Category Archives: State Fiscal Policy

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…

Public Pension Costs Continue to Rise

It seems like almost every other week now we get a report saying that the costs of the public pension system are higher than previously expected. Here is the latest one from The Providence Journal:

The Rhode Island public pension system may soon cost taxpayers far more than previously believed.

The consultant for state government’s $7-billion pension fund issued a report last week recommending that state officials revise overly aggressive investment assumptions that could be masking the true cost of the system. The change could cost state and local taxpayers as much as $63 million.

And that’s on top of the projected $218 million that state taxpayers are expected to contribute in the coming year.

“There is a widespread sense that the market meltdown in 2008, which has only partly been offset by subsequent gains, signaled that the financial world has changed in fundamental ways,” reads a draft report by Texas-based actuary Gabriel Roeder Smith, which recommends that state officials significantly revise the current assumption that the state pension fund will grow 8.25 percent each year in investments managed by the state treasurer’s office.

The report comes as the General Assembly wrestles with plans to trim costs from the pension system to help fill ballooning budget holes.

In addition to limiting cost-of-living adjustments for newly retired state workers, teachers and judges, the House of Representatives hopes to generate short-term savings by refinancing the retirement system’s $4.3-billion unfunded liability. Akin to refinancing a home mortgage, the move would produce short-term budget relief but cost taxpayers $2.2 billion over the next 25 years.

The actuary’s recommended change could wipe out much of the savings in the legislature’s plans.

Licht says Felkner got it wrong – But Walsh confuses issue

A Czar for Rhode Island?

Given President Obama’s well-documented fondness for appointing czars, we were more than a little surprised to see the Republican gubernatorial candidate propose a czar for Rhode Island. We know that John Robitaille is on the side of smaller government, but his proposal for a ‘lean’ czar to strip wasteful spending for taxpayers was less than well-conceived. If you want to cut government, here’s a thought: why not start with this czar? After all, isn’t trimming spending supposed to be the job of department heads? We suspect that Robitaille was attempting to show he was serious about budget discipline in proposing an entire position dedicated to the work, but instead, his suggestion comes off as a gimmick. Instead of pawning this most important task onto some rogue czar, Robitaille could show more leadership in promising that he himself will go through the budget and do some cutting of his own. After all, even President Obama pledged to do as much during his campaign. Obama never delivered, but Robitaille should hold himself to a higher standard.

Another Bad Ranking for Rhode Island

Rhode Island has the fourth worst gap between pension liabilities and available funding, according to a new study. In total, there is a disparity of $5 billion, the worst of any state in New England. Here is more from the Providence Business News:

Rhode Island has promised its public employees pension, health and other retirement benefits of $12 billion but has only set aside $6.8 billion to pay for them, according to a study released Thursday.

Rhode Island’s pension plans alone had the fourth-largest funding gap in the nation as of June 2008, according to the report by the Pew Charitable Trusts’ Center on the States. The state had set aside $6.8 billion to cover $11.2 billion in liabilities for state-administered pension plans, or 61 percent of the total, down from 83 percent in 1999. …

On top of that, Rhode Island has promised current and future retirees an additional $788.2 million in health care, life insurance and other benefits, but no money has been set aside to cover those programs, Pew found.

Nationwide, the picture is quite bleak. In all, there is a gap of $1 trillion between what the 50 states have promised to pay and what they actually have. Only four states—Florida, New York, Washington, and Wisconsin—have full funding for their pensions. Meanwhile, the worst gap was in Illinois, which has barely more than half the money it needs to cover its liabilities. The second and third worst states were Kansas and Oklahoma. One minor detail: all these figures are as of 2008, so one can only imagine how much worse things are, two years into the recession.

WPRI also has a good report on this here. To read the study itself, click here.

Out of Control Spending Has State ‘Out of Whack’

At the end of his column on the economic and fiscal crisis in the state, Ed Achorn has a fact-rich list of examples of how Rhode Island is out of step with the rest of the country. We quote some of the key ones below:

● Rhode Island has the largest number of school districts and school administrators per capita in America.

● It may be the only state with simultaneous decreases in students and increases in teachers from 2000 to 2006. Student populations declined by about 4 percent, while teaching jobs grew 36 percent, the highest growth rate in America.

● Rhode Island has the ninth highest teacher salaries and perhaps the lowest class sizes. Its students finish second to last in New England (before Maine) in SAT scores and tend to join the worst states in performance in standardized testing.

● The state has 50 percent more special-education students per capita than the U.S. average, and its costs per special-education student are 30 percent above the national average.

Notice anything? Like how nearly half of them involve the public school system. Two other statistics stand out as well—the fact that government employment has risen faster than population growth and that we have the highest pension system in New England. These last two items are to a large extent a function of what is happening in public schools as well, given that public school teachers account for nearly a third of all government employees in Rhode Island. Now, news that hundreds of teachers could be laid off in East Providence, Central Falls, and Lincoln doesn’t sound so bad.

Columnist: Ocean State Is Adrift

Ed Achorn doesn’t mince words when talking about the fiscal and economic crisis in Rhode Island in today’s Providence Journal. Here are the money quotes:

But the bulk of the blame belongs to the members of the General Assembly and municipal leaders, who have been spending like maniacs to grow government and reward the unions, at a rate that far exceeded growth of tax revenues or citizens’ income. They have used the jobs-creating private sector, not as something precious to nurture, but as a host on which to feed parasitically. Even now, as the host grows thin and pale, they don’t care enough to revive the victim. They want to drain it even faster with higher taxes. Apparently this will go on until it’s dead altogether.

They have worked to turn Rhode Island into a small copy of Michigan, with its foreclosed houses, boarded-up neighborhoods, high unemployment, declining population and devastated property values — in spite of the Ocean State’s superb advantages of location, beauty, higher education and cultural qualities.

This is the same writer who recently described Rhode Island as the ‘land of zombies’ for the lack of outrage among the public and accountability in government.