As has been amply
reported by other writers here and in other places, the state budget has
emerged from the mists of the Finance Committee, and will likely be voted on
and passed this week.
It contains no broad-based
tax changes, though there are small increases in cigarette taxes, and small
expansions of the sales tax, and tolls, to cover restoring 40% of the money cut
from care to the developmentally disabled, and to fund the state’s education
funding formula — the one that the legislature’s own study shows is inadequate.
Due to more
encouraging revenue projections than were the case last fall, some money has
been restored to important places, but it’s just a bit here and there.
This graph is still the policy of the state:
That lower line is the
effective tax rate on the median taxpayer. The blue line is the rate on the top
1%, and the red line is just thrown in there to show there is no relationship
between taxes and unemployment.
The message overall
from the legislature is that the cities and towns be damned. There seems no
willingness to acknowledge that the fiscal crisis in the cities is largely the
result of state policies.
Tremendous cuts in
state aid in 2008-2010 to both the municipal and education sides of city and
town budgets brought fiscal havoc everywhere, and last week we had the
spectacle of Lisa Baldelli-Hunt, a representative from Woonsocket ,
begging her colleagues in the legislature not to allow Woonsocket to fix the problems caused by her
colleagues.
Oddly enough, they
complied, and now we have two more cities half a step from joining Central Falls in
bankruptcy.
The sad fact is that by and large the people in charge of
our cities and towns have actually been more fiscally
responsible than legislators in the General Assembly, but they have less power,
and so the Assembly leadership can pretend otherwise.
That’s quite a claim,
isn’t it? How to back it up? How about this: as of 1990, Rhode Island cities and
towns collected about $1.3 billion, between state aid, property taxes and various
municipal fees. In 2008 — before the worst of the state aid cuts — they took in
a bit less than $3 billion.
This does not count
the car tax payments from the state, which only offset taxes that towns would
have collected from their residents. If you’re keeping score, that’s growth of
about 1.9% per year — after correcting for inflation.
This is troubling, but
it’s not necessarily evidence of mismanagement. Inflation measures the price of
goods and a few services, while towns spend their money on services and a few
goods.
So how best to measure
this if not against the inflation rate? If you want a yardstick with
which to measure a service-oriented enterprise like a town, how about a
private-sector service like Federal Express?
Fedex is fiercely
competitive, I hear, and non-union, to boot. How did they do? In 1990, it
cost $11 to send an overnight letter across the country, and today it’s about
$25.50 for the same service. After correcting for inflation, that’s up about 2%
a year.
What about the
state? After accounting for inflation in the same way, the state’s
general revenue has gone up 2.4% per year since 1990, and overall expenses are
up even more. (That’s the structural deficit and the rise in state debt you’re
smelling.)
So who is being more
responsible with tax dollars? The General Assembly, with members like
Baldelli-Hunt who give lectures to municipalities, or the towns, who have
controlled costs not only better than the state, but better than Fedex.
But it’s the towns who
get cut while the state basks in the adulation of business leaders who praise
legislators for their tax cuts.
The main message of
this budget bill is continuity. This is a budget motivated by policy choices
virtually identical to the ones of the previous year, the year before that, the
year before that, and so on.
The idea is to squeak
through another year with minimal pain to everyone, especially the wealthy.
But it was to a large
extent that very set of policies that brought us to the status quo: high
unemployment, bankrupt cities, ever-rising tuitions at the state colleges, and
lower taxes on rich people.
Do you like the way
things are going around here? Hope you do, because the legislature is
voting this week to give you more of the same.
Related
posts:
- Budgeting for Disaster – Part
III
- Budgeting for Disaster: Taxing
History
- Budgeting
for Disaster Part V: Granting a Problem
- Budgeting
for Disaster Part IV: Lack of Education
- Budgeting
for Disaster Part VII: Quasi-appropriate?