How the Governor’s Budget Sticks it to the Poor and Middle Class

Geoff Schoos has an excellent column this week about Governor Carcieri’s budget and the many ways he is throwing middle class and needy people under the bus. From the Cranston Herald:

“This is like déjà vu all over again.”
-Yogi Berra, New York Yankees great

As anyone who knows me will attest, quoting anything uttered by a current or former Yankees player pains me greatly. However, I like Yogi and thus will give him a pass. Besides, his quote is apropos to the fiscal year 2010 state budget introduced by the governor.

Let’s start with the filing fiasco. It seems that the governor couldn’t find anyone in the General Assembly who would properly file the budget bill on his behalf. According to House Minority Leader Watson, all the Republican representatives were opposed to the budget “on principle.” The Republican legislators were outraged that the governor’s proposed budget contained tax increases. More about those tax increases later.

Thus, the governor was left to his own devices as to the submission of his budget. Someone from his office hand-carried a copy of the budget bill to House Speaker Murphy’s office, where it apparently rested untouched. Thereafter, the question arose as to whether the bill had been properly submitted to the General Assembly. The consensus was that the governor’s delivery was, in fact, improper.

Finally, after standing tall on principle for about 24 hours, the entire House Republican caucus sponsored/co-sponsored the governor’s budget bill. Does that mean that they were against it before they were for it?

You just have to love Rhode Island political theater. It combines the best elements of comedy and tragedy, often at the same time. To continue with the comedic part of this theater, two days after the budget was filed, the governor retracted the revocation of a tax credit for businesses that provided dollars to private and parochial schools. As a result of pressure from the Catholic Diocese as well as communications organized by the Rhode Island Scholarship Alliance, enough pressure was placed on the governor to reconsider his position on this matter. Apparently, he was in favor of the tax credit before he revoked it and then changed his mind and reinstated the credit.

So far, this puts me in mind of another Yogi-ism: “When you come to a fork in the road, take it.”

As comedic as the back-story of the budget is, there’s nothing funny about its contents. Indeed, this is pure tragedy. In the interests of full disclosure, I haven’t read everything, but I’ve read enough to form some opinions.

Every budget rests on a set of assumptions. Without going into detail about all the assumptions contained in the 198-page executive summary that accompanied the governor’s 224-page budget, one assumption leapt out at me. On page 21 of the summary, based on calculations by the Consensus Revenue Estimating Conference, which in turn relies on forecasts from Moody’s and Global Insight, the unemployment rate for fiscal year 2009 is predicted to be 8.8 percent and rise to 9.3 percent in fiscal year 2010.

What? I understand that these forecasts and estimates were formulated last November, but doesn’t anyone read a newspaper or read the monthly reports from the Department of Labor and Training? As it stands now, in fiscal year 2009, the unemployment rate is 1.5 percent greater than the estimated rate.

Indeed, the unemployment rate is higher than the increased unemployment rate projected for fiscal year 2010!

I think this is important. It’s not that the REC got the estimate wrong. That’s to be expected, given the speed with which the economy tanked. Rather, it’s that nobody ever returned to these assumptions to make the necessary corrections.

Clearly, an economic model was in place. All anyone had to do is input the new, real numbers and press the calculate button. That would have spit out a more accurate, but no doubt less desirable result.

Why is this assumption critical? Because so much of the budget hinges on the assumption of how many employed and unemployed Rhode Islanders we have. For example, in trying to estimate state revenues derived from individuals, which constitutes about 32 percent of all state revenues, there has to be an estimated level of personal income growth. If those estimates of income growth are based on unrealistic numbers of unemployed workers, then those estimates – critical to calculating the projected state revenues from individual taxpayers – are bogus. And if those estimates are bogus, then a significant portion of the budget is wrong.

In addition to sloppy calculations, once again the governor has proposed a budget that disproportionately weighs more heavily on the poor, the elderly and the middle-class. Thirty-eight thousand low-income Rhode Islanders are going to lose dental care under this budget. The governor asserts that this is an optional benefit under the state Medicaid plan, thus the state can eliminate it.

No matter that proper dental hygiene is critical to overall health maintenance.

Add to that the 25,000 elderly Rhode Islanders who will be adversely affected by the elimination of the Pharmaceutical Assistance to the Elderly Program. It’s a fair assumption that these medications are vital to their health and well-being.

Finally, approximately 110,000 Rhode Islanders will pay an estimated $1,200 more in income taxes next year than they did this year. The vast majority of these selected taxpayers are individuals and families that earned less than $75,000 annually. This is in addition to the higher tax on cigarettes and significantly increased fees that fall more heavily on those with lower incomes.

Compare their plight with those who earn $175,000 or more. Their income tax rate will drop from a flat rate of approximately 7 percent this year to 5.5 percent next year. This decrease will continue until it bottoms out at 3.5 percent in a couple of years. Additionally, the corporate tax will be phased out completely by 2014, thus leaving an $82 million hole in the budget.

Here’s a non-Yogi-ism – the rich get richer, the poor get screwed and the middle-class gets the bill. Apart from faulty assumptions and fuzzy math, how did the governor’s magicians balance this budget scheme? Simple – the American Reinvestment and Recovery Act of 2009. On Feb. 26, the governor certified to President Obama that Rhode Island would use these funds to create jobs and promote economic recovery.

Yet two weeks later, the governor submitted a budget that promotes significant tax cuts and pays for them with “stimulus” money. Instead of reinstating the pharmaceutical program for seniors, as Florida did its Medicaid Aged and Disabled program for 13,000 seniors, the governor kept the cuts and passed the savings on to high-income taxpayers and corporations. His argument is that lower taxes will promote long-term economic growth.

This “build it and they will come” economic theory is based on a movie, not reality. And it violates the intent, if not the letter of the stimulus law.

Stimulus money is to be put in the pockets of people through short-term, shovel-ready projects; longer-term infrastructure projects (like broadband, etc.) that will promote continued economic growth, along with investments in health and public education.

Instead, we have reductions in health programs, status quo financing (if that) of public schools and, in spite of the purpose of the stimulus money, an increased tax burden on the middle class. All while high-income taxpayers skate home scot-free.

It is déjà vu all over again.

Does this upset you? If so, I would strongly recommend you contact our Cranston Representative Bob Jacquard, who sits on the General Assembly finance committee, and talk to him about why we are subsidizing high income earners while old men and women are going to suffer with broken and infected teeth or else pay out of pocket with their grocery money to get their teeth fixed.  Rep. Jacquard’s email address is:


3 thoughts on “How the Governor’s Budget Sticks it to the Poor and Middle Class

  1. Good analysis. I can say that many of the elderly I talk to are angry and worried, not only for themselves, but for the children, who are also being shortchanged in this budget. There’s a good post on Rhode Island’s Future about the cancellation of a bus that took Centerdale Manor residents to the grocery store. When you’re on your own on a fixed income a service like that is essential.

  2. Will anyone defend the gov on this? Can anyone defend him?

    The tax increases on the mid/lower class, and the tax decreases on the wealthy tell you everything you could ever–EVER–want to know about the values of the Republican Party.

    In its absolute clarity, it shows that the GOP does not beieve in lower taxes per se. The GOP believes in lower taxes for those who can most afford to pull their own weight.

    Remember, people, money isn’t just money. Money is power. lowering taxes gives the wealthy even more power than they already have.

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