anyone who cares about the future of our state, not to mention the future of whatever city or town you live in. I don't think what's wrong with it can be fixed by amendment, and I hope it goes down in flames. Sadly, I fear this is unlikely, because there are very few legislators with the courage to defy the leadership, but when the leadership has led you into a disaster, why do you still follow?

22:28 - 30 Mar 2009 [/y9/ma] link

Sun, 29 Mar 2009

Plus ca change...

From O. Henry's Rural Sports, one of his tales of Jeff Peters, the con man:

"Farmers are not fair game to me as high up in our business as me and Andy was; but there was times when we found 'em useful, just as Wall Street does the Secretary of the Treasury now and then."

07:21 - 29 Mar 2009 [/y9/ma] link

Sat, 28 Mar 2009

Our economic woes: Doing it to ourselves

The essence of Greek tragedy is that the hero does it to himself. King Creon destroys his family through his stubborn insistence on punishing Antigone. Oedipus was, well, blind to his own quick temper, and if he hadn't killed that guy he met on the road, things might have turned out differently.

At this point, it's hard to argue that the state's fiscal problems were not self-inflicted. Yes, we're in an economic crisis, but the state's books were out of balance before, and we blindly cut taxes to make it all worse.

But what a lot of people don't appreciate is how much of our economic problems are self-inflicted, too. Some interesting evidence comes from data developed to determine how best to stimulate our economy.

See more ...

15:56 - 28 Mar 2009 [/y9/cols] link

Mon, 23 Mar 2009

The budget follies: Comedy or tragedy?

W.C. Fields had it that "Comedy is tragedy happening to someone else." And in truth, what can you say about the budget farce whose curtain went up last week? If I lived in another state, I'd be laughing.

Governor Carcieri presented his budget to the legislature last week (only five or six weeks past the deadline). Astonishingly, he was unable to get any Republican to introduce it for him at first. They think he didn't cut enough spending, and though I disagree, they do have a point: fantasy makes bad budgets.

The Governor is committed to the fiction that we can have it all, and lower taxes, too. There are no cuts to programs mentioned at the top of the budget's executive summary except for cuts to state employee pay and pensions and some cuts to medical care for the poor. How can he manage such fiscal legerdemain? Easy: by sticking it to the cities and towns. Between this year and next, we're looking at around $110 million cut from state contributions to the non-school side of municipal aid, and $31 million restored by the federal government, through the stimulus package. General revenue sharing with municipal budgets will be a thing of the past, and the education cuts are deep and dramatic, too, unless you're running a charter school (up 20% since 2008).

Meanwhile, it's not even clear that the budget is even legal. The Governor intends to appropriate all the federal stimulus package money meant for city and town education budgets this year and next year, except increases in Title I and special ed money. His budget simply deducts the payments each town is to receive from their state aid payments. (Granted, for the current year they demand that towns make up part of the difference from the municipal side of the budget, but how does that help?) The state budget officer, Rosemary Booth Gallogly, isn't sure this is permissible under the stimulus package rules, and Providence Mayor David Cicilline has written to Arne Duncan, President Obama's new education secretary to ask that they not permit it.

See more ...

08:03 - 23 Mar 2009 [/y9/cols] link

Sat, 21 Mar 2009

Stimulus estimates

Have you wondered where the numbers come from when people say stuff like "tax cuts are less stimulative than food stamps"? Much of them come from estimates made by Moody's economy.com, and presented to Congress last summer (2008). Find them here.

09:43 - 21 Mar 2009 [/y9/ma] link

Sat, 14 Mar 2009

Suffering a catastrophe to prevent a catastrophe

Sometime in the future, a storm might come and knock down your house. If it does, rebuilding will cost a lot of money. Suppose you could shore up your house now, with a stronger roof and steel beams, but you'd have to sell all your furniture to do it. Would you prevent a disaster in the future by voluntarily undergoing one today?

The people managing the state's pension system say yes. Public employee pensions are on a lot of people's minds. There's a legislative commission looking into them, and some alarming testimony came from the Treasurer's office last week about the rising cost of pensions, which provoked predictable calls for slashing them, again.

See more ...

00:00 - 14 Mar 2009 [/y9/cols] link

Mon, 09 Mar 2009

More good reading

Can be found at Closing Arguments, a new blog by Matt Jerzyk, the founder (though no longer the proprietor) of RI Future. He intends to make it more about the legal and intellectual background to the news. It's good stuff, go there and read it. Often.

22:30 - 09 Mar 2009 [/y9/ma] link

Sat, 07 Mar 2009

Why is this kind of waste ok?

In debates over taxes, it's easy to get caught up in statistics, and sometimes it's a little hard to tell what they mean. But here's another source of data about the impact of taxes in Rhode Island.

Last week I wrote about the movie production tax credit: up to $15 million in credits we give out each year for movie productions in Rhode Island. We also have the Historic Structures tax credit, which was phased out last year, but there are still a number of projects that got in before the deadline and are now in the pipeline.

But what happens to credits awarded to people or organizations who don't owe that much tax? They sell them at a discount, and the buyer gets a break on their taxes and the seller gets most of the money and everyone's happy. Well, except the taxpayer who is subsidizing some rich person's taxes for what reason, exactly?

See more ...

19:11 - 07 Mar 2009 [/y9/cols] link

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