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Legislative Alert
 
This is expected to be the last week of the 2014 General Assembly session. Historically, this week tends to be the longest "witching hour" when the most controversial and the most detrimental bills rear their ugly heads and are passed into law with little notice and insufficient vetting. While the State Budget is extraordinarily important, equally important are the bills, moved in a flurry of activity out of committee, and passed on the floor by your representatives and senators.  
 
So, please pay attention and stay in contact with your legislators and leadership with the goal of letting them know that you are engaged, informed and will hold them accountable for the votes that they cast during this last week of session.
 
Bold Step Forward or just the Old Curly Shuffle?
They say it is a "bold step forward for RI's economy".  An $8.8 billion budget for a state less than the size of a thumb tack on a map of the country.  It represents an increase of $600 million over last year's $8.2 billion budget.That's more than a 7% increase over last year. RI's population has been flat or declining, our roads and bridges have never been worse, so where is it going?  It certainly hasn't gone to improve RI's economic landscape.    
 
This year's budget is not much different from past budgets in that there is no game changer -  more of the same, just different targets.  Increased gas tax, increased inspection fees,  increased good driving fees, increased taxes on the sale of your home and a way to collect more sales tax on items purchased out-of-state. Sure, the Speaker threw businesses a bone by reducing the corporate tax rate, but then pulled the bone away with combined reporting. To his credit, he did fix the "cliff" on the estate tax exemption and increase the threshold some, but is it just too late?  Have virtually all of the people with wealth headed for the hills already?  In standing to support  this tax change, even Majority Leader DeSimone said that we can't know how many people took their accountants' and their financial planners'  advice and left the state.
 
Then the discussion came around to removal of the Sakonnet Toll.  While we, along with many 'non-East Bay' representatives, believe there never should have been a toll on a commuter overpass in order to fund the entire state's infrastructure needs, why is the answer always one of two things - increase taxes and fees or push it off to the future? In this case, the plan calls for both, as money comes from many of the taxes and fees noted above, money is also required to come from general funds, yet there is no source to fill in the general fund hole that will be created!  In the end, is there really an infrastructure plan?  We think not.
 
Nor did Representative Morgan.  She asked Chairman Gallison how much the state spends at the DOT already.  Any guesses?  $500 million annually!   A Reason Foundation report said RI is spending 2 - 3 times the national per-mile average, but the deficient bridges, the urban congestion, and the rural non-interstate roads are not improving.  Again, why?  Rep. Morgan believes that there may be inefficiencies at the DOT.  We concur.  
 
As an aside, you should know that the Senate Finance Committee held a second hearing recently on a bill that would require the state take on responsibility for a large swath of the Providence road way system.  That means more state tax dollars to subsidize Providence's inability to provide basic public services. There is still time for the General Assembly to do this kind of damage.
 
It looks like other late-session damages will materialize as it relates to state contracts.  House bill H 7392 , a bill that provides for no competitive bidding in certain circumstances, may be sailing through the General Assembly.  It will be voted on in the House this week.  We suggest that you contact Speaker Mattiello  and Senate President Paiva Weed  ASAP and tell them that you can't afford overpriced, uncompetitive state contracts that have the probability of providing fertile ground for insider dealings.
 
So where does that leave RI after the passage of the House budget bill?  
The biggest impact item is not what is in the budget, but rather what is not in the budget.  With the Speaker not allowing the Oversight Committee subpoena power, perhaps there could be another tactic. Alas, the amendment to allow an independent investigation of 38 Studios was, of course, voted down.  Taxpayers never did receive an explanation as to what harm may have been wrought by placing those funds in escrow while proceeding with an investigation. That tactic would have signaled the "all important" willingness to pay while providing the time to do our full due diligence. After all, the first payment is not due until November. But, because the 38 Studios payment was included in the budget, RI will continue on the course of paying what we don't owe and limiting our ability to ever reach the truth about the insider dealings and potential corruption surrounding this mess.
 
Nuts and bolts of the budget.
$1 billion of projected deficits awaits us in the next four years.  No where did this budget include the issue of expanded Medicaid, that $52 million unanticipated cost that created a big hole in the budget, but magically disappeared.  Imagine an inventive solution like verifying eligibility for Medicaid sooner rather than later. That's what the big answer was.  Still, that only produced an estimated $15 million of savings. No where did the budget address the $23 million in maintenance cost for the RI Healthcare Exchange, nor did it make provisions to turn it over to the federal government. No where did the budget include legislation to help identify provider-side fraud in the Medicaid system or the Food Stamp system, which legislation has been before the General Assembly for years now. No where did the budget include the implementation of Ken Block's fraud report that would address both Medicaid and Food Stamp Fraud on the user side. No where did the budget include fixing government systems that we know, through media reports, are severely broken - systems like Unemployment Insurance and TDI systems, or the system of paying state nurses and state laundry workers exorbitant overtime as a standard practice (part and parcel to Medicaid abuse). And no where did it address the number one issue with small businesses in RI - overregulation (but we'd be remiss in not also mentioning the minimum tax for the "privilege" of being in business in our state).  Perhaps this will be paritally addressed by Representative Trillo's Commission to study and provide recommendations on streamlining the permitting process for small businesses. Our own BOD member, Lyn Jennings has accepted a request to participate in this commission.  
 
What was most important for you in the budget?  
If you listen to talk radio, many people are against paying the 38 Studios payment. You should know that 12 people voted against the budget as a whole. Does it mean they voted specifically against the 38 Studios payment?  That's for you to determine.  The 12 nays were Chippendale, Costa, Dickinson, Giarrusso, Hearn, Lombardi, MacBeth, Marcello, Mclaughlin, Morgan, Newberry, and Tanzi.  But we know one thing.  All of the other members, in voting for the budget, voted for the 38 Studios payment.
 
The Senate Finance Committee will hear the budget on Monday. See details of the hearing below. 
 
Recent harm done to taxpayers, outside the budget.
Recently passed legislation (H 7727/S 2690) that guarantees increased electrical rates was passed last week in both the House and the Senate and is expected to be signed by the governor.  Because it is not a tax that will ultimately be paid to the State, it is not part of the budget.  But make no mistake, the General Assembly just taxed you.  The only difference is you will be paying National Grid rather than RI.  You can read more about the legislation in our most recent GoLocal Article written by our Board member, Brian Bishop
 
Another harmful piece of legislation (H 7096), passed by the House recently, guts education reform (although the companion Senate bill (S 2738) has not yet come to a full vote on the floor).  It has been a longstanding axiom that the most important thing we can do to educate our children is to put a highly effective teacher in every classroom. The House believes it is not important to ensure the most effective teachers are in each class, each year.  H 7096 significantly reduces the frequency of teacher evaluations.  Rather than annual evaluations, they would only be performed for most teachers every three of four years, in spite of the fact that this change has the potential to severely impact the $75 million Race to the Top award.  This is also in spite of the fact that our very  own neighbor, Massachusetts, long known to have been successful in transforming education, requires evaluations every two years and Florida, a state also transforming education, evaluates teachers every year.  Why would the General Assembly work to tear down the reforms that won $75 million in Race to the Top money?  Perhaps it's because, according to the Thomas B. Fordham Institute, RI teachers' unions rank 5th most powerful in the country, a ranking higher than California.  However, RI may still have a prayer to improve education.  A recent California court decided the state's teacher tenure, dismissal, and layoff laws were unconstitutional. This may have a profound impact on the effectiveness of teachers in the classroom. US Education Secretary, Arne Duncan said the California decision represented "a mandate" to fix a broken teaching system.       
  
How the world outside the RI bubble sees us.
When all is said and done, can you really blame Aaron Renn for the article he wrote in City Journal about RI?  It was a dreadful portrait of the state we love, but it was true.  This budget does not do anything to change the course of history.     
 
The 51st year was the charm but not until after the election.
On the upside, although not part of the budget, a good government bill, Repeal of the Master Lever, was finally passed in the Senate (the House passed bill H 8072 last month). While it was disappointing that the Senate felt the average RI citizen would need more than 4 months to understand how a new ballot would work with no master lever, it was a day to rejoice in RI when the amended bill was passed, effective for January 2015.  Yea!  We are not sure, however, how much money will need to be appropriated for the cost to "educate the RI citizen".  It should be noted that, at the beginning of the Senate hearing last week, some of the Judiciary Committee members made reference to the various articles and Providence Journal editorials regarding the members' past inaction.  You can view the Senate members that chose to defend their past inaction during the June 12 hearing on Capitol TV. 
 
Will the Ethics bill get any teeth?
The Ethics reform bill now before the Senate is nothing more than a decoy as we have stated in the past.  A watered down version, meant as a facade.  It doesn't seem likely that real Ethics reform will take priority in the last week of the legislative session, but it seems very sad in light of the recent article written by the Boston Globe's Kevin Cullen regarding the rampant corruption in RI history, continuing unabated today, as he refers to the raid on the office of former Speaker Fox.
We will be asking for your dedication to Ethics reform next year if it is not properly addressed in this session.
 
So what's a taxpayer to do?
As for the $1 billion deficits we face, in the famous words of RI's House Finance Chair Gallison, "We're going to have to deal with it when they come". That should provide every taxpayer and the business community with something on which to hang their hat.
 
LEGISLATIVE HEARINGS 6/16/14 - 6/20/14
 
MON, JUN 16
Senate Finance                     Chairman DaPonte  
Room 211, 2:00 pm
 
H 7133 Sub A  Provides the budget for fiscal year 2015, along with various financial related articles. 
 

 

 

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