This article was researched and written by Geoff Schoos, President and Founder of RICLAPP. It appeared on January 13, 2010 in his bi-weekly column in the Cranston Herald.
Happy New Decade! The first year of this decade promises to be interesting because, if nothing else, it’s an election year. It’s a big election year. Heck, it’s gigantic. Every office, save our two U.S. Senate offices, is up for grabs. There will be three openings in our general state offices: governor, attorney general (who is term-limited and running for governor), and general treasurer (who isn’t term-limited, but running for governor anyway). In addition, we have a former republican Warwick mayor and United StatesSenator running for governor as an independent.
And that’s just the beginning. All of the legislative offices are up for election. In Cranston, we’ll have races for all nine council seats as well as for the office of mayor. And don’t forget the school committee. Let’s face it; this is a political junkie’s dream.
Yet, one person’s dream can be another’s nightmare. Anyone running in 2010 will be facing an array of daunting issues and an extremely hostile electorate. The issues, or rather the issue that drives all others, is obvious – as James Carville once said, “…it’s the economy, stupid.” No great surprise or insight here.
With a 12.7 percent unemployment rate (second in the nation), a $218.8 million deficit (including the $61.8 million deficit from last fiscal year), it’s no wonder that people are hostile.
The reported unemployment rate is low in that it doesn’t include everyone. It doesn’t include the underemployed who are those working part-time or sporadically just to earn a little money to pay the bills. And it doesn’t include those who have just given up and stopped looking for jobs that don’t exist. If those folks are included, the unemployment/underemployment rate has to be close to 25 percent.
What does recovery look like? One economic forecast projects that Rhode Island’s reported unemployment rate will still be 11 percent in year 2012.
We’re going to hear a lot about Rhode Island’s economic recovery this year. Plans will be presented and promises will be made. Central to this concern will be how do we put over 70,000 people back to work.
Rhode Island has been lagging behind the national and regional economy since the early 1990s. Prior to the recession of the early 1990s, Rhode Island tracked well with both the national and regional economies. However, since that time, Rhode Island never really recovered and now lags well behind in employment.
That fact alone does not bode well for the impact that any national or regional economic recovery might have. Aside from having the second highest unemployment rate in the nation, Rhode Island ranks seventh in the nation for job losses. Regarding non-farm job losses (and let’s face it, farming isn’t a big Rhode Island industry), from the second quarter of 2007 to second quarter 2009, Rhode Island lost 6.3 percent of its jobs compared to 3.1 percent in the other New England states and 4 percent for the country as a whole.
To a state that’s in the economic hole to begin with, these losses in and of themselves are devastating. Add to that the sectors where the losses occurred and you get a more dire picture. Manufacturing lost 15.1 percent of its jobs, construction lost 19.3 percent and professional/business services lost 8.2 percent of its jobs. If the wealth of an economy or a state is determined by what it makes, or what its skill level is, then these numbers are even more devastating.
The one bright spot in all this is the growth of education and health services jobs (+.4 percent), but even that pales in comparison to regional (+3.9 percent) and national (+5.2 percent) gains.
It is no wonder that the state has a budget deficit for this fiscal year of $157 million, that when added to the carry-over from last year comes to $218.8 million. The revenue projections for this fiscal year did not pan out. Remember, we started this year’s budget with a deficit of almost $62 million carried over from the previous year. Add to this the fact that revenues are less than anticipated – $130.5 million less than anticipated. This number is offset by the $4.6 million reserve fund so that the real number to be made up is a mere $125.9 million. Feel better yet?
Driving this downward spiral is the less than anticipated revenues from income and sales taxes. Add to that the reduction in cigarette taxes and a general “all other” category and you’ve got yourself a deficit. It could be worse. The lottery showed gains of $3.2 million more than anticipated, giving voice to the desperation of a lot of people.
In calculating this budget shortfall, you will find that 83 percent of the current deficit problem is a revenue problem. Put bluntly, we’re not taking in as much money as we need. So what is the solution offered by the governor and presented to the General Assembly for its consideration? An expenditure solution – 87 percent of this solution is to cut expenditures. Of these expenditures, $110.9 million, or 58 percent, are cuts in aid to cities and towns. Put more directly, Cranston looks to lose approximately $6.6 million in this fiscal year and an additional $13.2 million in the next fiscal year.
This reminds me of the New York Daily News headline in the 1970s – Ford to City: Drop Dead.
To make matters worse, over the next five years, the deficits are going to get worse. According to a report by the House Fiscal Staff last November, in 2011 we’ll be running a $400 million deficit, in 2012 we’ll have a $556 million deficit and finally in 2015 a whopping $769 million deficit.
So that’s the context for this year’s elections. We’re going to hear the usual out-of-context nonsense about voting records, what affiliations s/he might have that creates conflicts of interest and how this mess is someone else’s fault. Then we’ll be treated to grand promises and small solutions. Some will stand on their ideological positions of “no new taxes” or “soak the rich.” And let’s not forget the targeting of those most attractive of whipping boys (and girls), teachers and other public employees. Why talk policy when it’s easier to get elected by teeing off on someone?
Even then, most of the “positive” proposals will reflect short-term thinking and goals for long-term economic challenges. Even the governor’s “plan” is essentially a one-year “fix.”
The state’s fiscal condition is a multi-variable public policy issue that needs to be resolved primarily by politicians, who have been conditioned to respond to the single-variable of getting re-elected. In this environment, the toxicity that breeds the “you must lose so that I can win” attitude may make it impossible to discuss, let alone arrive at a real consensus to address these challenges.
A real solution to our current and future challenges will not be to trim expenditures here or raise a couple of taxes there. This challenge has long since passed being that easy. No, the real challenge and the real opportunity is to create a new state economy, one built on valid assumptions that will yield a structure and framework that will sustain well into the future. There are lots of valid assumptions, based on verifiable facts, at our disposal. All we need to do is access these facts, build our assumptions, test them and roll them out for discussion.
I’d like to participate in that discussion, and will as long as I have this column, but on the whole, it’s up to each of us to determine the climate in which these discussions take place. Will we get sucked into the same old politics of “us against them” that’s failed us so often? Will we exhibit the often-intolerant behavior that makes real public discussion impossible? Or will we insist on a political environment where real policy discussion can be aired, vetted and either approved or disapproved on its merits and not on extraneous factors such as who proposed the idea?
The election in 2010 is not a critical election. It’s a survival election. What’s at stake is nothing short of the survival of our state. Think about the scene in the movie “The Perfect Storm” where the Andrea Gail is caught up in that huge wave. That’s how serious this is.
And I’m putting any candidate who wants my vote on notice. My vote goes to the candidate with a comprehensive, viable plan to revamp and restructure our state’s economy.
Link to the article on the Cranston Herald’s website is below: