June 7, 2007

Governor Carcieri's Big Proposal

Carroll Andrew Morse

WHJJ's (920 AM) Helen Glover is reporting that Governor Donald Carcieri has proposed closing the state budget deficit by cutting 1,000 state jobs.

Communications Director Steve Kass is on with Glover now. Reductions will be achieved through a combination of attrition, retirements, and privatization.

Kass just mentioned that state employees are expensive because of the benefits and that changing to private-sector-style packages would save $500,000,000 per year, without any layoffs. I wonder, is this the real endgame?

7-to-7 is reporting that the Governor's proposal involves an across-the-board wage freeze, as well as layoffs.

Dan Yorke (WPRO 630 AM) opened his show by playing the Governor's afternoon press conference. Overhead, as a percentage of salary of a RI state employee, is 88%. For a typical New England private sector company, the overhead is 29%. For a typical unionized New England private sector company, it's 38%. (And, by the way, for a contracted state employee, it's 22.5%, the Governor throws in.)

According to Yorke, the Governor believes he can implement a workforce reduction on his own (is that a settled legal question?). However, a wage freeze or any other change in state employee benefits requires action by the General Assembly. Benefit changes would have to be renegotiated.

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Okay kids, your options are as follows:

1. You're fired.

2. Here's your 401(k).

You pick.

Oh, I LOVE it.

Posted by: Greg at June 7, 2007 2:51 PM

Big chunks of the budget go to:

> An oversized state gov't;

> An overly compensated state gov't;

> Overly generous social programs.

We are the fourth highest taxed state in the country. (For further details, see Ed Achorn's excellent column of Tuesday.) As the Assembly session winds down, the GA has not only failed to come up with constructive solutions to either the deficit or our high taxes, they are apparently proposing to raid the tobacco revenue again. So the Governor is stepping in. (Side note: $500,000,000 - fabulous that the Governor's staff has quantified the cost difference between public and private sector benefits.)

While public sector unions and the poverty industry will continue to criticize the Governor, let us not lose sight of the structure of our state gov't.

Speaker Murphy will have a large say in what the budget ultimately looks like. What are his priorities? Does he really believe that the emphasis must be on maxed out social programs that encourage bad decisions? Is that more important to him than the 1,000 state workers that the Governor is proposing to lay off (or allow to attrite)? More important to him than the state's public sector pensions, which are the second worst funded in the country? More important than the stark fiscal reality that has the state on the skids?

Posted by: SusanD at June 7, 2007 3:47 PM

Dear Greg,

The Governor is not king.

Here's our response:

1.) You, Mr. Governor, are a lame duck.

2.) You, Mr. Governor, lost seats.

3.) You, Mr. Governor, have never shown coattails.

We do not fear you or your silly little press conference. As usual, we can count on you for being long on headline grabbing and short on hard work.

That being said, some parts of your proposals (co-pay to $30, reducing the size of state government somewhat) are very interesting and worthwhile. Others (freezing contracts) are non starters.


Ed Achorn's column is loaded with wishful thinking and inaccuracy. Quoting him won't get you far. If it did, the GOP, parroting Ed Acohorn's line of thinking, wouldn't have LOST seats last time around.

In the words of Nancy Pelosi, "Elections have consequences."

Posted by: Bobby Oliveira at June 7, 2007 3:54 PM

Bobby, Ed Achorn always makes a lot of sense to me. What were the supposed inaccuracies that you are claiming in this week's column?

Posted by: Frank at June 7, 2007 4:05 PM

Governor Carcieri has Bobby Oliveira rolling out the talking points immediately. lol
That makes the score Carcieri 1 - Oliveira 0.
Yes elections do have consequences especially when we elect a governor who is unafraid of the union thug element here in Rhode Island. There is much merit to the governor's proposals. They will come to fruition eventually. We're broke and not even the castrated Democrats running the Assembly can quick fix their way out of it.

Posted by: Tim at June 7, 2007 4:07 PM

Hey Bobby.

$450 million holes due to poor legislative actions have consequences, too. If the GA can come up with a better idea, they haven't told us about it yet. And raiding tobacco money for a one-time fix ain't it.

Posted by: Greg at June 7, 2007 4:07 PM

Ed Achorn has major credibility problems due to his inexplicable love for House Speaker William Murphy. Achorn has long claimed Murphy is some wonderous reformer and a savior for our state. We're about to find out just how big those Murphy gonads truly are. Get out your magnifying glass! lol

Posted by: Tim at June 7, 2007 4:28 PM

Dear Frank,

Let's start with this:

Its percentage of well-to-do people — who are important to keep around, because they pay way more than their share in taxes — is lower than that of other states

Simply not true.

Then we move to the little story told by the GOP and Carcieri contributor (you think we don't track these things?). Either the gentleman is lying, according to other accountants here, or he's got a really shady accountant, according to accountants in Massachusetts.

That's 2. How many do you need before you realize that Mr. Achorn is a lot like Don Carcieri: A big blowhard who thinks that "commanding you", how he phrased "his compromise" to the Speaker and the Senate President, is the same as talking to you without anything to back it up.

Remember, on our side, when we see Carcieri, we see an out of touch spoiled brat who is afraid of hard work. It's kind of fun to make him mad.

Posted by: Bobby Oliveira at June 7, 2007 5:02 PM

Bobby, I might remind you that the Governor is the leader of the state, much to the dismay of the unions who think they control it -- and he's showing leadership.

The thing with the "well to do" in this state, is that they don't have to put up with paying taxes to this state, because they can declare residency elsewhere. Many do, and more will, unless there are changes, and then there will be no one left but you to subsidize the freeloaders in this state, of which there is no shortage. Use some logic.

Posted by: Will at June 7, 2007 5:28 PM

Bobby, not to be nit-picky or anything but ... what are percentages of well to do (and for that matter what is "well to do"?) in RI and in the other states? Just saying someone is wrong without presenting any of your own facts does not make you right. You aren't going to sway many without some data.

Posted by: Frank at June 7, 2007 5:44 PM

For those who missed it on the other thread-when does the tobacco settlement money run out? Under today's GA plan they are selling payments through 2060!

Posted by: Mike at June 7, 2007 8:05 PM

Dear Frank,

I would never expect you to:

The first place to start is with the Board of Realtors. Take a look at a few different items to get a total perspective:

1.) Percentage of "affordable" housing
2.) Percentage of housing over $1 million
3.) Average home price for a 2 bedroom raised ranch
4.) Percentage of folks for whom rent/mortgage makes up less than 30% of their monthly rent

Again, this is just a beginning to show that the Achorn claim just isn't real.


Please read the state constituion. The Governor has no power by himself. If he tries to exercise any, he will find himself in arbitration. Arbitration will be more expensive than any savings. (see the Laffey experience)

If he wants to reduce the size of government, I'll join him. Howerver, it gets done the right way. Pulling a number out of thin air, without regard for services, and leaving the hard work, what a shock, to your cabinet, is not the right way.

It should be noted that all the "well to do" pay property taxes here.


I'm starting to believe that the tobacco settlement bonds are infinite in nature.

Posted by: Bobby Oliveira at June 7, 2007 10:12 PM

As always, the demand for facts reveals Bobby O. as the twit he truly is.

Here is some real data from the most recent individual tax statistics (Tax Year 2004) published by the IRS (Bobby, if you know how to use excel, you can download the spreadsheet here: www.irs.gov/taxstats/index.html )

Pct of Returns filed by taxpayers with AGI of more than $200k and (in parentheses), pct of total income tax paid by filers with AGI of more than $200k:

1) United States 2.30% (25.18%)
2) Connecticut 4.42% (40.00%)
3) Massachusetts 3.53% (31.31%)
4) Rhode Island 2.16% (21.07%)

The data support Achorn. For some strange reason, high income taxpayers seem to find RI less attractive than neighboring states, or indeed the average state, despite our high taxes, nation's best welfare program and comparatively generous public sector union benefits...Maybe Bob Walsh, Kate Brewster, or Frank Montanaro can help us to understand this. Or maybe we should just send Senator Moura to talk some sense into those stupid rich people.

Posted by: John at June 7, 2007 11:05 PM

Dear John,

Thank you for proving nothing.

Mr. Achorn declared that the percentage of well to do folks was much higher in many other states then our own.

Then, you cherry pick two and show that we are only 4% off the national average (within the margin). If anything, we're average.

Didn't you learn anything in the last election about the "chicken little" message??

You also use as well to do a standard of $200k or more. Nobody uses that.

It was a nice try, but it failed upon the second reading.

Again, this is why your side has a hostory of losing elections here and elsewhere. Historically, the 1994-2005 period will just be a blip.

(Unless of course we somehow elect Hillary and the GOP may run both Houses for 50 years or more.)

Posted by: Bobby Oliveira at June 8, 2007 12:08 AM

As far as I'm aware, the proposed layoffs and firings are not subject to the arbitration provisions (except possibly in the case of one of the union contracts), although the proposals regarding the wage freeze and renegotiating health care benefits would be, if not successfully renegotiated (I would expect it to go to arbitration, because the unions aren't very interested in helping the state out of a crunch, only helping themselves).

As for the comparison with Laffey, Laffey eventually won, and he saved the city tons of money. The gov's trying to stop the gravy train. He knows it will be tough, but it needs to be done. Doing the right thing isn't always the easy thing. Of course, as for the General Assembly, doing the right thing doesn't come all that easily.

Posted by: Will at June 8, 2007 1:08 AM


You're beginning to sould like former California Govenror Gray Davis, who thought that winning an election gave him the power to ignore fundamental economic realities.

Things didn't work out too well for him in the end.

In the same vein, winning all of the elections in the world doesn't give the RI legislature the power to decree that growing spending faster than revenue collection shall not cause deficits, as much as they would like to.

Posted by: Andrew at June 8, 2007 7:47 AM

In fairness to Bobby, living in Newport has probably warped his mind into wrongly thinking that we ALL have enough disposable income to buy a McMansion like his friends. He thinks we can just GROW our way out of the problem.

Grow SPENDING, that it.

I can't imagine why he wasn't overwhelmingly elected.

Posted by: Greg at June 8, 2007 8:02 AM

Bobby you really are sounding like a know-nothing. First I have to thank John for supplying the data that you failed to come up with. Thank you John.

Out of the four points that you responded with:

1) none of them came with any data or reference to the data.

2) only one, the reference to housing over $1 million, sort of dealt with the subject matter, which was the percentage of "well to do" in RI.

3) as far as $ million homes are concerned, in RI of all places, you have to acknowledge that we have a slew of very expensive vacation homes along our many miles of coastline that are owned by out of staters, which has the potential to render this categorie of homes completely irrelevent in a conversation of RI incomes.

4) we are talking about incomes and you referred to housing data?!

Bobby, thanks to you Ed Achorn is starting to look like a genius!

Posted by: Frank at June 8, 2007 8:05 AM

Hey, the Gov wants to be a big hero on the radio talk show circuit. There's no stopping him.
To the people who are gloating about the governor's move, if it's approved: Your next complaint about state government will be answered with a nice tall glass of STFU.
The people who think layoffs are the answer to everything will rue the day this passes. The fat cats (lawyers, lobbyists, consultants) will not be feeling the pain the rest of the state will.

Posted by: Rhody at June 8, 2007 11:17 AM


It's not all that stinging to be called wanting "to be a big hero on the talk show circuit" when you're dealing with a legislature that wants to develop a state budget as secretly as possible, hide it until the last minute, schedule the minimum amount of notice legally allowed, and then hold the committee meeting on a Friday, hoping any unfavorable coverage will be too late for the weekly news cycle.

Actually discussing its most important piece of legislation with the public is something the legislature might want to give a try sometime.

Posted by: Andrew at June 8, 2007 11:49 AM

Dear Frank,

It's obvious that you do not have a lot of experience in the public policy arena. That's ok, everybody has to start somewhere.

Raw income data is almost never used because it is too geographically dependent. $200k in Mississippi versus $200k in Manhattan for instance. The $200k starting point is another problem in that it says well to do only equals the top 1 percentile.

Well to do is always determined as a ratio of housing cost to income or housing cost alone. A 30% guideline is usually observed as the standard. On all the housing measures, we as a state outperform many. (we even outperform in tangentials like who has health insurance versus who doesn't. 11% in RI versus a whopping 24% in Texas.)

Posted by: Bobby Oliveira at June 8, 2007 1:45 PM

Bobby, you are correct, I have zero public policy experience.

It's awfully hard for me to believe that when anybody is looking at wealth in the context of the effect of higher taxes on the behavior of wealthy individuals that you would place housing value ahead of income.

>>A 30% guideline is usually observed as the standard.

I have no idea what that means, could you explain it?

RI does have a pricey housing market. I have often heard realtors claim this was largely an effect of Boston's even more expensive housing market. I do not see how that translates directly to measures of wealth. For instance when homes values went thru the roof around here and homes seemed to literally double in value, the incomes of the owners did not grow at anywhere near that pace, while some incomes remained static, and some decreased.

When, as you say, they look in state wealth via housing values do they account for vacation homes owned by non-residents?

Posted by: Frank at June 8, 2007 5:18 PM

Dear Frank,

It is considered reasonable to pay 30% of your income towards rent/mortgage. If your income allows to be in a position where you would pay less than 10% towards the average cost of housing, then you can look at yourself as well to do.

Those non-residents, mostly due to climate (very few of them live North of here), still pay property taxes. If you want them to income taxes too, the tax structure isn't one half as important as the temperature on February 12th.

We are actually a subset of the Boston market, around Providence, and the New York market, around Newport.

Our biggest problem is not wages but age. Too many young folks simply cannot afford to live here since they are not ready to compete in either subset market. Without young folks around, our population ages putting more of us either on or close to a fixed income. This is not good news.

While I appreciate Seniors, I can't grow the tax base with them since discernible income 90% of the time is frozen. Hence, they cannot accept high risk investments that would lead to job creation of property redevlopment.

Posted by: Bobby Oliveira at June 8, 2007 6:10 PM

The people who think layoffs are the answer to everything will rue the day this passes. The fat cats (lawyers, lobbyists, consultants) will not be feeling the pain the rest of the state will.

Posted by Rhody at June 8, 2007 11:17 AM
Get a grip. He could lay off 5000 and Ri would still have MORE state employees per capita than New Hampshire. That's the price of corruption and cronyism.

Posted by: Mike at June 8, 2007 7:42 PM


I do appreciate your feedback, though it seems we are muddying the waters rather than clearing anything up.

Getting back to original point of tracking the behavior of wealthy individuals, specifically whether they are leaving RI because of the tax climate:

I would have to agree with John that there is no clearer or more accurate way to look at this than the IRS stats on AGI that show how the percentage of wealthy people living in the various states. Tracking this statistic over time should spell out whether or not the wealthy are leaving.

I still don't see how the housing market will be anything other than an indirect indicator of movement of individuals for one simple reason. When they move they don't take their house with them. People could be leaving the state in droves and the housing stock will remain the same, generally speaking.

One final question with regards to your definition of "well to do". It would seem to me near impossible to get the info (for all of RI mind you) to determine whether someone has invested more or less than 10% of their income on their monthly housing bill. I don't recall ever seeing my income information on any of the paperwork at a real estate closing. Maybe I'm wrong but I find it hard to believe that there is a source for a statistic combining individual income with owned real estate. If I'm wrong please let me know where I can go to find this info, I'd like to see it. Thanks.

Posted by: Frank at June 9, 2007 4:44 PM

Dear Frank,

In order to argue what you've argued, you have to argue that living in Maui and Biloxi are the same. They're not. For instance, in West Warwick, 40 grand a year foes a long way. In Newport, you can't even rent on that.

Your request is possible but takes work. It can be done via census tracts where both information is gathered.

When folks move, they tend a buy new home along the same income/housing ratio as they lived in before. If their income, as a result of the move, goes up by x, so does the house. The exception is the "last home" or internet business buyer who buy in a region which much more space/amenities can be achieved.

Posted by: bobby oliveira at June 10, 2007 12:15 AM
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