Category Archives: Chafee administration

Another low ranking for RI

Not to sound like a broken record, but is this any surprise?  From Ernst and Young:  Rhode Island has the 49th worst “tax burden on new investment” in the country.

If you are a little sad because we came in second to the last, don’t worry, if Chafee’s proposal to increase taxes on these and other items goes through, we can achieve 50th! (or 51 if you count DC)


Tax Day Rally

Somebody has to sell it

After yesterday’s showing at the State House where business leaders from all corners protested against the Governor’s proposed budget, it looks like EDC director Keith Stokes has the difficult job of selling it on the streets.  Here is the schedule for his chamber of commerce tour.  If you ever wondered if the EDC is looking out for the interest of the state or simply the salesforce for the governor’s “Winner Picker” agenda, you need look no farther for proof.

How Will Governor Chafee’s FY2012 Budget Impact RI Businesses? 

Businesses are asking how Governor Chafee’s Fiscal Year 2012 proposed budget will impact them.  The Rhode Island Economic Development Corporation invites you to learn more about the Governor’s budget and what it means for Rhode Island businesses.

RIEDC Executive Director Keith Stokes and a representative from the Rhode Island Department of Revenue will give an overview of the budget and provide detailed information and answer your questions about Governor Chafee’s Businesses Tax Competitiveness Proposal which includes:

a) reduction of the corporate income tax rate;

b) lowering and restructuring the minimum corporate tax/franchise fee; and

c) reduction and modernization of the state sales tax.
Some of the key questions that will be addressed include:

a) How will changes to the minimum corporate/franchise tax help small businesses?

b) How will the Governor’s tax proposal help retain and attract businesses in RI?

c) What are the impacts of the proposed change to the sales tax?

Speaking Engagements (scheduled to date)

April 21, 2011
Hosted by the Newport Chamber

Newport Harbor Hotel and Marina, 49 America’s Cup Ave., Newport
For more information or to register click here.

April 22, 2011
8:30 a.m.
Hosted by the  Central RI Chamber

NE Tech, 2480 Post Road, Warwick
For more information or to register, please contact the Central RI Chamber at 401.732.1100

April 27, 2011
8 a.m.
Hosted by the Northern RI Chamber

Kirkbrae Country Club, 197 Old River Road, Lincoln,
For more information or to register click here.

April 29, 2011
Hosted by the South Kingstown Chamber

South Kingstown Chamber, 230 Old Tower Hill Road, Wakefield
For more information or to register click here.

May 4, 2011
8 a.m.
Hosted by the North Kingstown Chamber

Pelly’s 19th Hole, 615 Callahan Road, North Kingstown
For more information or to register click here.

May 6, 2011
5:00 p.m.
Hosted by the East Greenwich Chamber

Location: East Greenwich Yacht Club
For more information or to register please contact the EG Chamber at 401.885.0020.

May 12, 2011
8:30 a.m.
Hosted by the Charlestown and Greater Westerly/Pawcatuck
Chambers of Commerce
Location: Shelter Harbor Inn
For more information or to register please contact the Greater Westerly Pawcatuck Chamber at 401.596.7761

May 18, 2011
8 a.m.
Hosted by the Narragansett Chamber

Location: To Be Determined
For more information or to register please contact the Narragansett Chamber directly at 401.783.7121

More dates and locations to be announced.

Event information is subject to change. Please register with the appropriate Chamber of Commerce to get updates regarding these talks.

In case you missed it, and so you don’t

In case you missed it, we had a quick response to the recent ProJo article on the Jack McConnell nomination to the U.S. District Court. These all follow our PR on the subject issued the day before.

The Journal reported that Senator Whitehouse defended answers to the Judiciary Committee by U.S. District Court nominee Jack McConnell as “accurate in every respect.” We beg to differ, as did Senator Grassley, the ranking Republican (“Senate panel endorses McConnell for R.I. judgeship, ”April, 1).

McConnell said, “My law firm entered into an agreement with the State of Rhode Island that set forth the attorney fees as 16 2/3% of any recovery obtained as a result of the litigation.” In fact, the contract says: “In the event the litigation is resolved, by settlement or judgment, … the parties hereto agree to seek . . . compensation.”

The fee agreement is triggered not by “any recovery” but by “settlement or judgment,” neither of which occurred in the DuPont Deal by the testimony of both Dupont and then Rhode Island Atty. Gen. Patrick Lynch. In the event of “in-kind” payments we would not be obligated to pay a fee.

Continue reading HERE.

And so you don’t miss it, I’ll be on Channel 10 news this evening (6:00) interviewed by Bill Rappleye on the recently reported raises given out at the State House.

It is difficult to say exactly which 10 second quote will be taken from the 10 minute interview, but here’s the point I made, I don’t begrudge anyone making money from hard work, but it is understandable why people are outraged by these raises as we suffer in an economy where benefits are being cut and people are leaving our state because of the onerous taxes (see our Leaving RI study for documentation of this fact).  Handing out raises to anyone in government in this environment is offensive. But I think the ire is misguided when you consider the fact that teachers in Rhode Island who happen to be in the first 10 years of employment get close to a 9% raise NOT because of their job performance, but simply because they were employed another year.  Those and other exorbitant contractual raises based solely on seniority that apply to everyone are the real budget deficit driver.

Of course, if more government services were provided by private entities, who have “competition” to ensure compensation is judiciously allocated, then all these problems would go away, now, wouldn’t they…

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.

A sign of things to come?

News that Judge Flanders is leaving the RI Board of Regents may be a sign of things to come for education reform in Rhode Island – or the lack there of.

The story also includes info on Flanders taking over as receiver in Central Falls.  Knowing his sharp understanding of the state’s constitution should make for some interesting options in regards to dealing with contracts.  We wish him luck.

Licht says Felkner got it wrong – But Walsh confuses issue