Licht says Felkner got it wrong, but Walsh confuses issue

In OSPRI’s recent OpEd in the Providence Business News, “Rhode Island spending well above documented need,” we use a comment from Richard Licht to make the point summed up in the title. Here’s what we said:

Rhode Island Department of Administration Director Richard Licht nailed it at the New England Public Policy Center at the Federal Reserve Bank of Boston presentation recently, when he pointed out that the cost of government in Rhode Island is so far above the calculated “need” that if we just lowered it to that level, our deficit would be gone. (March 3, 2011, The Rhode Island Foundation) At that point, I considered the day a success.

Mr. Licht’s statement came in reaction to the presentation, “How does New Hampshire do it,” which diagrams the Granite State’s ability to operate at a cost 20 percent below the New England average. New Hampshire also spends well below the “Expenditure Need,” a metric calculated by a state’s poverty rate, prevailing wages and other demographics, weighed against the New England average. No surprise, Rhode Island spends well above that calculated “need.”

Licht quickly, with a back of the napkin calculation, said that the amount we spend above that need threshold is about the same amount of our current deficit – approximately $295 million. That’s right! Rhode Island spends more than we “need” to. But how do we spend less?

Much to our surprise, Licht took exception to this piece on the Dan Yorke show yesterday (podcast available here).  Compare the bold sections above where I paraphrase the comment made by Mr. Licht at the event to the bold section below where Mr. Licht describes on the Yorke show what he meant to say.

“First of all, I did not say what Mr. Felkner said, or, first of all I didn’t use the words he said- secondly, I did make a comment it’s totally out of context and has no, didn’t understand the tone of which I said. . . I did, without an envelope, because I didn’t need an envelope I could do it in my head, it showed a little, that we spend close to 8 billion, and it was a bar graph so it didn’t have exact, but the amount of space it looked like it was a $300 million difference, so I said, by the way, this difference of 300 million, I deal with every day, that’s our budget shortfall and if just had that I could solve our budget problems, I said it lightly, and I said it jokingly everybody laughed in the room, and I went on to say, really what my point was…  How do you define need?  I was giving an explanation that I’m hard pressed to repeat because I didn’t understand it. I went up to the women (who gave the presentation) afterwards, Dan, and said,  your numbers on need are based on 2007 fiscal yr, which was from July 06 to June 07, I said, that was at the height of the economic boom, have you done an analysis for 2010? “

YORKE: “Gotcha, so you’re suggesting that’s he’s completely misinterpreted your reaction to the presentation.”

I never said, nor did I imply, that Richard was deadly serious about using this analysis as a template for cutting the budget.  I  apologize if he took offense (but I’m not sure why).  Yes the observation he made was obvious and off the cuff — if not the back of an envelope.  But taken under the rule that one’s first intuition is best, it is clear that the presentation had an impact. Indeed he goes on to say he followed up afterwards looking for updated figures, implying that “need” may have risen as the economy cooled.

This doesn’t impress me as the response of someone who thought Rhode Island’s overspending relative to a low tax neighbor unimportant, or the comparative approach nothing but a joke. If you think people aren’t telegraphing when they joke, think again. Bob Walsh of the NEA followed up Richard’s comments by pointing out that Rhode Island fairs better by comparison to Southern New England, so maybe we should be spending $100 million more.  Yeah, people laughed at Bob’s comment too, but do you think he was kidding?

I’m not suggesting that Licht came into the room as a tax and spender and left as a fiscal conservative. But even a joking acknowledgment of the obvious relation of our deficit to overspending is a step in the right direction. I know that when he is not joking Licht is a consummate administrator and I hope he will take the message of state competition seriously as he helps guide the Chafee administration through budget negotiations.

It does appear that Mr. Licht, or perhaps the Chafee administration in general, wants to distance itself from the idea of cutting the RI budget by reducing the number of people we provide government services to – which was the point of my article. But, I didn’t imply the administration supported the changes to Medicaid eligibility I outlined. I did take advantage of the subject of spending beyond need being raised to open the tough discussion of trimming our priorities.

Even if the “need” is higher in 2010, I believe Rhode Islanders think it is no joke that we are overspending, indeed if our services, benefits and eligibility have been relatively generous, they should be trimmed in order to insure that our safety net remains available to those actually facing real poverty. To be faced with a proposal for $160 million dollars in structural tax increases with no structural cuts in expenses has not distinguished the Chafee effort coming out of the box. The general economic rule is that you can’t tax yourself out of a structural deficit. You must cut $3 for every $1 raised. I’m a no new taxes guy and I’m bidding against myself by pointing this out, but if frank discussion is necessary at this juncture, so be it.

I trust the administration is actually committed to the same. True, the figures at that presentation were for 2007, but are they willing to consider cuts based on 2010 figures?

PS. If they are interested, may we suggest reviewing our report on Medicaid spending – Doing Long Term Care RIght.

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2 responses to “Licht says Felkner got it wrong, but Walsh confuses issue

  1. THAT was Yorke’s response? Did he challenge him at all?

  2. Boy they sure know how to dance. The more Richard spoke the more my stomach turned. Good job Bill, you caught him opening his mouth and by accident he told the truth. oops.

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