The Road to Ruin

Governor Chafee has called his tax and spending plan the “pathway to prosperity,” but it’s actually the “road to ruin” for Rhode Island families and small businesses.  I’ll-conceived and politically motivated, it does nothing to stimulate the economy, create jobs or cut the cost of state government.

We have a spending problem - not a revenue problem. Balancing a structurally flawed budget by raising taxes simply kicks the can down the road and ignores the cost drivers that create excessive spending and dramatic budget growth.

According to the 2010 census, during the past ten years Rhode Island’s population grew by a puny 0.04%, yet during that same period of time our state budget grew by a whopping 62.5%. Where’s the money going?

A recent RIPEC (Rhode Island Public Expenditures Council) report showed that over the past decade our state budget has increased by over $3 billion dollars, primarily due to increased expenditures for public personnel costs and social service entitlements.

When Rhode Island families and small businesses have had to cut back and learn to do more with less, those who serve the public and those who receive from the public must realize that no one is immune from substantial cut backs.

Raising taxes now, in lieu of budget cuts, may appease the public employee unions and the poverty advocates, but it will disproportionally hurt ordinary Rhode Island families and push more small businesses into bankruptcy.

The hard cold truth is that we must reset both government spending and public expectations. One way to start would be to initiate zero-based budgeting. It will force every department to evaluate what they do, why they do it and what’s the return on the investment. Each budget line item must be examined and justified, or eliminated – no exceptions.

Until this budget process is completed, there should be a total spending freeze, including a temporary wage-freeze for all public employees. There must also be an immediate increase in employee contributions to their healthcare coverage with a minimum of 25% for everyone - including members of the general assembly.

We must also reform the public employee pension plans, increase the minimum retirement age, stop the pension spiking schemes, and end automatic COLA.  If we fail to act now, it’s projected that annual taxpayer contributions to the retirement system will skyrocket to over $1 billion by 2030.

There are organizational and operational changes that must be made. If unattainable through collective bargaining, the general assembly must legislatively implement a one-time suspension of seniority-driven bumping procedures so we can reorganize and consolidate many state functions and departments.

Waste, redundancies and inefficiencies add up to millions of dollars in “hidden costs” that could be eliminated through the implementation of best practices and LEAN management techniques. A joint labor-management effort would certainly make sense, but that doesn’t appear likely in this politically charged environment.

On the social services side, we must crack down on welfare fraud and abuse, evaluate eligibility rules and reorganize our human services department into one centralized agency. By eliminating fraud and abuse and implementing better controls and management, we will have ample resources to help those who are truly in need.

And while we are at it, let’s ensure our social service programs are actually helping people and not simply entrapping them in a harmful co-dependency with government entitlements. For example, we must end the incentives for women to have additional children out of wedlock, and place more emphasis on education and skills training as a pathway to self-reliance.

Our cities and towns must cut spending as well.  Granted aid to cities and towns has actually decreased over the past few years, however additional local savings can be realized if we eliminated all unfunded mandates, such as minimum staffing, and give our municipalities the freedom and the tools to better manage their budgets.

And finally, our unemployment benefits are among the highest in the nation. We have to trim back both the amount and the duration of benefits. And let’s tell the federal government they’ll have to wait for us to pay back the $290 million we borrowed for the unemployment insurance trust fund.

Here’s a plan, they can take the high-speed rail money earmarked for RI and pay down the loan. Our small business owners cannot afford an increase in the UI tax and we certainly cannot afford a new train to nowhere.

Let’s not allow this administration to railroad us into believing we can tax our way out of this recession.  If there ever was a time to be engaged in your government, it’s now.  

Governor Chafee’s badly flawed budget proposal is now in the hands of the General Assembly.  Tell them to derail this harmful sales tax scheme, cut spending to the bone and give small businesses a chance.