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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Fiscal Derring-Do!
Economic Jiggery-Pokery!

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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.


Creative Commons License Tom Sgouros

Mon, 30 Jan 2006

Watch out for data

One of the things that education reformers like to do is to rant about accountability and claim that we aren't looking carefully enough at the job our schools are doing. So quite a lot of No Child Left Behind money goes to testing, and the act also contained requirements that increased the number of schools doing testing.

So some results are in from the 2003 NAEP tests, and a couple of researchers at the University of Illinois have looked at them. They looked at math achievement, and tried to compare private, public and charter schools, controlling for the demographic differences between the schools. (The study can be found here, at the web site of the National Center for the Study of Privatization in Education, an institute run at Columbia University. The executive summary is short and coherent, so is worth a read. Good pictures, too.)

The researchers found that once you remove the effects related to the different populations served by Catholic, Lutheran, conservative Christian, charter and public schools, that public schools actually do quite well in teaching math to children. In most cases, the test scores show that public schools actually do better than these other kinds of schools.

The tests in question are confined to 4th and 8th graders, so the whole study is pretty limited in scope, but still, it should give the public education handwringers something to think about.

14:00 - 30 Jan 2006 [/y6/ja]

Wed, 25 Jan 2006

Budget Advisory Group

The report of the group studying how to improve the presentation of the North Kingstown School Department budget is available here.

This is the second of the items referred to below.

19:33 - 25 Jan 2006 [/y6/ja]

Tue, 24 Jan 2006

Housing cools a bit (about time)

An article in the Projo today reports on news from the state's realtors. According to the RI Association of Realtors, the most damaging aspects of the real estate price run-up seem to be moderating. (The quote the realtors use, and is in the headline, is "a more rational market.")

This is good, but in this month's issue (didn't you mean to subscribe?) I derived an estimate for the amount of real estate speculation in the market. My estimate is that well over half a billion dollars in real estate purchases every year is for the purpose of selling again at a profit, not for providing housing.

This is a large number, but more to the point, speculation will tend to drive up prices worst in the places where you can find bargains: South Providence, West Warwick, and so on. Even a more "rational" real estate market will still be a problem in those communities, until there are no more bargains. And another way to say "bargain" is "affordable housing."

To put this plainly, we have a huge pile of cash sloshing around the state, and it will continue to slosh until there is no more affordable housing, at which point it will have to go back into stocks or gold or something.

10:35 - 24 Jan 2006 [/y6/ja]

Mon, 23 Jan 2006

School enrollment projections

This is the first of a couple of items of purely parochial interest. This is my critique of the enrollment projections and the technique used to make them by the North Kingstown school department.

14:20 - 23 Jan 2006 [/y6/ja]

Tue, 17 Jan 2006

Sales tax rates

Once again we're discussing sales taxes, and once again the chestnut pops out of the fire that says that Rhode Island's sales tax is among the highest state sales taxes in the nation. And once again, we leap up and say, yes, but that's a textbook example of a misleading fact. Outside New England, other states have county governments, and most of them use the sales tax to raise their revenue.

According to this table from the "Sales Tax Institute," there are 22 other states that contain counties where the combined state and county sales tax is higher than it is here. In five more states there are places where it is equal to the rate we pay.

It's not strictly relevant to the debate, but Rhode Island is smaller than almost all the counties west of the Mississippi. But it's a complex world. Read more about counties here, and you'll see what I mean.

14:31 - 17 Jan 2006 [/y6/ja]

Thu, 12 Jan 2006

New issue out


  • Educational equity. What's going on in the legislature (and why).
  • Affordable housing. Trying to put a number on how much of housing demand is speculation. (Answer: a lot.)
  • Interview with Thom Deller, the principal in the Providence Planning Department, about affordable housing, and what the city of Providence can do, and what it can't.

Wouldn't now be a great time to subscribe?

22:36 - 12 Jan 2006 [/y6/ja]

Tue, 10 Jan 2006

The gains from competition.

Some interesting thoughts on competition and its capacity to improve our schools are here and here.

12:35 - 10 Jan 2006 [/y6/ja]

Sat, 07 Jan 2006

Unfunded liabilities, again

A friend writes:

...Still, how would you answer when asked about Providence's near-billion dollar unfunded liability?

The issue as I see it isn't whether it ought to be addressed or not. I agree that unfunded liabilities of governments ought to be addressed, but for different reasons than they need to be addressed for private corporations, and the different reasons lead you to different conclusions about how aggressive you need to be about it. The reason to address it for a private corporation is that the corporation might go out of business, and leave everyone holding the bag. The reason to address it for a government is that pay-as-you-go is more volatile than paying out of an endowment (which is essentially what a zero-unfunded- liability situation is). Volatility = large swings in costs for taxpayers.

It's unkind to future taxpayers to leave the unfunded liability large enough that its volatility will have a large impact on city finances. But it's unkind to current-day taxpayers to amortize the liability aggressively. So by all means, address the liability, but let's remember that we had a stock-market crash a few years ago, and if a slightly less aggressive amortization schedule seems like a good idea, precisely who would be hurt?

And to be a bit of a curmudgeon about it all, I'd have to say that all billion-dollar unfunded liabilities are not created equal. Some might represent a billion dollars in 2010, and some might represent a billion dollars spread over 30 years. If it's the former, well, obviously that's trouble. But if it's the latter, which is more likely, well that's a lot of money, but it's still works out to something like $40 million a year, or about 8% of the City budget, maybe less. Now tell me why I should be more upset about an 8% hike in the budget a year in a few years than I should be about either massive tax increases or devastation of municipal services of one kind or another in the short term.

Social Security operated happily for half a century with what would have amounted to a vast unfunded liability, had its accountants and actuaries chose to characterize it that way. But they didn't, and not only didn't the system collapse, it never failed to deliver its benefits. In the early 1980's, the SS "reform" created a trust fund to deal with the baby boomers, but I increasingly incline to the view that it was more of a fraud than a reform, and need never have happened.

23:09 - 07 Jan 2006 [/y6/ja]

Fri, 06 Jan 2006

Beacon bill back, but fixed

Last season I wrote about the Beacon Insurance changes that were afoot. The changes would essentially have removed all kinds of regulatory limits on Beacon's business, and were a bad idea.

The bill is back, but language has been added to make explicit limits that had been only implicit before. This makes the change more like what the sponsors originally said it was: simply a way to let Beacon write insurance for RI corporations that do business elsewhere.

Beacon continues to be one of the real public policy success stories in Rhode Island over the past 15 years. With the proposed changes, it will have the opportunity to expand on that success. What it does with that opportunity, I hope to find out.

21:55 - 06 Jan 2006 [/y6/ja]

Thu, 05 Jan 2006

The cost of war.

In case you were wondering.

12:13 - 05 Jan 2006 [/y6/ja]

How Much is Too Little, and How Little is Too Much?

Over a decade ago, the Supreme Court of Rhode Island ruled that Rhode Island's method of funding public education was unconstitutional in the way its reliance on the property tax favors rich communities over poor ones. Being unwilling to dictate a solution, the Court left it to the General Assembly and the Governor to come up with a solution -- and they haven't.

The next in a series of AS220 Stinktank Fora is coming up, January 18. Come hear discussions you won't hear from elected officials. But should. Here's a press release. And here's the full schedule of fora.

12:08 - 05 Jan 2006 [/y6/ja]

Mon, 02 Jan 2006

More about GASB 45

This is the impending rule change that will force state and municipal governments to account differently for the benefits they offer their retirees. (See below.)

The issue is that the rule change will require governments to account up front for the money they don't currently have to pay the benefits in 2015 and beyond. But why stop there? We know darn well that we are going to have to pay teachers their salaries in 2011. But, scandalously, we don't have money put aside to fund that future liability: a fiscal disgrace. What's truly astonishing about this situation is that our school department expects to fund it strictly pay-as-you-go, out of taxes. Worse, I don't think we have funds for 2010 put aside, either. Or 2009, for that matter. And now that I think about it 2008 looks a little thin, too.

One can say that work that will be done in 2011 will be paid with 2011 dollars, and that we don't have to worry about it until then, but I have a daughter who expects to graduate from high school that year and I think the liability is to her (and me), not to the teacher, and I think it was incurred when the school department invited her into first grade. And I'm scandalized to learn that money wasn't put aside to endow her education.

This is not the normal way to look at the finances of an enterprise like a school, but apart from history (i.e. "No one does it that way") it is no less valid than the standard way. Accounting rules are about the portrayal of reality. They are not reality. Through the magic of accrual accounting, your business can be well in the black and still have no money to pay the bills.

Choosing which expenses to accrue and which to account as cash is all about judgments of what is appropriate, not observations of fact. There is rarely a "wrong" answer. The state uses this kind of judgment all the time. There are hundreds of commitments made without the funds to back them up: matching funds for a multi-year grants, multi-year employment contracts, etc. One could even say that the act of building a bridge incurs a future liability for taking it down (or at least maintaining it).

And the bridges bring me to the real point: I'm not saying, and haven't said, that it's not fiscally responsible to run your enterprise in the new way envisioned by the GASB 45 rule. It probably is. Certainly we wouldn't have a spare bridge to Jamestown now if we had been smarter about funding maintenance years ago. But switching from what-we-do-now to what-this-rule-clearly-favors entails certain (large) costs. I'm all for fiscal responsibility. But not at all costs. If I have to give up a certain degree of confidence in the future in order to preserve current services that are important to me, the decision is not a foregone conclusion. But the adoption of GASB 45 will tilt the field heavily toward the advocates of responsibility, and make it much harder to advocates of services to carry the day.

All this is not only true about government, but also about how I live my life, and I bet I'm not alone. How many of us have always done the "fiscally responsible" thing in our lives? And of those, how many are sorry about what they missed? I owned and ran a tent circus for a while, which, to be honest, was about as far from fiscally responsible as you could imagine. But it was a grand good time, for me and a few thousand other people, and I don't regret it for a minute.

15:03 - 02 Jan 2006 [/y6/ja]

Union contracts

Valerie Forti, of the Education Partnership, had an op-ed (reg. required) in Saturday's Projo about analyzing school costs. Her basic point is a good one: school districts should spend more time bringing their school committee members up to speed about what is in the contracts and what ought to be there. But here's a quote:

They have started to talk about what many have been afraid to say: Union contracts are not about improving student achievement.

Well I don't know why many were afraid to say it. I have a contract with a company for which I write computer manuals. I think it would be a real stretch for anyone to imagine that my contract with them is even partly about improving the quality of the manuals I write. It has nothing to do with that, really, and I doubt very much that the guys who signed it think it does. Our contract defines the conditions under which I'm going to write the manuals, including how much they'll pay me, what they'll provide me, and what and when I'll deliver. I would resist unilateral changes to the contract we've agreed upon, and I bet the company might object if I just started charging at a higher rate.

Making the manuals better just isn't a contract issue. The company can make things hard for me or easy for me, but I haven't written those things into the contract. I expect that teachers have, in many cases, been able to write those things in, and to the extent that they have, I agree it can be a problem. But when someone like Forti complains that the school day is too short to accommodate some new program, I'd want to know about the program before being upset about it.

There are plenty of valid knocks on the unions that represent our teachers, but what bothers me is that our schools could be so much better than they are, but that the discussion always gets hung up on greedy teachers. Here's how I'd change Forti's formulation around:

They have started to talk about what many have been afraid to say: Attacks on union contracts are not about improving student achievement.

By all means, let's talk about whether teachers deserve their health benefits. But let's not pretend that we're actually discussing how to improve our schools while we do that.

14:56 - 02 Jan 2006 [/y6/ja]

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