Tuesday, November 14, 2006

Deep in the hole.

$100 million is a lot of money - especially in a small state. So when the state with America's fourth highest overall tax burden finds itself staring down the barrel of a projected state budget shortfall that could go into the 9 figure range, you have to stop and ask yourself what's got Little Rhody deep in the red.

Not surprisingly, the cost of state employees and entitlement programs top the list of the fastest growing costs, while on the revenue side, the state saw declining sales tax revenue (those Massachusetts malls are but a short drive away) and declining gambling revenue. The Rhode Island Public Expenditure Council has a complete analysis of fiscal year 2007 here (warning - PDF file). Their recommendations of cutting the size of state government, scaling back the growth of state benefit programs and enacting tax reform to compete with Massachusetts on creating private sector jobs. Here, RIPEC and Governor Carcieri are in agreement, and it sounds fairly Republican. This may probably also explain why the overwhelmingly Democratic state legislature isn't biting.

If Rhode Island can learn anything from the state they used to call Taxachusetts, it's that tax decreases coupled with decreased state spending can, in fact, serve as a serious economic stimulant. It's ironic that Kennedy country benefited economically from Reaganesque supply side economics, but Massachusetts could teach Rhode Island a thing or two about fiscal discipline, private sector job growth and reducing the state tax burden (although with Governor-elect Deval Patrick ready to take office, this may change).

Finally, Dictators of the World has been updated with the latest on Fidel "Feelin' Ill" Castro and a look at retro-politics in Nigeria. If you don't read it, someone else just might!

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