Wednesday, March 12, 2008

Providence Fiscal Crisis


Providence Fiscal Crisis for Dummies

In keeping with the title of this article, I will not discuss or use any real numbers to support my argument – only theoretical (and very simple) examples.

Step 1:

In the year 2000, presidential candidate George W. Bush proposed a sweeping tax cut if he was elected. Despite the fact that it was pointed out that the wealthiest 1% of the citizens of the USA would be the biggest benefactors of such a plan, Mr. Bush was determined to downsize federal government. In January of 2001 he took office.

He proceeded to push through his tax cut and, indeed, cut many of the federal programs that he saw as being better served by individual states (RI included). This meant much less funding of social programs by the federal government. Millions of people around the US were faced with losing the social programs to which they’d come to depend on. Unfortunately the need for these social programs didn’t disappear when the federal funding did. The responsibility for paying for them was merely shifted to the state (RI). But…most of us were paying lower (oh so slightly) federal income taxes.

Step 2:

The states (including RI) were now scrambling to offset the decline of federal funding. At this same time there were a growing number of citizens in the state(s) who were in desperate need of these social and economic government programs due to these same federal cuts. They now turned to the state (RI) to provide a continuation of these services. At this same time RI (having an income tax that piggy-backed the federal system) was forced to raise it’s percentage of the federal tax in order to maintain the same level of income through resident’s income tax.

The last thing a governor wants to do, particularly a republican governor like Donald Carcieri, is to raise taxes and expand government’s responsibility in social programs. So, as the burden on the state grew he was forced to choose between raising taxes or cutting programs and aid to the cities and towns. Just as the president had done at the national level, Governor Carcieri decided these programs were better run by the local governments as opposed to by the state. After all, he didn’t run for office to expand state government – he ran to ‘cut big government’ (as all good republicans do).

He cut social programs and cut funding to the individual cities and towns and is now desperately attempting to balance his budget without the need to raise taxes. Tens of thousands of people were then facing the possibility of losing the governmental assistance and programs that had helped them get by on a day to day basis. That responsibility now shifted to the cities and towns. But…most of us were paying lower (oh so slightly) federal income taxes, and about the same amount in RI tax.

Step 3:

Around this same time there was a change of leadership in the City of Providence. Prince David had taken over and had swept out the old guard and replaced them with his knights - with a promise of responsible government. Providence, being an urban center, had always had a disproportionate number of the state’s lower income citizens in the most desperate need of the social programs that were cut on a national and state level. Therefore, Providence quickly became one of the biggest losers in a country led by Bush and a state led by Carcieri.

Thousands of people were now dependent on Providence to provide the funding for their needs. Crap runs downhill, and the cities and towns are at the base (bottom) of our governmental ladder. There was no other entity to push this responsibility on. With no other choice, the city began to spend much more than it was earning via its main source of income – property taxes. Inevitably the city had to raise its tax rate to bring in additional revenue. Providence home owners began to foot the bill for the federal tax cuts – the trickle down effect run amuck. A typical Providence home owner was paying about $200 lower federal tax and about the same in RI tax, but they were paying about $500 more in property tax per year – with no end in sight.


In the middle of this municipal fiscal crisis Providence’s Prince was hiring his new staff and wasn’t shy about writing checks on the city’s future. A record breaking contract after a nationwide search for a School Superintendent. A record breaking contract (heck, the 1st contract ever) for the nation’s “top cop”. We’ve yet to see the details on the entire package, and it already costs the taxpayers in excess of $200,000 p/year. A Chief of Administration who was paid an enormous salary and allowed to buy into city employee’s already weakened pension system. He was quickly given a 37% raise after a mere two years in office. This additional money was “magically” provided by some outside agency - but no conflict of interests we've been told by the Prince. A record breaking salary (again a 1st) for the Fire Chief, which reportedly brings his salary above the Police Chief’s by the end of the terms.

Around this same time, the mayor negotiated a "voluntary" tax program that allowed the city’s many tax-exempt institutions to “voluntarily” pay a very small percentage of the normal property tax rate. Pennies on the dollar. Talk about a drop in the bucket!

Wow – where’s all this money coming from in the middle of a crisis?

As things got progressively worse (I can’t imagine why), the Prince and his allies at the town’s ‘printing press’ point their fingers at the firefighters of the city. Their outrageous salaries, it seems, has pushed the city over the edge. Although these warriors face more health risks than any other members of the city, the mayor wants to cut their health plan and have them pay for it to boot! He also wants them to give up the pension plan that they’ve been paying into for 20+ years (and at a higher rate than any other city employee) and trust him to divvy it up fairly. He says they’ve abused it and it’s not fiscally sound. They feel confused - they've always thought it was in trouble because the city had put off paying its contributions for years.

Well, crap continues to roll downhill and the city firefighters seem to be at the very bottom of the Prince's dung heap.

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