Really? RI State Gov't Should Eliminate Internal Audits?

I'm all for cutting government. But this? A page taken directly from the David Cicilline Handbook On Governing?

The Rhode Island Society of CPAs (RISCPA) announced its strong opposition today to Governor Chafee’s proposal to abolish the Rhode Island Bureau of Audits. Under the Governor’s proposed FY2013 budget (House Bill 7323, Article 4), the Bureau, which provides the internal-audit function for all of state government, would be entirely eliminated.

“Eliminating the Bureau of Audits, a key tool in preventing corruption, would be a grave mistake,” said Robert Mancini, Executive Director of the RISCPA. “The proposal would undermine transparency, accountability and the crucial internal audit function of the State.”

The Bureau of Audits performs the auditing function for the Executive Branch of the State Government. It provides an independent appraisal and evaluation of the effectiveness of financial and operational controls through objective analyses, evaluations and recommendations.

DMV Will No Longer Spit On You

One of the big changes to the new Rhode Island Department of Motor Vehicles (DMV) is they're going to try to be a little nicer. According to the AP, Governor Chafee reported:

Rhode Island's governor says he wants residents to know they can now expect to be treated with courtesy and "dignity" when visiting their local Division of Motor Vehicles office.

I have to say, I'm quite glad that being treated with dignity by state employees who I need to give money to, is worthy of a press release and story, never mind it simply being a change in how they do business.

While we're on the topic of the DMV, one thing that I can't understand is why they're expanding.

Chafee, an independent, has said fixing the DMV is one of his top priorities. Since taking office in January Chafee has appointed a new DMV administrator and opened new branch offices.

Great, you want to make improving the DMV one of your top priorities, then downsize it. By downsize it, I mean greatly eliminate the number of employees, and use tiny offices. There's no need for offices the size of what was being used at the Apex building in Pawtucket. I'm thinking a 20 by 20 foot office would suffice. Think about this, how many things do you actually need to do in person at the DMV? I can think of two, road tests and identification photographs. You "webify" the rest of the tasks through the DMV's web site.

So you need your road test examiners, someone to take the photographs, and maybe someone as a concierge. Set up three kiosks in the new DMV offices for people who don't have access to computers, send out instructions to all the public libraries in the state, so they can help people as well. After that, have a few people in offices taking care of all the online requests for titles and plates.

What else is there? We'd drastically cut down on the redundancy of staff in the many offices. We'd have one central office handling all the web requests. We'd be able to downsize the workforce while improving efficiency for people by letting them simply go online and conduct their business through a computer instead of spending hours of their day in line at the DMV.

Governor Chafee and new DMV Chief Lisa Holley, if you want to improve the department and be more efficient, don't open more offices and hire more staff at an increased cost to the state. Join the 21st century and put it all online. It's the smart thing to do.

Who Just Said Sovereignty??? Terry G? Joe B? Oh, It Was the Governor!

This is interesting. Sovereignty for certain segments of the state's criminal justice system.

A federal appeals court has upheld Gov. Lincoln Chafee’s right to refuse to turn over accused murderer Jason Pleau for federal prosecution that could result in the death penalty. ...

Chafee issued a written statement late Thursday that said, “I am gratified that the 1st Circuit has recognized our state's right to refuse a federal request to transfer a prisoner for the purpose of exposing him to the death penalty. ... There is no question that Jason Wayne Pleau is a career criminal who deserves to be punished for his crimes. .... It is about maintaining and protecting the sovereignty and laws of the state I was elected to govern.

But not for the state's borders;

A state higher education board on Monday approved a measure that would allow students who immigrated to the United States illegally to pay in-state tuition rates at Rhode Island's public colleges and universities after the General Assembly declined to take up the issue.

not for the state's budgets; not for the state's jobs or other segments of the state's criminal justice system.

Gov. Lincoln Chafee Wednesday signed an executive order revoking the controversial Illegal Immigration Control Order issued by former Gov. Donald Carcieri more than two years ago. Carcieri’s order required all state departments and all contractors doing work for the state to use the federal E-Verify system to ensure all newly hired personnel were in the country legally and were eligible to work. It also required that State Police, corrections officials and the Parole Board to work with the federal Department of Immigration and Customs Enforcement (ICE) to assist them in enforcing immigration law.

Government: Where Popular Services Are a Problem

Here's an excellent indication that something is askew in our way of government operation:

Charles Odimgbe, chief executive officer of RIPTA, said he was aware of the problem [of insufficient beach-bound buses] but that his hands are tied.

"We have a deficit of $4.6 million," Odimgbe said. "I do understand there are way too many people wanting to go to the beach. But the riders need to understand about the funding constraints we are going through."

Odimgbe said reserve buses would cost money. "I don't see how we could compound our deficit by adding more service," he said.

"It's a beautiful day, sunny. People want to get to the beach, I understand that," he said. "But this is about all we can afford."

So, a government agency offers a service with predictably high demand, but since it loses money with every person who uses the service, it must ration it to stay within budget. Perhaps RIPTA should partner with a private company that is able to charge able-bodied, employed people for their charter to the shore.

The article mentions a federal grant that "reimburses" RIPTA for offering free bus rides on days of poor air quality but doesn't explain why that wouldn't apply to reserve buses. Readers can only guess why it is better to leave people standing at the curb for hours on such days than to charge them for the bus ride for which they're waiting.

And then there's the curious coincidence of a week-old cessation of reserve buses with a week-old doubling of parking fees for state beaches. Conflicting currents of distorted interests is big government.

Wisconsin Governor Takes on Unions to Solve Budget

Wisconsin Governor Scott Walker is squarely taking on the unions to help fix his state's budget problems (h/t).

Elements of Walker's proposal include state employee wage increases limited to the rate of inflation unless approved in a voter referendum. State workers -- other than police, fire, and inspectors -- would lose many bargaining rights and could opt out of paying union dues after current contracts expire, with dues no longer collected automatically.

State workers will have to raise the amount they contribute to their pensions to 5.8 percent of salary, and double their contribution to health insurance premiums to 12.6 percent of salary. Wisconsin's unfunded pension liability is $252.6 million, according to Moody's Investors Service.

People aren't happy:

The proposal drew outrage from labor unions and Democrats in the state, which has a $137 million budget deficit in the fiscal year ending June 30 and larger deficits to come.

"If Republicans get their way, workers will no longer be able to negotiate over the hours they work, the safety conditions they labor under or the health insurance and retirement benefits they and their families depend on," Senate Democratic Leader Mark Miller said in a statement.

Republicans--who control the state legislature--anticipate a tough road but think they have no other real options.

"We are out of money and the options are few. We can either raise taxes -- which is absolutely off the table -- reduce spending or lay off workers," Jeff Fitzgerald, the Republican Speaker of the State Assembly, told local radio.

"I expect the Capitol to explode" with protests, Fitzgerald said. "It's going to be a very difficult week."

Nonetheless, it is expected that the Governor's plan will pass.

But What About the Other Campaign Promises of Gov-Elect Chafee?

Governor-Elect Chafee has declined to reconsider his decision to rescind Governor Carcieri's Executive Order 08-01 (pdf) on the grounds that he cannot back away from a promise that he made during the campaign. After looking over some of Mr. Chafee's other campaign promises, I'm excited to hear this - at least, his grounds for doing so. H/T Patrick for picking up on this; in a comment thread that I can no longer find the comment thread under Justin's post "Chafee's Aimin' to Give It", he had wisely asked,

So why does Chafee have to keep some campaign promises and not others?

Okay, here we go. Quoting directly from the "Chafee for Governor" website.

First: the state must control government spending and be more efficient.

* * *

I will be a partner with our mayors and town managers as we work together with the General Assembly, to repeal many of the costly state mandates on cities and towns. We cannot reduce state aid to our local communities without reforming these mandates.

* * *

Third: I want to generate new state revenue from economic growth, not by raising taxes and fees.

* * *

Make no mistake, I will oppose any changes to our taxes without first reforming our spending, particularly the mandates.

Admirable fiscal goals and a fine set of promises - certainly as worthy of keeping as the one that has been the animated topic of headlines and talk shows for the last couple of weeks.

The Governor-Elect and his Transition Team Decline to Answer Anchor Rising's Civics Questions, Citing Disagreement with Their Premises

I submitted the Anchor Rising list of Gubernatorial civics questions to the transition team of incoming Rhode Island Governor Lincoln Chafee -- who, you may recall, stated during his campaign that “Rhode Island state government must be open, accessible, and accountable to its citizens" -- and asked if the Governor-elect would be willing to sit for an interview on them. A spokesman for the Chafee transition team declined the offer, saying that...

We do not agree with the premise of these questions.

The questions that the new administration is not willing to discuss, premises included, are listed below.

---

1. The previous legislative year began with the creation of a Teachers' Health Insurance Board, which on its face looks to be a violation of the separation-of-powers provision of the RI Constitution. We ended the year with the passage of a municipal fiscal stabilization bill, that can be basically used to suspend democratic governance in any RI municipality.

   Are we living through times right now that are so extreme, that basic principles of democratic government need to be shoved aside?
   
   

2. One set of criteria in the new fiscal stabilization law that can trigger a municipal takeover by the state involves decisions made by bond-rating agencies. The 1990s RI Supreme Court opinion which will likely be used to justify this new law begins with the statement that "on or about July 16, 1993, Moody's Investors Services, a recognized bond-rating agency, downgraded the town of West Warwick's municipal bonds to a grade Ba".

   Do we now live in a society that believes that financial-industry needs take precedence over democratic voice?
   
   

3. There has been speculation in national media that several states facing long-term fiscal problems -- a category that can be fairly said to include Rhode Island -- may ask for a Federal bailout, or that Federal laws will be changed to allow them to declare bankruptcy. Do you believe that either of these options are possibilities for Rhode Island in the near term?
   
   
4. The combined state and municipal budgets for Rhode Island have grown steadily (adjusted for inflation) over the past 10 years, a period of time which includes September 11, 2001 and its immediate aftermath, the end-of-the-financial world as we knew it in 2008, and the relative lull (at least domestically) in between.

   Is it by design or by accident that government has been growing as if on autopilot -- or would you disagree with that characterization entirely? Compared with 10 years ago, are Rhode Islanders getting more in return for their increased spending?

King on Pensions

Maybe I'm missing something, but it seems to me that there's a huge conceptual flaw in general treasurer candidate Kerry King's pension solution:

"We have a crazy system of 150 pension plans, which makes no sense at all," he said. "We need to bring all these plans together."

That would put all government employees into the same plan, doing away with extra perks that some municipalities may have included in their employee contracts.

"The Cadillacs are gone. We're all driving Hondas or Chevys," said King. "We can't afford Cadillacs in this state. We never could."

King said that, as treasurer, he would advocate for legislation that would require all municipalities to join a single statewide plan.

Consolidating all pensions at the state level also consolidates all of the incentive for municipal unions to install and manipulate legislators to keep the Cadillacs rolling. It will also require reform groups to work at the state level, rather than with the possibility of local neighborhood-by-neighborhood organization and advocacy. The general treasurer could certainly advocate for more intelligent control of the system, but it's still in the hands of the corrupt General Assembly.

The Little Policy Details That Say So Much

Sometimes, in the noise and rancor of politics and budgeting, one's attention becomes monopolized by particular details. Consider the following:

[The state's public-employee unions'] chief target: a proposal to limit annual pension increases to the first $35,000 in retirement pay initially. The $35,000 would go up each year, in keeping with the Consumer Price Index, and legislative budget writers stripped from their final bill a provision that Carcieri sought — to reinforce a right they already have to adjust these cost of living adjustments of up to 3 percent annually.

By way of comparison, Massachusetts has, for more than a decade, limited its annual pension increases to the first $12,000 in retirement pay.

There's no excuse for so much of what goes on in Rhode Island. Oh, there are rationalizations and complaints, and they'll continue to float to the surface as bubbles long after the state has drifted to the bottom. But the poor leadership and self-serving lobbying have no justification but greed and corruption. One class rallies and demands the continuation of ill-advised and unsustainable handouts, and another class suffers until its members reach the threshold of whatever's keeping them in the state.

The cycle continues, and down we go.

A Familiar Tale in New Jersey

A recent speech by New Jersey's new Republican Governor, Chris Christie, to that state's League of Municipalities sounds some strikingly familiar chords:

Our citizens are already the most overtaxed in America. US mayors hear it all the time. You know that the public appetite for ever increasing taxes has reached an end.

So when we freeze $475 million in school aid, I am hearing the reverberations from school boards saying now you are just going to force us to raise taxes.

Well there is a 4% cap in place as you all know, yet school boards continue to give out raises which exceed that cap, just on salary. Not to mention the fact that most of them get no contribution towards the spiraling increase in health care benefits.

He goes on to explain that the state is going to reduce its spending, give municipalities "the tools helping you to reduce spending at the municipal level," and change the rules of arbitration to balance the scales during negotiations. My understanding is that the Republican Party is not quite so insignificant in New Jersey, as in Rhode Island, so perhaps Christie will have a shot at moving changes that our own Republican Governor Don Carcieri can only suggest.

On a broader level, we can hope that we're entering an era in which leaders have some basic familiarity with concepts of cause and effect.

A Glimpse of Competitive Possibilities

I've been meaning to note this little clue of a possible reality under a more rational government:

One effect of the recession, however, was a fall-off in private construction that left contractors hungry for work. They moved into government construction work, competing with the contractors who usually do those jobs, driving prices down.

The result, Lewis said, was "a very favorable bidding environment." Last year, two projects came in more than $1 million under budget. DOT officials expect to have an extra $12.4 million that they can spend to nibble away at a huge backlog of unfunded highway, bridge and related work.

You know, this needn't be a recession-only phenomenon. If there weren't so many excuses to pay more at the various levels of government, this introduction of competition into the budgeting processes would be relatively mild by comparison. From gender requirements, to police patrols, to wage and benefit requirements for the contractors, government purposefully makes its projects more expensive. After all, those who benefit from the false minimums have more incentive to affect policy than does the individual taxpayer... except, perhaps, when the system becomes so ludicrous that bridges begin to threaten to collapse and the roads are all in disrepair, with no money to fix them.

RE: Budget Misery - Moderate Solutions

Over at the FrumForum (a moderate Republican blog run by David Frum) Eli Lehrer explains:

Many of the biggest budget items for states—Medicaid, bond payments, pension obligations to retirees—are virtually impossible to reduce. Big , broad-based tax increases, although difficult to avoid under many states’ balanced budget laws, will simply discourage investment and growth. Without indulging into liberal (“tax the evil corporations”), moderate (“run government like a business”), and conservative (“cut taxes to increase revenue”/”privatize all education”) fantasies, states looking to balance their budgets aren’t totally out of luck.

He offers six suggestions for balancing budgets, two of which address some familiar problems here in Rhode Island: pension reform and eliminating "special tax abatements and business 'relocation/retention' grants." As to the latter, Lehrer explains:

In efforts to attract new enterprises, revitalize decrepit areas, boost politically favored types of business, nearly all states run massive corporate welfare programs including “enterprise zones,” “TIF (tax increment financing) districts,” “job retention tax credits,” state “HUB (historically underutilized business) zones.” Although a few states simply give grants to private businesses, most of these programs involve issuing bonds, building infrastructure, or granting tax credits that benefit only a particular business or development. The practice produces headlines for politicians but largely serves to let political leaders decide on the location of development that would happen anyway. These business subsidies tend to feed on themselves: cities like Chicago and Syracuse, New York have made such widespread use of them that almost all new development requires some sort of tax abatement or other assistance since unabated tax rates are so high as a result. Although it appears almost certain to cause some short-term pain, many states would almost certainly increase revenue while cutting base tax rates if they simply quit the abatement drug cold turkey. Certain areas, many of them in need of help, probably would lose out. But, in the end, the free market would make better decisions about business locations than central government planners ever could.

As we've argued before, the goal should be to make the state more business friendly in general by lowering taxes and regulatory barriers across the board. This can be accomplished by simplifying and streamlining, not creating a web of loopholes and "incentives" that result in one-off deals benefiting a particular business instead of all.

Budget Misery and the Government Payroll Economy

Rhode Island is not alone in facing budget deficits as many other states (if not most) are in the same predicament. As a recent study by the Cato Institute shows, a lot of the deficit problems stem from generous public employee compensation packages.

State and local governments face large budget deficits as revenues have stagnated and spending has remained at high levels. To reduce deficits, large savings can be found in the generous compensation packages of the nation’s 20 million state and local workers. In 2008, wages and benefits of $1.1 trillion accounted for half of total state and local government spending.

Cato's charts speak for themselves.

Part of the problem is that there are now more government workers than "goods producing workers" (construction, manufacturing, mining, agriculture) in the U.S. (source, h/t):

As John Carney and Kamelia Angelova (who produced the above chart) explain:

We've gone from providing jobs in profit-making private industry to providing jobs in profit-eating government work. Toward the end of 2007, the total number of government jobs exceeded the total number of goods producing jobs. Welcome to the government payroll economy.

Yup.

Is a New Way for Labor to Limit the Options of School Committees in the Legislative Works?

The Rhode Island General Assembly has posted the list of bills from the 2009 session vetoed by the Governor that will be considered for overrides. The House's list is available here, the Senate's list is available here.

One bill (passed unanimously by both houses in the last week of the regular session) scheduled for an override that hasn't garnered much attention as of yet is H5613/S0777, which would limit school committees negotiating heath-benefits in teacher contracts to a choice of plans approved by a newly-created statewide board...

Upon expiration of collective bargaining agreements, only benefit plan designs approved by the board in accordance with this chapter may be specified in future collective bargaining agreements...

And who is it that would be siting on this statewide board?

The board shall consist of twelve (12) members, as follows:

1. Two (2) members shall be appointed by the president of the Rhode Island Federation of Teachers and Health Professionals and may be active or retired teachers or officials from the union;
2. Two (2) members shall be appointed by the president of the National Education Association of Rhode Island, and may be active or retired teachers or officials from the union;
3. One member shall be appointed by the president of RI Council 94 of the American Federation of State, County and Municipal Employees;
4. One member shall be appointed by the president of the Laborers International Union of North America;
5. Two (2) members shall be appointed by the president of the Rhode Island Association of School Committees;
6. Two (2) members shall be appointed by the Rhode Island School Superintendents' Association;
7. Two (2) members shall be appointed by the president of the Rhode Island Association of School Business Managers.

Each appointing authority may remove or replace any member appointed by that appointing authority at any time.

Governor Carcieri vetoed this particular bill despite his support in principle for consolidating school-system health plans, stating that...

The Board consists of twelve (12) members, at least ten (10) of whom are potentially direct beneficiaries of whatever benefit plans are negotiated. Additionally, none of the proposed membership represents municipal or state government or Rhode Island's taxpayers. Municipal officials and the people elected by the voters to balance budgets, fund education and set property tax rates should have more control over school budgets, not less.

As the Governor explains, this legislation is yet another attempt to subordinate the budgetary authority of elected representatives to an unelected panel, to move some actual decision-making power to a body whose members are are directly accountable to special interests, rather than to the taxpayers whose money is being spent.

Or, stated more pragmatically, if the citizenry doesn't like the limits on their representatives that are imposed by this new board, how exactly do they go about changing its membership?

H5613/S0777 would also continue Rhode Island's unfortunate tendency to obscure the clear lines of responsibility that should in exist in a government budgetary process. The ever-increasing layers of indirection added by the state serve mainly to allow officials to point fingers at someone else for the problems that exist -- think of a school committee suing a city or town council in court through the Caruolo Act -- and claim there's nothing they can do to help correct bad situations (other than raise taxes), because the important decisions have already been made somewhere else.

Unless I'm missing something here, this is one bill that legislators should think twice about and have to explain to the public before voting to override.

Morfessis Withdraws as EDC Director

WPRO news (630AM) and Projo 7-to-7 are reporting that Ioanna Morfessis has withdrawn herself from the Directorship of the Rhode Island Economic Development Corporation, citing a family medical concern.

Pawtucket and East Providence Have a New Rep. With Old Ideas

The last paragraph of Alisha A. Pina's story in today's Projo on Democrat Mary Messier's victory in Tuesday's District 62 special election (former Rep. Elizabeth Dennigan's old seat, mostly Pawtucket with a little bit of East Providence) provides a perfect example of how the state Democratic Party's intellectual bankruptcy on fiscal issues continues to propel Rhode Island towards the more conventional form of fiscal bankruptcy…

During her campaign, [Ms. Messier] said the “need to control taxes” is a top priority and also supported the development of a new school district financing formula that would be fair to all cities and towns.

Alas, as has occurred all too-often in Rhode Island, we have a brand-new Democratic representative who believes that a "funding formula" can do the impossible: bring more money to her community, without requiring substantially higher new taxes to raise that money -- unless 1) soon-to-be Rep. Messier meant during the campaign that Pawtucket, already one of the largest recipients of state aid, should receive less money from the state, when she discussed making things "fair to all cities and towns" or 2) "controlling taxes" has become a new Democratic codephrase for "raising statewide taxes", i.e. "we controlled them by not raising them as high a we could have!"

Rhode Island won't be able to pull out of its fiscal and economic crisis if it keeps electing representatives who expect that state's problems to be solved by revenue-shifting programs funded by magic money that will fall from the sky.

The Future According to RIPEC

It seems to me that the most important numbers from Katherine Gregg's Projo story about Rhode Island Public Expenditure Council projections on the state budget are the ones at the bottom…

The state’s overall budget for this year soared 12.9 percent over last year’s to a record-high of $7.8 billion with new federal dollars accounting for most of that new spending. With the added federal dollars, lawmakers were able to shave $275.9 million (8.4 percent) off the state-funded portion of this year’s budget.

The problem as RIPEC sees it: 0.3-percent growth in state revenues to support a 6.2-percent spurt in spending in 2010-11; 2-percent growth to support a 9.2-percent increase in required state-spending in 2011-12, after the stimulus dollars run dry.

...but for those who prefer absolute numbers, rather than percentages, there's this...

Worst case, RIPEC foresees the state ending this budget year with a $60.6-million deficit — on top of the $61.7-million deficit left over from last year, and then accumulating deficits of $244.4 million next year and $483.8 million the year after that. If lawmakers are unable to close the gaps along the way, RIPEC predicts, the cumulative deficit would swell to $850.6 million by 2012.