Rhode Island Policy Reporter

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A look at the lousy situation Rhode Island is in, how we got here, and how we might be able to get out.

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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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Thu, 28 May 2009

Basic Educational Plan

Find the draft plan here.

Find the old standards here.

The official comment period for the BEP is now past, but you can see instructions for comment here, and contact information for the members of the board are here.

What's this about? See below.

17:23 - 28 May 2009 [/y9/my]

But who will run the programs?

As the state continues to reel from both years of budget mismanagement and our economic woes, it escapes no one's notice that the cities and towns are reeling, too. North Providence is planning an unpaid payday for its employees, while Providence is banking on being able to tax college students.

The story is that not only is there the natural reluctance to raising taxes, but towns are wearing a shiny set of fiscal handcuffs these days in the form of a law limiting the increase in the amount of money they can collect in taxes each year. Applying this limit to the amount of money instead of the tax rate is an interesting idea. What it means is that even if the tax base increases -- if there is some new construction in town, or a new business moves in -- the increase in the town's property value can't be captured in property taxes.

This law was the brainchild of Teresa Paiva-Weed, Democrat of Newport. She is now the Senate President, so until she changes her mind about its wisdom, the towns will wear these handcuffs.

But all is not lost. Mayors and town councillors have been begging for the "tools" they need to reduce their budgets, and help is on the way from the state Board of Regents, in charge of elementary and secondary education.

The word, "tools," has a clean and abstract sound doesn't it? Imagine a razor-sharp auger or perhaps a scalpel deployed in service of delicate budget surgery. Well, maybe.

Among the many duties of the Regents is to oversee a set of standards for what constitutes a school in Rhode Island. They have a set of curriculum standards to dictate what you can expect a fourth-grader to learn, achievement standards to say what we expect a tenth-grader to know, and professional standards to say what we expect a teacher to be. But they also have a set called the "basic educational program" which specifies what you can expect the staff of a school to look like. For example, it says there should be a music program and a library, and says more or less what they should look like.

Until now. You'll be glad to know that after the Regents' meeting on Thursday, June 4, many of these restrictions on local districts will be raised.

In February, the Regents put out a proposal for new set of standards. The new standards excise pretty much every mention of staff and staff qualifications, save only for psychologists. The old standards contained sentences like "there shall be a halftime [librarian] in schools with 250 to 499 children," and "at least 20 minutes in each school day is devoted to health and physical education taught by certified personnel (recess is not considered physical education."

The new standard contains sentences like these: "A high quality visual arts & design and performing arts education program leads to arts literacy for all students..." But nowhere does it require any school to have such a "high quality" program. In fact, in the very next paragraph it says schools will only be obligated to offer courses in "at least one" of the performing arts.

The physical education standards will say what we expect children to know about their bodies and about fitness, but they don't dictate times, or the staff to do this teaching. The "Library and Media" section is my favorite, and doesn't mention staff at all, as if the books in the library -- excuse me, the "high-quality library-media program" -- will just float off the shelves and into the backpacks of willing young readers. The rest is the same, lots of "high quality" but very little in the way of specific requirements.

Another delightful surprise in reviewing this opus was in the cover sheet that called for comments. It requested comments on the "economic impact on small business and cities and towns." It did not request comments on the educational value of the changes being proposed, or their potential to affect dropout rates in our high schools, let alone the value of learning to appreciate the most beautiful achievements of our civilization.

The upshot is that school districts will be freed from the fiscal shackles that bind them, and can manage their programs to increase their productivity. Sounds good? Even better, how about we say they can empower high quality local school leadership to manage a streamlined 21st-century cutting-edge high quality educational program. What this really means, of course, is there will be nobody to insist that elementary music classes aren't just an hour of listening to the radio once a week with the regular teacher. If some school committee wants to call that a "high quality music program" then there's now officially no one to say otherwise.

So wave a fond farewell to your school librarians, the music and art teachers, the drama teachers and all the rest of the extras that make kids want to go to school. After the June 4 meeting, they won't be required, so how long do you think your town will keep them?

People complain about unfunded mandates, and they have a point that a lot of the things a city or town is forced to do come without money. Special education mandates, for example, can prove quite expensive, and federal dollars seldom cover more than about 20% of their cost. But you can take the point too far. After all, having a school at all is essentially an unfunded mandate.

But the passage of regulations like these are essentially to say we no longer care what kinds of services are delivered by our towns, we care only how much they cost. Is this true? Let the Regents know what you think about the Basic Educational Plan -- details here.

17:21 - 28 May 2009 [/y9/cols]

Sat, 23 May 2009

Don't work cheap

About 20 years ago, when I was earning my keep as a rope-walker and fire-eater, I prevailed on Roger, an old-time circus performer who wintered in Fall River, to give me a lesson in rigging. Roger was a cool guy, and performed atop a 120-foot sway pole that wobbled back and forth while he did handstands and the like way up there. Circus performers all do their own rigging -- because who else would you trust? -- and he turned out to be as expert as any long-term survivor of a career like that.

I went over to his place one day, and Roger showed me the sequined capes and clogs he made his entrance with. I seem to remember a chimpanzee costume, too, though I can't remember how that fit in.

Over lunch, Roger showed me how to arrange stakes in the ground to hold weight, according to what kind of ground it is and how much the load. He had tons of other useful advice for a beginner, about minimizing props and the importance of acquiring a second act. (He also had a very funny plate-spinning act that involved breaking a lot of china.) The best advice he gave me, though, he saved for last. As we made ready to part, Roger looked straight in my eyes and said, "I've given you some help here, and here's how you can return it: Don't work cheap."

He was right, too. Since then, I've noticed the rate for a variety performer has barely budged. Individual performers I know have seen their wages grow, as they improved and found new markets, but overall, I don't think the market rates have gone up much.

The reasons why aren't too hard to see. Performing is a fun job, and anyone would rather be working than not working, so the temptation to work cheap is strong. Plus, when negotiating a gig, you're always hearing, "It's a fundraiser for a good cause," or "It'll be great exposure."

But what's good for us individually isn't always good for us collectively. A performer who works cheap helps make the market worse for everyone else. In just the same way, a worker who gives back some wages may keep his or her job, but is contributing to the erosion of wages for everyone else.

The "paradox of thrift" is the economists' version of this conundrum. If every family increases the rate at which they save their income, we'll all go broke together, even while we save money. A certain amount of spending is necessary to keep businesses afloat and if everyone does what is rational for themselves, our economy will tank -- worse than it already has.

So in the current economic conditions, what can we do to keep wages and spending from diving? What's needed is an institution to hold wages up and prevent people from working cheap. Unions are one answer, and government is another. Peer pressure from people like Roger is still another.

One of the interesting features of wages in Rhode Island is that, according to statistics from the US Labor Department, white-collar work pays on a scale comparable to similar jobs in Connecticut and Massachusetts, while blue-collar work tends to pay much less. I spent a little time with this data a while ago, and noticed that Rhode Island is unique in the Northeast in this respect. In all the other Northeastern states, the ranks are comparable, or reversed, with the blue-collar work ranking higher compared to the national average than white-collar work. According to my analysis of the statistics, we sit with California and the states of the deep South. This wage disparity helps explain why our average income is lower and our poverty rate is higher than our neighbor states.

There are some who say this is just the market at work and it should be left alone. But it's hard to see why, really. These are private matters in one respect, but these low wages collectively have a huge -- and depressive -- impact on the economy that we all make our living in.

What can the government do? It can crack down on the abuse of contracting, for one thing. Employment laws exist for a reason, but long-term contracting jobs exist to get around those laws. Many of these people are employees in every sense of the word except the official. They tend to make less than market wages, and they don't have workers comp or disability coverage. Freshman Representative Chris Fierro of Woonsocket has been doing yeoman's work in pushing the Assembly to do something about this in the construction industry, and I wish him luck with it. Other possible reforms might involve raising the minimum wage further, or enacting "living wage" ordinances. It's never popular to insist something ought to be more expensive, but it's the way to keep our economy moving.

Free market ideologues will doubtless clamor this is interference in the free labor market. At which point I'll ask what does it mean to require welfare recipients to work (or prisoners for that matter), or to provide health benefits for Wal-Mart and other employers who won't insure their employees. This is not to mention the state's own abuse of contracting -- the janitorial services company staffed by illegal aliens, for example. These all act to depress wages or benefits. In other words, the government already interferes with the market, against the interests of blue-collar workers. We've been doing that for a long time, and no one says boo about it.

This is even before you consider the economic impact of the cutbacks and layoffs associated with the state budget debacle, itself largely caused by discredited supply-side tax policy, again working against the interests of the great bulk of our population. In other words, in one category after another, from tax policy to employment, your state government is committed to policies that make our economic debacle worse.

14:10 - 23 May 2009 [/y9/cols]

Nerd stuff: Gini coefficients and the state economy

10:41 - 23 May 2009 [/y9/my]

Wed, 20 May 2009

The Tax Cut Fairy

10:09 - 20 May 2009 [/y9/my]

Tue, 19 May 2009

The value of politeness

Here is President Obama's commencement speech at Notre Dame. It has one of the best arguments for courtesy in argument that I know of—humility, consideration, and the ability to see oneself in others.

And this doubt should not push us away our faith. But it should humble us. It should temper our passions, cause us to be wary of too much self-righteousness. ...

Remember that each of us, endowed with the dignity possessed by all children of God, has the grace to recognize ourselves in one another; to understand that we all seek the same love of family, the same fulfillment of a life well lived. Remember that in the end, in some way we are all fishermen.

If you've ever composed a letter to the editor or a blog post or a paragraph of political invective, or if you intend to, read the whole thing.

01:08 - 19 May 2009 [/y9/my]

Fri, 15 May 2009

Are averages what matter in school costs?

Does it matter what school you attended? Of course it does, you say. A study of Chicago schools says it might matter less than you thought, and this is relevant to today's debates about charter schools and the Mayoral Academy planned in Cumberland.

The Chicago school choice program allowed kids to enter a lottery for spots in magnet schools. A detailed look at the results of student achievement showed that the school kids got into had little or no discernible effect on student achievement. However the researchers also found that entering the lottery was a good predictor of academic success. In other words, kids who applied to go to a different school did better in school than their peers, regardless of the school they actually went to.

Why this is so is a little unclear. Maybe the kids who enter the lottery are better motivated, maybe their parents are better motivated, who knows, really? Whatever the cause, it does appear to be the case that the kids who entered the lottery were the better students. (A study followup can be found here.)

This is relevant because last week there was a hearing on a bill to require the charter schools known as Mayoral Academies to select their students at random from the entire student bodies of their school districts. The idea is that we don't want only the good students to wind up at this wonderful new academy. But the Academy-in-waiting opposed it, as did the Charter School alliance and the Department of Education.

I spent a little while talking to Bill Fischer, the spokesguy for the academy last week. To their credit, they are very sensitive to the accusation that they might be skimming off the "cream," and Bill assured me the lottery and outreach would be designed to make sure the demographics of the Mayoral Academy match the demographics of the districts these kids come from. He said they opposed the bill because of logistical concerns -- it's simply easier to run a lottery that parents enter than it is to come up with a list of all the families expecting to have a kindergartener in school next year.

It's a realistic concern, since schools seldom know who their students will be until school opens in September. There might be good ways to get around the problem, but it was while I talked to Bill that I understood what really bothers me about Rhode Island charter schools.

How much does it cost to educate a child? This is an easy question to answer if what you want is the cost of running a school or a school district divided by the number of students. But how useful is that number?

My car gets pretty good mileage. With the four members of my family in the car, it takes about a gallon of gas per person to get to my in-laws' house. But what if I decide not to go, and take my gallon of gas and use it for fire juggling? What won't happen is that everyone else will get there on three gallons. They'll run out of gas instead, be stranded on the side of the highway and call me a bad parent.

What's relevant isn't the average cost, it's what economists call the "marginal" cost. The marginal cost of getting me to my in-laws' isn't one gallon of gas, it's more like a few ounces added to the gas it takes the rest of my family -- and the car -- to get there.

This is a basic point about business, too. If it costs Chrysler $10,000 a car to make 10,000 cars, it doesn't mean Chrysler can save $10,000 by only making 9,999 cars. It's silly to claim otherwise, and yet that's what legislators do as a matter of routine when discussing school budgets.

Back to the Mayoral Academies. This fall, they hope to open the kindergarten, with 75 students from Pawtucket, Cumberland, Central Falls and Lincoln, chosen through a lottery. With those 75 students will come about $750,000 in funding, taken from the school districts in question. But 75 kindergarteners is barely 5% of the kindergartners in those four towns, which means the likelihood is there will be approximately zero savings by not having those students in school. Sure, a bunch of 23-kid kindergarten classes will become 21-kid classes, and it's even possible that one or two of the districts will be able to cut a teacher. But collectively you can guarantee they won't be able to cut $750,000 just because they have 75 fewer kids. This point is so basic you can't help wonder about people who deny it -- especially the ones who want me to be impressed by their business experience.

What will be cut is exactly what usually gets cut: the quality. Whatever music programs remain in these four school systems will be at risk, extracurricular clubs and athletics will be sacrificed, they'll use some outdated textbooks another year, they won't replace as many broken desks and so on. Maybe they'll get some givebacks from their teacher unions, but it's unlikely they will make up the lost quality for a variety of reasons, few of which have to do with intransigence.

Meanwhile, over at the Mayoral Academy, they've raised $4 million in addition to the $750,000. Those kids are going to go to a fabulous new school, with clean carpet, new toys, and lots of computers. Who paid for it? Private donors, but also the kids back in the old schools, sitting at the broken desks, wondering if there will still be a soccer team this year.

I have nothing against charter schools. We are fools not to experiment with how education is delivered to our children. But I am against funding these experiments in a way that damages the kids who don't get to experiment. As usual, there's a rule of thumb here: Whenever you hear someone say "it's not about the money," it's all about the money.

22:57 - 15 May 2009 [/y9/cols]

Sat, 09 May 2009

Banks in charge

A few weeks ago, I wrote that while the economy won't run without banks, we shouldn't let banks run the economy. Last Thursday, we saw evidence.

First, bank lobbyists successfully killed the "cramdown" provisions of the bankruptcy reform legislation in the Senate. Cramdown is an unmusical term for allowing a bankruptcy judge to modify the terms of a home mortgage. You may not be aware that a judge can modify the terms of a loan for a business or a vacation home or a yacht, but not a primary home. Foreclosures and bankruptcies litter our economic playing field, so it makes some sense to reduce these.

Not to the banks. Bank lobbyists (with the exception of Citigroup's) insisted that the "moral hazard" was too great, and that people would be going bankrupt willy-nilly if this passed, to get their mortgage terms changed. This, of course, is both inane and hypocritical, too. Inane because going into bankruptcy is hardly the kind of thing anyone does lightly. Hypocritical because the bank lobby's position on issues of their own moral hazard (i.e. unaccountable executive pay) is that it's simply not a problem, even though the evening news continues to scream otherwise.

But no matter. As Sen. Dick Durbin (D-Il) said about his Senate colleagues, "Banks own this place." Jack Reed and Sheldon Whitehouse voted right, but only 43 other Democrats did, and so the measure went down to defeat. So that wave of foreclosures will continue to wash over us.

On the very same day, a few hedge funds and investment banks forced Chrysler into bankruptcy by refusing to settle their claims to the company's assets. This is altogether too bloodless a way to describe it. More accurately, several thousand people will be put out of work because a few millionaires refused to voluntarily sacrifice anything at all on their behalf.

But what about the Gordon Gekko "greed is good" perspective on the economy? The idea was Adam Smith's: that if we all look out for #1, then everything works out best for everyone. It's a dandy theory, but I don't see it corroborated by the facts on the ground. What I see is a great deal of angst and suffering caused by a few people who appear to feel zero responsibility to the very society that made them fabulously wealthy individuals.

Back here in Rhode Island, we've gone out of our way to make life good for banks and bankers -- cutting taxes, lifting usury laws and more -- but the real impact on the conduct of state business has been in the financialization of policy.

Take the continuing strife over state employee pensions. The unfunded liability of the pension system is large and that's a problem. But the bottom line for any pension system is only that the pension checks don't bounce. All the rest is detail about what's the least painful way to do that, and there is more than one way. One strategy is that we accumulate money in a pension fund, invest it and pay the pensions out of the proceeds. Sound familiar? Another would be to invest the money in education -- improving child welfare, public schools and higher education -- and paying the pensions out of tax collections levied from a state economy that has grown as a result of our investments. This might not sound familiar, but paying increased expenses with economic growth is how Social Security has worked for decades. Even without the income from its trust fund, Social Security taxes will be adequate to cover its pensions for several years to come.

So those are two different ways to pay employee pensions in decades to come. But only one is ever considered, and the reason is that Rhode Island policy makers rely only on the banker's view of what constitutes investment. To them, buying stock in Lehman Brothers, or a 30-year bond from General Motors is investment, while spending money to improve a child's education is only expense. And don't tell me about risk, please. As we're seeing, the safest public investments are likely not financial. The economies best positioned to weather this economic storm are the very places that have the best-educated populaces: Massachusetts, for example, but also Germany, France and Finland.

The financialization of policy extends much further. Rather than carry a fund balance from which to pay our bills, the state and lots of cities and towns rely on short-term borrowing ("tax anticipation notes"). This is OK so long as interest rates are low, but it has obvious problems when they aren't, and it's not free, either. The price of keeping a low balance is millions of tax dollars spent on commissions to bond traders.

There's more. Rather than raise the revenue for investment in our universities, we cover the lack by borrowing in order to build fancy buildings that won't be filled because of staffing cuts. Rather than raise the revenue for road maintenance, we borrow outrageously in order to replace rusty bridges in Providence and on the Sakonnet River.

All this means we have a colossal state debt -- almost twice as big as when Governor Carcieri arrived -- so we desperately need to stay in the good graces of the bankers to keep our interest rate low.

Here's the important part. From a banker's perspective it all makes perfect sense. If money is what you own, unemployment is not nearly as threatening as inflation. Keeping workers employed at Chrysler, letting people ease their mortgage payments, investments in education and road maintenance. These all have stimulative effects on the economy, and stimulation can lead to inflation and inflation is a banker's worst enemy.

Me, I have more labor than money, so I fear unemployment -- a reduced demand for labor -- much more than inflation. The people who share my situation outnumber those who don't, so I continue to wonder why it is that big bankers call so many of the shots.

22:44 - 09 May 2009 [/y9/cols]

Choice and Chicago Public Schools

The original study of the school choice program in Chicago, Cullen, et al, was written up in Steven Levitt's book Freakonomics. A follow-up in more depth can be read here.

13:53 - 09 May 2009 [/y9/my]

Thu, 07 May 2009

Some sense about journalism.

An excellent essay from Walter Pincus.

As a copyboy in 1954, fresh out of college, I delivered mail to Hanson Baldwin, then the Times's highly respected military correspondent. When Baldwin wrote a news story or a piece of analysis, it was read in the Pentagon and in Congress. They had to read him because his years of coverage and his insights made him as expert as top generals and civilian defense officials. I didn't know it then but those days had a maor influence on my approach to journalism.

I am a Democrat, and everyone knows it. No one is more aware of it than I am as I write stories for the Washington Post. I worked for Senator J. William Fulbright twice in the in the 1960s, when I was lucky to run two eighteen-month Foreign Relations Committee investigations for him. The first grew out of magazine articles I had written about lobbying in the U.S. by foreign governments. The second focused on military involvement in foreign policy, and grew out of discussions I had with Fulbright during my initial time with him. Those two sabbaticals were among the most important and enlightening years of my life, and influenced my view of reporting on government. They showed me how little I knew as a reporter about how government really worked.

12:57 - 07 May 2009 [/y9/my]

Sat, 02 May 2009

EDC: What's the point?

Last week, a panel of worthies convened by the Governor submitted their findings about how to reform the state's Economic Development Corporation. I read their memo, and developed some minor whiplash as I went from the good parts to the, um, less good parts.

Here's one of my favorites, that illustrates both the good and the bad. Permitting is a perennial complaint of businesses. In order to protect public health and the environment, there are a series of approvals many businesses need to get from the state or local government in order to build or expand. These range from permission to fill a wetland or certificates of occupancy from the local building inspector. Of course, a fair amount of the complaints generated are because of permission denied. It is true, of course, that many businesses would be more profitable if allowed to break the rules.

But the problem is that even the responsible companies face long delays in permitting, both from the state and municipalities. This can hardly be much of a surprise. DEM, through whom many state permits must go, has been a legislative whipping boy for decades. Oddly enough, their permitting delays persist, despite the relevant division having 10% less staff than they did five years ago. How strange. You'd think that kind of punishment would teach them a lesson, wouldn't you?

The panel then, has accurately identified a very real problem faced by many RI companies. So how did the problem arise? The panel didn't ask. How can we make permit approval quicker? By passing a law requiring DEM to answer a permit application within 15 days. So, no new resources, no acknowledgment that some environmental tests are dependent on the weather or the season, just a deadline. I wonder, do you need to go to management school to learn that sort of crisp and commanding decision-making?

(The irony is almost too cheap to print, but it nonetheless seems worth noting that the Governor hasn't managed to submit a budget on time for years, and his office recently explained how the deadlines in the judicial selection laws were simply "advisory.")

But what of EDC itself? The panel complained they were without focus, and alternately complained they didn't spend enough time working with already-existing local companies and that they don't have a good marketing approach to attract companies from elsewhere. So which one should the refocused EDC take on? Both, says the panel. That will sure improve the focus, won't it?

Some background you might not remember: Back in the misty dawn of time, EDC was born as the RI Port Authority and tasked with issuing bonds to develop and preserve the Port of Providence. When the Navy pulled out of Quonset, the Authority's authority expanded there. Then, in 1995, when Governor Almond decided that the state's economic development apparatus should no longer be a department of the state, he laid off the entire department, and transformed the Port Authority into EDC.

Why the Port Authority? Simple. Almost alone among state agencies the Port Authority had been granted unlimited borrowing authority when it was formed, which EDC inherited. And borrow they have, for good and for, well, less good. They blew $30 million on Alpha-Beta, a bio-tech flop, and EDC's authority was a pivotal part of the deal that allowed state debt to balloon in order to pay for the I-boondoggle rearrangement of Route 195. There's plenty more, including $14 million for the Masonic Temple hotel project, and $30 million for the troubled Wyatt jail in Central Falls.

What's more, freed from the state personnel system, EDC was free to pay its executives whatever they please, and to conduct their business however they pleased. Their executives could wear good suits, house their operation in first-class office space, and generally conduct themselves just like the overpaid CEOs they spend their time with.

This isn't to say EDC hasn't done some good. I've written approvingly about the geek dinners they promoted under Saul Kaplan, its last director, and there have been other networking initiatives that bore some fruit, too. But let's be honest. What's the point of EDC at all? In large part, the best things the state can do for the state's economy have to do with those essential things that the private sector can't (or won't) do: universal public education; maintaining roads, bridges, water lines and the like; policing the marketplace; protecting the environment; facilitating grant-funded research. These are the factors that could make ours a stronger economy. What an EDC can do will only ever be a minor effect compared to these others.

This, of course, is a political problem for the agency because expectations are so much higher than can be achieved.

What happens at an agency with such an ill-defined and difficult role? Failure, that's what. Over the years, EDC has seen some good people come through its doors (along with the inevitable few who only look good in a suit) but they've been tasked with the impossible. Their mission has been to make our state's economy bloom despite the fact that we are shrinking our investments in our infrastructure, our workforce and our environment. And what have we seen? Tremendous pressure to do something has produced ill-considered loans, and nebulous and occasionally laughable plans.

A future EDC or something like it could play a useful part in monitoring the state's economy, and in technology transfer, trying to push new technologies into the market to advantage local businesses. They could be useful promoting networking and centralizing some information businesses need. But our EDC has served mostly as an ATM for corporations, and as a state-paid corporate lobbyist, pushing tax cuts in the legislature, oblivious to the effects these cuts have had on permitting delays, to say nothing of education and bridge maintenance. The agency needs to be rethought, but the changes must go a lot farther than this panel envisions.

09:53 - 02 May 2009 [/y9/cols]

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