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R.I.: Regionalize Now and Avoid Manana Mania

The Providence Journal, Sunday Commentary Section
June 2012

Recently, Governor Chafee announced the formation of a task force that will begin identifying possible ways for fiscally stressed municipalities to find potential savings that could help them reduce their financial burdens. I applaud this long overdue action. Over the past several years, I have found it entirely appropriate to refer to Rhode Island as "Redundancy Island," emphasizing the fact that the extreme redundancy in the provision of our state's municipal services has very obviously raised overhead costs for our municipalities, which has unfortunately translated into higher property taxes. The problem with this transcends the fact that property taxes are regressive. Rhode Island’s very high property taxes not only hurt our state’s residents directly, but have the indirect effect of acting as a potential deterrent for businesses looking to locate or expand here, something not lost in fifty-state comparisons that consistently paint our state in a highly negative light as a place for doing business.

Before we get too giddy celebrating the formation of this task force, let me state a few points that must be made. First, and foremost, from the very start, the work of this task force should also embrace possible service consolidation changes that can be applied throughout the entire state -- a global template, so to speak. While this may sound daunting to persons who have lived here all their lives, to those of us who are originally from other states, all of which are necessarily larger geographically than Rhode Island, this is hardly very difficult to fathom. A logical and reasonable starting point for us could be municipal service consolidation at the county level.

Second, the work of this commission should not be done in as gradual manner as it appears it will ultimately be done now. While only a few municipalities were mentioned initially as the focus of the task force, this “starting small and getting larger” approach will almost certainly devolve into the standard fiscal methodology here: mañana. Perhaps that was acceptable once upon a time. But as Rhode Island celebrates the 25th anniversary as a post-manufacturing economy it finds itself in trouble. Perhaps there is no immediate risk, but far too many ominous signs continue to appear. Every day it seems that more of our cities and towns are queuing up with serious fiscal troubles. And, our state’s somewhat limited margin for economic error continues to erode every day, especially as Europe is in a recession, and US and Asian growth is slowing.

Third, in a broader context, our state’s municipal redundancy and the resultant high property taxes are but one element of our list of structural deficiencies. From this discussion, it should be obvious that not all of these are associated with our labor market. However, our redundancy-related high property tax burden is not independent of our state’s labor market deficiencies. Our structural labor market problems have brought us very sluggish job growth, to put it kindly, and persistently high unemployment rates. Add to this our high property taxes and we now have yet another element on our worry list: as the US housing market moves closer to a bottom, once housing here improves, skilled Rhode Islanders who have not been able to secure satisfactory employment in this state will now be able to sell their homes, take whatever home equity they have, and leave for states with brighter job prospects. Not only will this further exacerbate our existing labor market skill deficiencies, we will have lost tax paying individuals who generally do not place many demands on government services. In all likelihood, this will only add to our fiscal stress at all levels, further increasing demands for higher property taxes.
As bad as all of this seems, there is actually an encouraging element in the situation Rhode Island now finds itself in. While austerity, most notably the requirement to annually balance our state’s budget, does indeed diminish our rate of growth, we are in a position to moderate the effects of ongoing austerity, perhaps substantially, if and when we begin to institute major structural changes into our state’s economy. This means an end to piecemeal policy, as has been the practice here, and more importantly, and total abandonment of denial, specifically the “glass half full” approach of our leaders. Rhode Island’s economy is in trouble, make no mistake about that. And we’re running out of time to fix it. If we continue to embrace mañana, the negative feedback loop I alluded to earlier, where structural labor market deficiencies interact negatively with our municipal redundancy and high property taxes, will continue. Instead of embracing national economic growth, we may well be driven to fear it.

by Leonard Lardaro


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