By Tom Sgouros in
RIFuture.org
Governor Chafee was a man confident of what our government can
achieve in the annual State of the State speech. He’s optimistic about what
Rhode Islanders can achieve with steady hard work, and willing to boast about
it. In that pride and his faith in government, I would call it progressive in
its essentials.
But there are things I worry about in the Governor’s budget
proposal.
I also worry about his proposal to lower the state’s corporate
income tax. There are some good parts to this. Chafee suggests that
we offset the cost by reducing the benefit of the Jobs Development Tax Credit
by 50%.
This tax credit cost us $16.4 million last year (see here), and CVS took $15.4 million of it, so cutting
this by 50% means cutting our subsidy to CVS by almost $8 million, something I
can certainly support since I’m not at all clear why CVS needs a subsidy from
state taxpayers.
Overall, though, doing anything at all to reduce state
revenue certainly works against what Chafee says is among his priorities,
lowering the state’s reliance on the property tax.
On that point, Chafee was slightly apologetic, but firm: “I may
sound like a broken record at this point, but in the years before I took
office, cities and towns bore the brunt of the downturn in state revenues.
Those most severely affected were the distressed communities that could least
afford it.”
He is proposing some new state aid, some of which will go to the
state’s poorest cities and towns, but the $30 million he proposes isn’t much.
By themselves, the budgets of Providence, Woonsocket, Pawtucket, Central
Falls, East Providence, and West Warwick add up to more than $1.4 billion, so
we’re talking about adding 2% to that mix. It’s not completely clear how
much that can help.
Chafee justly boasts about fully funding the state’s education
funding formula, while glossing over the many ways in which the formula is
neither fair nor adequate. And he does propose increasing state aid to
the state colleges by $6 million, while in the same sentence demanding they cut
$6 million more from their budget. With luck and a new education board,
he’ll get cuts from administration and overhead and not from programs, but I’d
like to see the cuts before deciding whether this is the way to go.
About economic development he said, “My hope is that you all
will be skeptical and wary of deviating from the steady, methodical
construction of a Rhode Island economy built for today and for the future.” He
explicitly cautioned against looking for the quick fixes, and pays special
attention to the risks of ex-baseball players. And I also enjoyed his
expression of skepticism about the many rankings that always seem to so upset
people here.”
Overall, I have to agree with Chafee that he is moving us in the
right direction. “The state of our state is steadily improving,” he said.
And I appreciate his refrain throughout the speech about the slow-and-steady
time scale of lasting improvements. Unfortunately, some of the problems
are substantially larger than the scale of the solutions he proposes.
Again, it’s hard to fault a man who has been turned back by the
legislature so firmly the past two years. The dismal state of the state’s
budget is really their doing, and Chafee’s administration is doing its best to
make the best of a bad hand.
Tax inequity has economic consequences as it deprives people who
spend the bulk of their income of money to spend. Over-reliance on the property
tax has economic consequences to both businesses and citizens that far outweigh
the effect of state taxes. Funding inequity among our cities and towns
has social consequences that far outweigh the savings the rich enjoy from the
past several years of tax cuts.
To his credit, the Governor addresses all of these in his
budget, but the solutions he proposes are within the radically constrained
limits set by General Assembly leaders who choose to ignore or belittle the
biggest challenges we face.
Tom Sgouros is
a freelance engineer, policy analyst, and writer. Reach him
atripr@whatcheer.net. Buy his book, "Ten Things You Don't Know About
Rhode Island" at whatcheer.net
