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, 22 Aug 2008

NECAP Postscript

One of the funny things about democracy, you never know what's going to take off. The Department of Education began encouraging schools to form "School Improvement Teams" (SITs) some years ago. I haven't managed to speak to anyone who knows exactly when and why they were invented, but the idea is to get parents, teachers, administrators and people from the community together to present reform ideas to principals and school committees. In practice, I gather that few of them have an independent existence and largely serve to ratify decisions made by others.

But look what happened. Four energetic members of the SIT at Exeter/West Greenwich High School have become quite concerned about the proposed graduation requirements, and have formed a statewide SIT coalition to air those concerns and communicate them to the Board of Regents more effectively. They've already had one meeting, attended by dozens of people from SITs from all over the state. They're having another on Tuesday August 26, from 5-7pm at the Exeter-West Greenwich High School, 930 Nooseneck Hill Road (Rt 3) in West Greenwich. If you're part of a SIT, you're invited. If you're not, you're invited, too, though maybe you should consider joining one.

13:55 - 22 Aug 2008 [/y8/cols]

What does a high school diploma mean?

If, like me, you have a high school student in the house, you probably know about the new requirements for high school graduation. Adopted in 2003, the first class to satisfy them (mostly) has just graduated.

The requirements are interesting. There is a requirement for a certain amount of course work, and also a requirement for a "project" that involves a great deal of individualized attention and instruction. Students are expected to think of something good to do, to do it in some depth, and to report on it with a paper or presentation. At my daughter's school, she tells me that one boy, a drummer, composed a piece of music for nine xylophones and another converted an old car to use biodiesel. Others arranged internships with a variety of local businesses. The idea is to acquaint the students with pursuing something deeply, while also allowing them to follow their own interests.

But those aren't the only parts of our graduation requirements. Seniors are also required to have taken the NECAP tests, a standardized test administered in the fall of junior year. This is kind of a curious requirement, since the test was designed to be an assessment tool for an entire school, not an individual student.

The problem with the NECAP tests is a suspicion among people on the Board of Regents that lots of students don't take it seriously enough. So it was added to the new graduation requirements, though at a low enough level that flunking the test won't deny anyone a diploma by itself. It's an odd reason to add this as a graduation requirement, but it's an odd world, isn't it?

The graduation requirements were developed five years ago, by a different board not yet dominated by Governor Carcieri's appointees. But now it is, and now this board is considering a proposal to make the NECAP test worth a third of a student's final grade, a level at which flunking the test could indeed cost a student a diploma.

Sounds good to you? Get tough with those students, right? Well maybe you should ask what's the difference between a tool for evaluating a school and a tool for passing a student. The important one is this: more people flunk, and that's kind of the point. The reasons are technical, but the basic idea is that you learn more from the statistics if the passing rate is much lower than would be true for a review test in a class. So, for example, there's trigonometry on the math section of the test, which lots of students haven't taken by 11th grade. Is that the kind of test you want where a kid's future is on the line?

What's more, the test is administered annually in the fall of 11th grade. What's the point of a "graduation" test that covers only what you learned in 9th and 10th grades? Really, this is just reform that sounds good without actually being good.

In truth, though I think they're overrated, I really have nothing against high-stakes tests. The nation of France has survived just fine with one for decades. But France also has a uniform national curriculum to get their students to it and past it. We have only the test. (They also have widespread agreement about what constitutes a good education, something else we don't have.)

High-stakes testing is only fair if it comes with a curriculum to match, and then only if we don't pretend that the students who don't pass will somehow vanish. Those students are all real people, every single one of whom deserves a fair chance at a decent life. What's on the table isn't going to offer it to them.

Being fair about this means adding test days to give kids a second chance, providing remedial classes for kids who fail, and changing curricula to accommodate the test, and this is the real problem. Because if you think we can add services like that in a state where even our "rich" school systems can barely maintain the programs they already have, then you haven't been paying attention in class.

13:54 - 22 Aug 2008 [/y8/cols]

Transit subsidies

For interested readers who want to know more about transit before government subsidies. That is, in the days before government transit subsidies, there were private transit subsidies.

A 1955 Time magazine article tells the story of what happened to the DC trolleys after the 1935 Public Utilities Holding Company act of Congress forced electric companies to divest themselves of the trolley lines they had operated as loss leaders. Essentially, investors bought the company in order to loot it of its cash holdings, not to run it at a profit, because it didn't make a profit.

A wikipedia article describes how the Pacific Electric Railway was always pretty much a loss leader for Henry Huntington's suburban real estate development interests.

09:20 - 22 Aug 2008 [/y8/au]

Wed, 20 Aug 2008

No kidding

A court has ruled that the EPA can't force states to be as lax as they are. How about that?

09:07 - 20 Aug 2008 [/y8/au]

Mon, 18 Aug 2008

Fish don't notice the water

After pointing out such state budget trivia as the fact that poor people and immigrants can hardly be the cause of our fiscal woes, I am often asked, "Well, where does the money go?"

Like any interesting question, this has a complicated answer, but it has an answer. I don't have my finger on all the parts of it, but I see some of it, and a big part is something very few people pay attention to, perhaps on purpose.

It's said that fish don't notice the water, and like those clueless fish, most of us don't give the shape of our world much thought. It's just the way the world is, after all. Providence is a city, where some people work and lots of poor people live. Some rich people live there, too. The suburbs are less expensive to live in, and have better schools. Some suburbs are quite rich towns, and so on. These things have been true for a long time.

But they haven't been true forever. Browsing in Department of Education archives, I recently ran across a report listing the property value per student in each of Rhode Island's towns in 1950, and it's a pretty different list than you'd make today. Narragansett is at the top of the list, because of a few grand mansions and because they only had about 400 students. But the top of the list is actually dominated by the state's cities. After Narragansett came Providence, Pawtucket, Woonsocket, and Central Falls right in a row. (The complete list is printed in this month's Rhode Island Policy Reporter.) This is pretty easy to understand. In 1950, the city was where the action was. The country was for rubes. Providence's schools were the pride of the state, and the taxes were lowest there, too. Hopkinton had the highest tax rate of any city or town.

Needless to say, this isn't the case any more.

Similar surprises were further down the 1950 list. East Greenwich was near the basement, just a bit above Warwick and a few notches behind North Kingstown.

What happened? Well, people moved out of the cities, and we had a baby boom. But you may not have noticed, because you grew up in the world where both of these things were so easy to take for granted.

As people moved from the cities, they were selling land and houses there, driving down prices, and buying land out of town, driving up those prices. The result was that through the 1950's and 1960's, not only were suburban growth rates of 4% and 5% per year not at all uncommon (North Kingstown, Coventry, East Greenwich, among others), but the prices of property went up fast, too. When tax rolls grow that fast, and land values are increasing, revenues grow, too. Under those conditions, anyone can balance a budget, and many did so while clucking sanctimoniously at the cities. (Many still do.)

Meanwhile, in those cities, property values declined, but services couldn't. Providence has only two-thirds the number of people it had in 1950, and a much smaller fraction of the property value, but it has the same number of blocks to police, the same number of houses to burn, and it has more students in its schools.

The growth of suburban budgets financed a 50-year building spree, as we put roads, bridges, schools and fire stations all over the state. In 1958, we had about 3,020 miles of local roads in the state, according to a report archived in the statehouse library. In 2006, Federal Highway statistics show we had 5,538 miles. (We count miles differently now, so the difference is likely even greater than it seems.) We've built sewer systems in Warwick, expanded water systems in Kent County and the East Bay and converted volunteer fire departments to professionals all over the state. In essence, we've built ourselves almost a whole second state's worth of infrastructure.

The ironic thing about all this is it's much more expensive to provide the same level of any municipal service in the suburbs than in the cities. When houses are far apart, it takes more pipe to get water to them or sewage from them. School transportation costs more, and there are many fewer taxpayers per mile of local roads. So long as any individual town's growth rate was high enough, this wasn't a problem, but as soon as growth flags, the piper comes for his due, and years of heedless building have to be paid for.

The other big problem comes when suburban residents start demanding (or needing) the same level of services as the cities provide. When people move to the sticks and then demand fire response times comparable to what they'd have in Providence, you have a recipe for very high costs. When crime rates creeping upward make suburban residents demand policing like they'd get in Pawtucket, that's a problem. When increasing density increases water pollution to the point that people demand new sewers, well that's pretty expensive, too.

There is a "blue-ribbon" tax commission meeting through this fall to talk about how tax policy should be shaped for our state's future. Let them not fail to take into account the paradox of our tax system: the places where services are expensive are the places with the low taxes.

Think that's not your problem? You're in the suburbs and all's fine with you? Let the cities deal with their own problems? Wait until high gas prices start driving people back into the cities, and the shoe will be on the other foot. In the meantime, let's come up with a tax system that doesn't penalize us when people move.

10:47 - 18 Aug 2008 [/y8/cols]

How do you get out of a recesion?

Some big shoes are waiting to drop these weeks. It's still far from clear how the state's labor crisis is going to be resolved. Last week the Governor's office presented their application to the federal government to make Medicaid into a block grant, and there were hearings on that earlier this week. Meanwhile, I read that URI is planning to cut $5.7 million from its budget and not replace any of its faculty or staff who retire this year.

We'll hear much more about these in coming weeks, but I thought it would be good this week to step back and look at the bigger picture: Are you better off today than you were before you heard of Don Carcieri? How about William Murphy, the Speaker of the House? Is your life better since he became Speaker in 2002?

I spent this afternoon reviewing statistics about the state's economic performance over the past year, and "dismal" seems too optimistic a word. The URI Current Conditions Index (compiled by URI economist Leonard Lardaro) is an attempt to render some complicated economic indicators, like the unemployment rate, the size of the labor force, retail sales and so on, into a single number. You probably won't be surprised to hear that the index stands lower today than at any time since 1983, the earliest date for which it was compiled.

Our state lost over 5200 jobs last year, around 1% of the total, leaving us one of only six states to lose jobs in 2007. The "information" sector (software, data processing, and so on), along with the construction industry and what's left of our manufacturing industry (half what it was in 1990) led the way in job losses, and we currently have the highest unemployment rate in New England.

Pretty exciting ride we're on, isn't it? Want to hear the bright spots? The hospitality and health care sectors saw significant job growth, so if you want to wait tables, this may be your lucky year. (And I hear there are job openings for cleaners in the state court system, too.) The value of exports grew 7.4%, faster than any other New England state besides Connecticut. On the other hand, the fastest growing export sector was "waste and scrap", whose exports went up 41.4% in value. My bet is that a lot of that can be attributed to the spike in value of several scrap commodities, like copper. According to people I know in the non-profit housing world of South Providence, empty foreclosed properties there only last a week or so before the copper pipes and wiring are stripped.

So, in the face of all this, what is your state government doing? Well, nothing, really.

Actually, that's not quite fair. I understand that under new leadership, the Economic Development Corporation has some good initiatives underway, promoting networking in the state's tiny software industry, for example. This is a good thing, but small. Apart from that? Well, let's see: cutting the pay for thousands of state employees and cutting off health and income benefits for thousands of welfare recipients and immigrants. So that's tens of millions of dollars that won't be spent in Rhode Island this year. That'll help, for sure.

But wait, you say, those dollars will still be spent, but they'll be spent by the people whose taxes would have paid for those wages or income supports. Sorry. The only people getting any tax relief out of this Governor are wealthy people who spend only a small fraction of their income. A million dollars of income supports for the poor is a million dollars injected pretty directly into the state's economy. Poor people don't save very much and usually spend almost everything they earn. That's what it means to be poor, after all, so they spend it all, and stores, services and landlords benefit. Richer people have money they don't need to spend, and lots of ways to sock away their money where it will have no effect on the state's economy. The stimulative effect of government spending is diluted or lost when it is spent on them.

The truth is that cutting taxes is not the way out of a recession and never has been. We did not cut taxes to get out of the Great Depression or any recession since. You'll frequently hear anti-government crusaders credit Ronald Reagan's tax cuts with ending the recession early in his first term, but that's a half-truth if there ever was one. That is, it's true only if you choose to ignore his massive defense spending, record deficits and the Federal Reserve's retreat from punitive interest rates. (And no, revenue didn't go up, either. It dropped over $100 billion per year averaged over the next four years, according to a 2003 Treasury department report -- link at whatcheer.net.)

The sad fact is that our state's economy is crumbling around our ears (along with our bridges) and every major player in our government is agreed that the only thing we can do is less of everything. It's election season soon. You may see more of your state representatives in the next few weeks than you have this past spring. Ask them whether they think this is a good idea.

10:29 - 18 Aug 2008 [/y8/cols]

Fri, 01 Aug 2008

Reagan tax bills

A random google search in service of next week's columns brings this gem of a report about the actual revenue effects of the actual tax bills passed by the actual Congress, since the 1940's.

Have you heard someone say that Reagan's tax cuts increased revenue? Do you realize that this is complete idiocy, but wanted more backup? This report is for you. Here's what the Economic Recovery Tax Act of 1981 cost our government in billions (current dollars) in each year after its passage:

Loss (billions)-38.3-91.6-139.0-176.7

And just to be clear, this is the product of the US Treasury Department in 2003, revised in 2006.

18:07 - 01 Aug 2008 [/y8/au]

Where will the hardball bounce?

Last week, members of the state's biggest public employee union, AFSCME Council 94 voted to reject the contract deal negotiated between the state's union leadership and the Governor. No one is quite sure what happens next, because something like this hasn't happened in a long time.

Let's be clear what did happen: the union membership unequivocally repudiated their own leadership, rejecting what those leaders had described as the best deal available under the circumstances. So now the leadership is in a hard place, stuck between a Governor who won't give and a membership who won't budge.

"Hasn't happened in a long time" isn't to say it never has. In March 1991, on the heels of the credit union shutdown, Council 94 members rejected a proposal their leaders had crafted for pay cuts and deferrals, prompting Governor Bruce Sundlun to enact a plan for layoffs and to close down state government for ten furlough days.

As it turned out, though, we only shut down for three days, and within a month or so, a compromise had been reached that involved limiting the layoffs and deferring some compensation and this second plan squeaked by the membership. There were fireworks, but there was a compromise, too.

Sadly, things are pretty different this time around. For one thing, much of the union leadership had supported Governor Sundlun in his election. They felt he was, at root, a sympathetic figure. (Many changed their minds a couple of years later.) He made certain his own paycheck was affected -- a small gesture for a multi-millionaire, but a gesture nonetheless. He made it clear the choice was between layoffs and pay cuts, and promised no layoffs if the cuts were accepted. The compromise included some layoffs, but they were limited.

Contrast that with Governor Carcieri, to whom small gestures are foreign (and who announced last Friday that he's not interested in more negotiation). He asked employees to accept less money, but is also on record that accepting less money wouldn't rule out layoffs. I can imagine taking a pay cut in order to avoid being laid off, but what, exactly, would be the point of taking a pay cut in order not to avoid being laid off? Would you take that deal?

And here's the other big difference. Bruce Sundlun was ambushed by events not under his control. He took office only to find a third of the state had bank accounts in insolvent and possibly insolvent credit unions. Ed DiPrete left him a fiscal and economic disaster. That first year Sundlun was trying to fill a $222 million mid-year deficit in a budget half the size of today's. He cut the budget and inveighed against tax hikes, but when the Assembly passed a budget that included higher taxes, he didn't veto it. And you know what happened? We got out of the crisis, we paid back the DEPCO bonds ahead of schedule, and a few years later the budget was in surplus.

Today, though, our fiscal crisis is the result of events very much under our control, the result of a tax cut overdose administered long before the economy tanked. The Governor and Assembly leaders knew this crisis was coming -- and have known for years -- because they caused it. The Assembly leadership is more responsible than the Governor for most of the tax cuts, but it's not as if he's objected to them.

The union leadership is in a hard spot here. For years, they have played the inside game at the state house, cultivating and protecting personal relationships with Assembly leaders and members. But over the last many years, those relationships have won them very few victories. Last year they won a provision to make it harder for the Governor to privatize state services, but they've also lost big time in the pension "reform," the casino, health care options and more. Given the circumstances of 1991, it's easy to see why a compromise happened. Given the circumstances of today, it is going to be hard for union leaders to explain to their members why they should compromise with this Governor. This year, we're in year three of a five-year cut to the taxes of the wealthiest individuals in our state. Are they telling their members to take less pay in order to preserve those tax cuts?

Oh, and for all the people cheering for unions' defeat, thinking this will mean lower taxes: Think again. The money saved by these cuts in union wages and health benefits and pensions? It's already claimed by those 12,000 people at the top of our income pile who still expect years four and five of their tax cuts. If it doesn't go to that or some new "targeted" corporate tax cut, it will pay the interest of new borrowing to prop up a bankrupt Department of Transportation. It is not going to you.

The record of the past few years is all too clear on the point: Reducing the taxes of low and middle-income people is simply not on the table at the state house. What is on the table instead are state demands that cities and towns reduce your taxes while at the same time providing more services. That sounds similar, but it's a very different thing indeed.

17:46 - 01 Aug 2008 [/y8/cols]

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