Rhode Island Policy Reporter

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RIPR is a (paper) newsletter and a weekly column appearing in ten of Rhode Island's finer newspapers. The goal is to look at local, state and federal policy issues that affect life here in the Ocean State, concentrating on action, not intentions or talk.

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whole site RIPR back issues

Available Back Issues:

  • Aug 09 (38) - How your government's economic policies have worked against you. What a fake nineteenth century nun can teach us about the tea party protests.
  • Jun 09 (37) - Statistics of optimism, the real cost of your government. Judith Reilly on renewable tax credits. Review of Akerlof and Shiller on behavioral economics.
  • Apr 09 (36) - Cap and trade, the truth behind the card check controversy, review of Governor's tax policy workgroup final report.
  • Feb 09 (35) - The many varieties of market failures, and what classic economics has to say about them, review of Nixonland by Rick Perlstein.
  • Dec 08 (34) - Can "Housing First" end homelessness? The perils of TIF. Review of You Can't Be President by John MacArthur.
  • Oct 08 (33) - Wage stagnation, financial innovation and deregulation: creating the financial crisis, the political rhetoric of the Medicaid waiver.
  • Jul 08 (32) - Where has the money gone? Could suburban sprawl be part of our fiscal problem? Review of Bad Money by Kevin Phillips, news trivia or trivial news.
  • Apr 08 (31) - Understanding homelessness in RI, by Eric Hirsch, market segmentation and the housing market, the economics of irrationality.
  • Feb 08 (30) - IRS migration data, and what it says about RI, a close look at "entitlements", historic credit taxonomy, an investment banking sub-primer.
  • Dec 07 (29) - A look at the state's underinsured, economic geography with IRS data.
  • Oct 07 (28) - Choosing the most expensive ways to fight crime, bait and switch tax cuts, review of Against Prediction, about the perils of using statistics to fight crime.
  • Aug 07 (27) - Sub-prime mortgages fall heaviest on some neighborhoods, biotech patents in decline, no photo IDs for voting, review of Al Gore's Against Reason
  • Jun 07 (26) - Education funding, budget secrecy, book review of Boomsday and the Social Security Trustees' Report
  • May 07 (25) - Municipal finance: could citizen mobility cause high property taxes? What some Depression-era economists had to say on investment, and why it's relevant today, again.
  • Mar 07 (24) - The state budget disaster and how we got here. Structural deficit, health care, borrowing, unfunded liabilities, the works.
  • Jan 07 (23) - The impact of real estate speculation on housing prices, reshaping the electoral college. Book review of Blocking the Courthouse Door on tort "reform."
  • Dec 06 (22) - State deficit: What's so responsible about this? DOT bonding madness, Quonset, again, Massachusetts budget comparison.
  • Oct 06 (21) - Book review: Out of Iraq by Geo. McGovern and William Polk, New rules about supervisors undercut unions, New Hampshire comparisons, and November referenda guide.
  • Aug 06 (20) - Measuring teacher quality, anti-planning referenda and the conspiracy to promote them, affordable housing in the suburbs, union elections v. card checks.
  • Jun 06 (19) - Education report, Do tax cut really shrink government?, Casinos and constitutions, State historic tax credit: who uses it.
  • May 06 (18) - Distribution analysis of property taxes by town, critique of RIEDC statistics, how to reform health care, and how not to.
  • Mar 06 (17) - Critique of commonly used statistics: RI/MA rich people disparity, median income, etc. Our economic dependence on high health care spending. Review of Crashing the Gate
  • Feb 06 (16) - Unnecessary accounting changes mean disaster ahead for state and towns, reforming property tax assessment, random state budget notes.
  • Jan 06 (15) - Educational equity, estimating the amount of real estate speculation in Rhode Island, interview with Thom Deller, Providence's chief planner.
  • Nov 05 (14) - The distribution of affordable houses and people who need them, a look at RI's affordable housing laws.
  • Sep 05 (13) - A solution to pension strife, review of J.K. Galbraith biography and why we should care.
  • Jul 05 (12) - Kelo v. New London: Eminent Domain, and what's between the lines in New London.
  • Jun 05 (11) - Teacher salaries, Veterinarian salaries and the minimum wage. Book review: Confessions of an Economic Hit Man
  • Apr 05 (10) - Choosing a crisis: Tax fairness and school funding, suggestions for reform. Book review: business location and tax incentives.
  • Feb 05 (9) - State and teacher pension costs kept artificially high. Miscellaneous tax suggestions for balancing the state budget.
  • Dec 04 (8) - Welfare applications and the iconography of welfare department logos. The reality of the Social Security trust fund.
  • Oct 04 (7) - RIPTA and DOT, who's really in crisis?
  • Aug 04 (6) - MTBE and well pollution, Mathematical problems with property taxes
  • May 04 (5) - A look at food-safety issues: mad cows, genetic engineering, disappearing farmland.
  • Mar 04 (4) - FY05 RI State Budget Critique.
  • Feb 04 (3) - A close look at the Blue Cross of RI annual statement.
  • Oct 03 (2) - Taxing matters, a historical overview of tax burdens in Rhode Island
  • Oct 03 Appendix - Methodology notes and sources for October issue
  • Apr 03 (1) - FY04 RI State Budget critique
Issues are issued in paper. They are archived irregularly here.

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The Rhode Island Policy Reporter is an independent news source that specializes in the technical issues of public policy that matter so much to all our lives, but that also tend not to be reported very well or even at all. The publication is owned and operated by Tom Sgouros, who has written all the text you'll find on this site, except for the articles with actual bylines.


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Fri, 27 Jun 2008

What's a Mayoral Academy?

Part of the state budget bill passed last week created "Mayoral Academies" a new kind of school. This was a controversial article of the budget, with labor fighting hard against it, but fairly easily overcome in the vote. So what's the story behind this effort?

One version of this story has it that these are an exciting new experiment in public education, established due to the bravery of Cumberland's Mayor Daniel McKee and midwived by important members of the progressive movement like Ramon Martinez, leader of Progreso Latino in Central Falls. The schools will be regional, serving one or more towns, and operated by non-profits, so are able to attract grant funding, possibly lavish, from the likes of the Bill and Melinda Gates Foundation.

Sounds good? Here's the other version: Rhode Island now has a new label on its charter schools, with zero protections for the teachers who work there. The establishment was made possible by so-called progressives who abandoned their union allies (who recently stood with them on immigration, Medicaid and child-care funding) in the hope of getting better schools for some of their children. These are schools that will be funded by tax dollars, but run by one of a handful of already existing nonprofit agencies that run schools, so we have the first step towards privatizing our public school system.

Which version is right? Trying to decide, I read the bill that established these academies, and it just takes the old charter school statute and sprinkles "with the exception of mayoral academies" all over it. It says that any charter school established by a mayor is hereby exempted from almost all regulation, from labor rules to retirement plans to the number of school days in a year.

Now charter schools are interesting in many ways. Certainly there's plenty to fix about the existing school system, but that's exactly the problem. The Met School is, I hear, a fine place, but I don't yet see how it's helping Providence's Central High School a few blocks away.

So I moved on to the Mayoral Academy report, issued by McKee in January. What I learned from the report is that these academies are all about money. There's a page or two of stirring vision for the future of education in there. Had all the usual stuff about "very high expectations" and "energetic and talented leadership." But it was completely lost amid all the tables about taxes and relative costs between Rhode Island and other states.

So if money's the subject, let's talk about money. Charter school proponents often talk about how charter schools won't displace public school funding. But that was clearly proven untrue in 2004, when the Governor's budget took $7.9 million from the state's public schools and gave the exact same amount to the charter schools. Subsequent budgets have been only slightly less blatant. By now, this point is unarguable: more charter schools equals less money for other schools.

The Mayoral Academy proponents talk about money from private foundations they expect to pour in to support them. No doubt there will be some, because anti-union education reforms seem always to attract initial funding from big foundations. A lot of capital was suddenly available fifteen years ago when Baltimore experimented with privatizing its public schools. (Baltimore gave up on the experiment only four years later. It didn't help school performance, and was too expensive.) The first one or two Mayoral Academies can expect substantial support from out of state, which will be a fabulous thing for their students. After that, who knows?

But there's money, popping up again. "Money isn't the problem," is a sort of mantra among education reformers, but they're wrong. Money is very much the issue in education, and if you need proof, consider the Mayoral Academies themselves. When you get to the bottom of all the claims and counter-claims, essentially what Mayor McKee is saying is that with more resources -- taken from teachers instead of taxpayers -- he can create a school with superior outcomes.

And what do you know? The school departments and teacher unions also say that with more resources they can create schools with superior outcomes. What a coincidence.

So the big difference between the teachers and McKee is only where these resources come from. McKee wants it to come from teachers and from the existing public schools -- and from the grant fairy. Teachers say that the amounts you can get that way are just too small to make a big difference, and besides public schools should be funded by the public.

But this gets to the real issue. No one should have any doubt that, liberated from all kinds of rules, Cumberland and other towns can establish some wonderful and cozy schools, with all the finest equipment, fascinating courses, individualized attention. But so what? They'll only be providing this experience for a small, randomly-chosen, population of students. What about everyone else? Their parents pay taxes, too.

Mayor McKee's Academy, his solution to our education woes, will leave the majority of students in its region still in the same schools, but now with less money. The students who don't luck into his Academy will find themselves hearing about the wonderful opportunities available there, but they won't be able to share them -- a land of equal opportunity for the lucky. I'll leave it to others to explain why that's such a good idea.

22:51 - 27 Jun 2008 [/y8/cols]

Shape of the Starting Line

By popular demand, here's a link to The Shape of the Starting Line, a report I wrote in 2006 for Working RI. It's an annotated bibliography of current research on the relation between academic achievement and poverty, nutrition, early childhood education, family circumstances, reading aloud, teacher unions, charter schools, and much more. I enjoyed researching it, and hope you enjoy reading it.

If you are interested in charter schools, I particularly recommend page 37. If you are interested in teacher unions, try page 33.

13:01 - 27 Jun 2008 [/y8/jn]

Sat, 21 Jun 2008

An interesting comparison

An article in the Nation points out that the pay of the five most highly-paid hedge fund managers added up to $12.6 billion in 2007, while the five best-paid CEOs earned a measly $290 million. Almost makes you feel sorry for the CEOs, doesn't it? Especially when you consider that the hedge fund salaries are considered capital gains, so they pay tax at a lower rate than you do.

Find CEO salary data at the New York Times, while the hedge fund data came courtesy Alpha, a hedge fund trade magazine.

11:57 - 21 Jun 2008 [/y8/jn]

Fri, 20 Jun 2008

What a budget, what a year!

The fiscal 2009 budget has now been approved by the Assembly, and everyone expects the Governor to sign it. Here are a dozen things worth knowing about it.

  1. The official word is that there were no changes to any taxes. But what this means is that the tax on bottled water the Governor and legislature enacted in May will stand. This also means that taxpayers earning more than around $250,000 will get their cut on schedule and pay a few thousand dollars less in income tax than they did last year. It also means that raising the tax on health insurer premiums and expanding it to cover dental insurance apparently doesn't count. The last such change in this tax was promptly passed on to you, though, so this one probably will be too.
  2. All traffic fines will increase. An offense that cost you $75 will now be $85. Minimum court costs are going up, too.
  3. The only bond issue to be on the fall ballot is a transportation bond: $80 million to make the fiscal train wreck of the Department of Transportation much worse, and also $7 million for public transit. The agricultural open space bond and other DEM priorities were not deemed important enough, so you won't get to vote on them.
  4. But that's not the only borrowing. The state intends to borrow (without a referendum) almost $350 million to buy back already-issued historic tax credits -- at full price. This will cost us about $47 million for the next nine years. Of that $47 million, a bit more than $9 million a year will not go to restoration or the wages of construction workers, but to lower the taxes of whoever bought the credits. For perspective, this is just a little bit less than the state collects from taxes on alcohol each year. So if you buy a ten-dollar bottle of wine, about sixty cents of its sales tax will go to lower someone else's tax bill.
  5. There are several cuts to Medicaid, though some were not quite as bad as the Governor had proposed. (Medicare drug share payments, however, are slated to increase slightly.) The state remains essentially without a plan to realize the savings they claim in shifting long-term care patients to home care, though, so these savings likely won't happen. Quite a number of the poor people and immigrant children who are cut off will wind up getting care from emergency rooms, so these savings probably won't materialize either.
  6. You'll be happy to know that escalating costs due to the escalating caseload at DCYF have been addressed. That is, DCYF is to be empowered to help only 1,000 kids who need foster placements or similar services. If you happen to be kid number 1,001, you are officially out of luck. This, of course, is likely unenforceable, and could possibly put the state at some legal risk, making those savings unlikely to be realized, too.
  7. Administration of the crime victim's compensation fund will take a 10% chunk out of that fund, so if you are due some money from the fund, you'll get 10% less than you might have had you been beaten up this year instead of next.
  8. The reimbursement rates for child care are going up, slightly. Last year, they were pinned at 75% of the going rate for child care in 2002. (Seriously.) This year, the rate will be 75% of the average of the 2002 rate and the 2004 rate. (No joke, it really says that.)
  9. The budget changes law to allow "Mayoral Academies". These are charter schools, championed by Cumberland Mayor Daniel McKee, and exempted from any requirement about teacher pay, benefits or pensions. Proponents say they won't deprive the regular schools of money, but the claim is only convincing to people with short memories. In 2004, Governor Carcieri took $7.9 million from the state's public schools and gave it to the charter schools, and subsequent budgets have been only slightly less obvious. The record is pretty clear on the point: new charter schools will mean less money for existing public schools. Period.
  10. Municipal aid will remain unchanged from this year (which, you will remember, was cut $12.5 million in May). To make this a little more palatable, the state is promising "up to" $14.1 million in new education funds to be split among the cities and towns. (For technical reasons, it also takes back a little aid from a few towns, leaving the difference at $12.8 million.)
  11. Those cities and towns will doubtless be glad to hear about the establishment of a new "Advisory Council on Municipal Finance".
  12. There is barely a hand's width of distance between the Governor and the House leadership. The budget reads like the Governor's second draft. There are some important modifications here and there, but the basic thrust of his intent is intact -- the budget is balanced by spending cuts that affect the poor and middle and tax cuts that affect the people at the top of the income heap.

But really, the bottom line of this budget is that it's not even going to meet its own goals. False savings claimed today will give us a shortfall come November, and we'll have to cut more next spring. Meanwhile, wealthy people get their taxes cut, everyone's property taxes will go up (five towns have requested and received waivers of the state limits on property tax increases) and some of the biggest cost drivers -- DOT borrowing and health insurance, to name two -- remain completely unaddressed.

23:28 - 20 Jun 2008 [/y8/cols]

Mon, 16 Jun 2008

Another idea: neat, plausible...

What do you think about tutoring kids who attend failing schools? Sounds like a good idea, right? Too bad it doesn't appear to work.

Another chapter in a series of bad-but-simple solutions to serious problems.

15:00 - 16 Jun 2008 [/y8/jn]

Fri, 13 Jun 2008

What kind of government do you want?

As discussions about next year's state budget gets down to plastic tacks painted to look like brass, it's worth putting our heads up from the weeds for a moment to think about what our government should be.

For example, I would very much like to live in a world where my government was more efficient. Wouldn't you? I wouldn't mind lower taxes, but even more I'd prefer a government that could provide some of the services friends of mine who live elsewhere get from their governments. In Virginia, a friend who left here recently reports that there is an extensive network of community swimming pools, with youth teams that train and compete in them all summer. In Portland, Oregon, a fabulous and cheap light rail system whisks people in and out of downtown, creating new and prosperous business districts around its stations. Further afield, in most of Europe, college tuition is free or negligible, and a student's choice of university to attend is limited only by his or her grades. And of course, in most of the rest of the world, health care is paid for either by the government or a state-run insurance pool

Ok, I live near a beach, so I can do without the swimming pools, but transportation, college tuitions and health care are three of the biggest expenses my family faces. (Well, the tuitions won't hit us for a couple more years, but it's near enough to begin to scare me.) In other places, government helps families with those expenses. Why not here?

Yes, yes, I know. Here in the land of the free and the home of the brave, you're a sissy or a communist if you so much as murmur a faint longing for the easier life better government services might provide. Well, here's news: Oregon and Virginia are part of the US, and Great Britain pretty much invented cut-throat industrial capitalism, and they still manage the transport, tuition and health care hat-trick.

In truth, people here get so worked up about government spending that we have created a state government completely unable to deal with important problems. A better RIPTA, for example, could save us all millions, improving air quality and traffic while providing a cheaper way to get around, but it would require investment up front, so it doesn't happen. Investments in education and our environment could pay back even more, but are off the table, too, as are little savings we could find, like in the processing of welfare applications. A sensible, single-payer, health care system could save you and me and every business in the state tens of millions of dollars or more, but I don't see any prominent politician advocating for that, either. At best we get advocates for tiny little half-measures, like Lt. Governor Elizabeth Roberts's health care package.

What's worse is that come July 1, after all the cuts you've heard about, next year's budget is not going to be balanced. There are a number of places in the budget where the anticipated cost savings simply will not happen. For example, yes it is true that home care is a more economical way to care for poor elderly and disabled patients, and regulations that encourage it are a good thing. But it is not true that $67 million of that savings can be realized in a single year, which is what the governor put on the table when he proposed the new regulations. To put that in perspective, that's a 10-15% cut in service. Home care is cheaper, but that's a big savings, and from testimony at budget hearings, it's not at all clear that the state has a real plan to achieve it. Home care is irrelevant to many of the patients in Medicaid-paid long-term care because they no longer have homes to which they could return, and haven't for decades. Will we wheel them down to the curb and leave them?

There are also personnel savings anticipated that probably will not come to pass. Some of these, like the furlough days, likely won't happen because the unions haven't agreed to them (at least not yet) but others simply won't happen. For example, if you retire from state service after next September, you won't get free health care. (This was a part of the supplemental budget passed last month.) Naturally, most state departments are experiencing a rush to the exits by people who have a choice about when to retire. So the cost of that health care is going to spike up, which will probably erase most or all of the anticipated savings.

From my seat in the bleachers, it looks like we're going to get huge and unprecedented budget cuts this year, along with property tax increases to make up for lost state aid, and my bet is that next year we're going to have a big deficit again because lurking in the savings estimates of this awful budget are going to be lots of little presents just like these.

Oh, and one more thing: remember that all this is being done in the name of lowering your taxes.

21:38 - 13 Jun 2008 [/y8/cols]

Sat, 07 Jun 2008

Tax limits: a simple strategy

What shall we do about our property taxes? Pretty much everyone agrees property taxes are too high. But that's the easy part. The hard part is figuring out what to do about it. Two years ago, Teresa Paiva-Weed, the Senate Majority Leader from Newport, had a neat and plausible idea: limit them.

So the Assembly that year passed S-3050, limiting the increases in the taxes a city or town can collect year over year to 5.5%, then 5% and marching down to 4%. Amazing, no? You wonder why no one thought of this before.

The newspaperman and essayist H. L. Mencken once wrote, in an essay about inspiration, "There is always a well-known solution to every human problem -- neat, plausible, and wrong." And of course, the reason no one thought of simple tax limits before is it's a horrible idea.

When the bill was proposed, there was not huge opposition to the idea by the cities and towns themselves. Who would oppose lower taxes? But this was, so far as I could tell, largely due to a calculation expressed to me by a town finance manager who told me he was sure the legislature wouldn't pass only the tax levy limits. This was only part of a package, he assured me, that would include increased local aid, as well as changes in laws about collective bargaining, pensions, and relief from other state mandates.

He countered my skepticism with condescension: "The Assembly knows what they're doing. They wouldn't have passed this without planning to increase state aid."

Two years later, guess what? They didn't.

There have been some serious unintended consequences from the legislation, too. For example, cities across the country have used something called "Tax Increment Financing" (TIF) to redevelop blighted areas. The idea is that, usually in cooperation with some private developer, a city or town issues a bond to finance some improvement, and pledges the increase in property taxes they expect from that improvement to repay the bond. A perfect example is in East Providence, at the old BP/Amoco tank farm, about 300 acres on the Providence River.

BP/Amoco is willing to sell, but the land is contaminated. The city would like to clean up the land, and Gilbane would like to develop it. Currently the land is worth a few million, but as housing and shopping, it could be worth as much as a billion dollars. This would be a serious shot in the arm for East Providence's finances, but it's not permitted under 3050, which would redirect all the increase to lowering the tax rate. Lowering the tax rate isn't necessarily a bad idea, but unless the TIF bonds can be repaid, the improvement won't happen at all.

TIF financing can be controversial, and it's not always a good deal. But East Providence isn't even going to get a chance to try to make a good deal unless this changes.

And then there's school funding. Amid very little fanfare, there is a new school funding formula working its way through the legislature. In many ways, it does represent a fairer way to allocate school aid than the completely arbitrary system we have now.

But fair or not, a lot of districts are going to get hit hard by it. The Newport schools, for example, are slated to lose about $11 million from their $37 million budget if the legislature won't come up with additional school aid. Why? The new formula includes a factor called "tax effort". This is essentially a way to measure how much a town could raise from its property taxes and compare it to how much it does raise. Put crudely, this formula says to some towns that they are undertaxed compared to others.

It's one thing to say to a town it's "undertaxed" but also to say it's not allowed to raise the revenue to replace the lost state aid is a strange definition of fair. (A town can raise taxes over the Paiva-Weed limits to replace lost state aid, but they have to ask the state for permission to do so and the request has to have the support of 4/5 of the city or town council. So far this year, Bristol, Foster, Tiverton, West Greenwich and Richmond have asked for a waiver.)

Except for Newport's Paiva-Weed, the legislators in control of things come from towns that will gain in the new school aid formula, so passage looks promising. I tried to get a comment on the conflict from Steve Costantino, from Providence, the chair of House Finance. He spoke quite persuasively in favor of the new school aid formula at its hearing a couple of weeks back, but declined comment on whether passing the school aid formula would require changes to 3050.

TIF and school aid conflicts are only the beginning of the list. The tax limits have also changed municipal politics, and may even have increased taxes in some towns whose managers have realized that if they don't ask for enough money this year, they can't catch up next year. Ultimately, though, the limits are fundamentally undemocratic, denying towns both the money they need to run, and the independence to decide how to raise it. Is that the way we want to run things here?

07:34 - 07 Jun 2008 [/y8/cols]

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