Thu, 26 Oct 2006

Referenda in November

[This is an article from the October issue, printed here because we have an election coming.]

In a few weeks, we'll have an election to vote in. Because most of the content has been leached out of the reporting of politics in America, most of us will vote on candidates without exactly knowing what policies they stand for. How many know, for example, that Lincoln Chafee has fully backed CAFTA (free trade with Central America) and permanent trade relations with China, and voted for the credit-card industry-backed bill to restrict personal bankruptcies in 2005? How many know that Governor Carcieri has repeatedly passed up an easy opportunity to lower pension costs for all the cities and towns in the state?

But there is one place on the ballot where we have to learn about the issues, since the issue is the only thing there. Here is our list of the statewide referenda you'll see in the voting booth this November.

Gambling

Question 1 will permit the Narragansett Indian tribe to build a casino in West Warwick with their "chosen partner," Harrah's Entertainment, in this case. Harrah's is planning to pour about a billion dollars into building this project, so the construction will certainly provide jobs. And the casino itself will employ people after it's built. But whether this will be enough to outweigh the negative impact on Lincoln Park and Newport Grand is quite unclear. Even more unclear will be the state's share of the proceeds. The state takes 60% of the slot revenue in those places. Harrah's offered 25% once, but there's nothing written down.

The whole selling point of the casino to the House leaders who put this on the ballot is its impact on state and town finances. But these "details" are completely absent from any public document. Harrah's has offered its number, but it's not written into the referendum. And once the casino is approved by voters, the power in the negotiation slips right over to Harrah's. We are inviting an 800-pound gorilla to share our little state with us, and only hoping that he doesn't stain the carpet.

Right to Vote

Question 2 would restore the right to vote to people who aren't in jail, but are still on probation or serving a suspended sentence after a felony conviction. Rhode Island is the only state in New England that prevents these people from voting. Probation and parole are supposed to be ways to ease the former criminal back into society. The way we do it, though, it's just a continuation of the sentence. It's fine to think that someone's sentence should be longer, but the fact remains that these are people who are out in the world, living and trying to work among us. One would think it important to make it easy for them to succeed.

Capital Budget "Reform"

Question 3 is a technical change to the constitution changing some aspects of the state budget. Right now, each year, the state budgets only 98% of the revenue we think we'll receive. The remainder gets put into a "rainy day fund" which is used to carry us over short term cash-flow problems. The fund itself is capped at 3% of revenue, so when it's full, whatever is left over is the "Capital Plan" and is to be spent on capital projects like parking lots, and repointing bricks in state buildings.

The problem is that one of the ways that the state budget has been balanced in the past few years is by calling repayment of state bonds a capital project, and moving it into the Capital Plan. So this year, we'll spend about $25 million on capital projects and about $39 million on repaying bonds out of this fund. This is not the way the Capital Plan/rainy day fund was planned, and the people who planned it are upset about that and want it restored to its original purpose. If I were planning a new state from scratch, this is how I would design a budget process. But I'm not, and reality forces me to admit that this is how the state has been balancing its budget for several years. Approving this measure will mean a $30 million hole in next year's budget in the name of fiscal fitness, but that money will be spent on maintaining state buildings instead. Maintaining our buildings is important, but our Governor views the budget as a zero-sum game. No new expense is worth paying for, in his opinion, so the extra costs will certainly displace something else. If you were concerned about cuts in state spending last spring, you should be very concerned about passage of this measure.

The measure also increases the size of the rainy day fund, from 3% of the general revenue to 5%. But this change is phased in over a few years, so it won't be a very dramatic change at all.

Higher Ed Bonds

Question 4 is a $73 million bond for one high-profile project, and one smaller, but probably necessary one. The high-profile project is a new College of Pharmacy building at the University of Rhode Island in Kingston. The lower-profile project is a renovation of some buildings at Rhode Island College.

High-profile projects like the College of Pharmacy are the way universities attract students as well as funding. In other words, this is potentially an investment with a payoff. The pharmacy program is a good one, and has grown out of its current home. But the likelihood of the investment paying off in the long run is also dependent on whether the state chooses to support the university or (as is currently the case) not. State support of our colleges has been on a 15-year slide, though the state is always ready to borrow for fancy buildings to appear supportive. Our colleges are now essentially private institutions with a little bit of state funding. In 1990, the state contributed a bit less than $70 million to URI, and tuitions made up a bit more than $40 million. In 2007, the state's contribution will be $86 million: up 23%. But the tuition contribution is up well past $100 million: up 150%.

Transportation Bonds

Every two years, voters are asked to approve another round of borrowing for RIDOT. What voters here may not realize is that what seems like a routine operation here is very unusual among states. We are among the only states in the country who borrow year after year to fund our road construction. Most states borrow for unusual expenses, like big bridges or toll roads, but we borrow for \emph{everything}, and every year the debt service we pay goes up by $3-4 million. It's the very definition of an irresponsible budget practice and the same people who insist on the "prudence" of a reform like question 3 see nothing wrong with this routine borrowing.

Had Lincoln Almond stopped this practice a decade ago, we would now have about $300 million less state debt. The interest on that debt is roughly equal to what DOT is proposing to borrow in this bond measure. In other words, we're now borrowing to cover debt service payments. Using a credit card to pay your credit card bills is a common financial strategy, but not a good one. DOT is in a deep fiscal hole. Vote yes on number 5 to make it deeper. There's much more about DOT's fiscal woes in RIPR issue 7, available here.

The transportation bond is lumped with a bond to buy new bus equipment and transit improvements. It's $80 million for highways and $7 million for commuter rail stations in Warwick and Wickford and $1.5 million for new buses. These kinds of transit improvements are always lumped with DOT bonds, to help them pass. The strategy is a disgrace, since people who think the state needs more transit are forced to vote for more highways. There's nothing essential about doing it this way. The Department of Environmental Management does the opposite, and has three bond issues at stake.

DEM Bonds

Bond question 6 ($11 million) will fund the rebuilding of big parts of the Roger Williams Park Zoo, number 7 ($4 million) will rebuild part of Fort Adams and provide some improvements around that park, and number 8 ($3 million) is for helping towns build soccer fields and playgrounds. All of these are general obligation bonds, which means they will be repaid by state tax money, not by zoo or park admissions, or by the towns that receive the help. They are also very modest in size compared to the benefit received.

Affordable Housing

Question 9 is a $50 million bond to build affordable housing. The housing market in the state is in deep crisis, and anything will help, but this bond won't help much. Residential housing is a $5 billion a year market, so this much money isn't going to do much except provide housing to a few lucky families. The truth is that our housing crisis is really a market failure, and the state really has no housing policy besides building a few units, and forcing towns to develop a policy of their own. Until the state decides to address the market conditions directly, we will all suffer.

[If you thought this article was useful, there are lots more coming. This month's issue also contains a report on disturbing developments in labor law, a description of what's wrong with comparisons between Rhode Island and New Hampshire, and a review of an excellent, but troubling, book about the Iraq War by George McGovern (remember him?) and William Polk. Please subscribe, and help support useful research on RI public policy.]

14:57 - 26 Oct 2006 [/y6/oc] link

Ads and the like: