Deal Flow

Crunching the budget numbers and what they mean for working families

An interview with Rachel Flum, executive director of The Economic Progress Institute

Photo by Richard Asinof

Rachel Flum, executive director of the Economic Policy Institute, interviewed by ConvergenceRI at Olga's Cup and Saucer, talking about the state budget.

By Richard Asinof
Posted 5/15/17
The Economic Progress Institute is one of the state’s best advocacy voices on behalf of working families, providing detailed number crunching around the state budget.
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PROVIDENCE – The countdown to the state budget has begun, as we await the final product for FY 2018, crafted by the leadership of the House in the R.I. General Assembly.

Each year, there is a promise that the budget process will become more transparent, with more time for better input from the general public and legislators.

Yet, if past experience is prologue for what will happen next, many of the details and bargains struck in negotiating sessions behind closed doors will remain hidden beneath the final number crunching.

Instead, one budget bill will likely emerge from the House Finance Committee, which will then be sent quickly to the entire House for a vote, and then move on to the Senate, in a rush to enact a budget and conclude the legislative session, with summer vacation beckoning, awaiting the signature of the Governor to become law.

What gets lost in translation on the cutting room floor may or may not get addressed in a special session later in the fall.

Show me the car tax
The most noise this legislative session has been generated by the plans by House Speaker Nicholas Mattiello to keep his campaign pledge to eliminate the car tax, followed by plans by Gov. Gina Raimondo to offer two free years of college tuition to high school graduates who attend public colleges and universities in the state.

The recent revelation that actual state income revenues were running about $100 million behind previous projections has cast a chill on what new programs may be possible under the FY 2018 budget.

That, along with the continuing problems as a result of the botched rollout of the $364 million Unified Health Infrastructure Project, or UHIP, and with it, a cascading wave of troubled delivery of benefits to the state’s most vulnerable residents – and the failure to achieve projected savings, has the legislative leadership sharpening its pencils.

Also looming are the turbulent storm clouds from the proposed federal budget and the latest version of Trumpcare, which promise massive cuts to Medicaid and the health care industry, the state’s largest private employer.

Plans to reduce the flow of the existing stream of tax revenues – or funding increased spending on innovative programs, whatever the long-term return on investment – may have to be postponed.

The social contract
What is often missing from the debate around taxes is a vision of the “good” that taxes achieve, as part of a social contract between government and its citizenry, the bargain struck by the founders in devising a Constitutional form of government.

As the preamble to its fact sheets, the Economic Progress Institute has reframed that social contract. saying: “Most Rhode Islanders share a vision of what the Ocean State should strive for: great schools for our children, safe roads and bridges, vibrant communities, prosperous families, and access to quality and affordable health care, housing and child care. The primary way we pay for these things is through our taxes.”

Formerly known as The Poverty Institute, the Economic Progress Institute bills itself as a nonpartisan research and policy organization, “dedicated to improving the economic well-being of low- and modest-income Rhode Islanders.”

Since the organization was founded by Linda Katz and the late Nancy Gewirtz in 1999, it has become a respected authority on “issues impacting the economic vitality of our residents and our state,” according to the Institute’s website.

Or, as Rachel Flum, the Institute’s executive director, framed the conversation during an interview at Olga’s Cup + Saucer with ConvergenceRI: “Our legislative agenda is always around working families.”

Paid sick days
One of major budget priorities in the legislature this year, according to Flum, is the Institute’s work on paid sick days legislation.

“What we find, especially for low-income folks, is that they don’t have access to even one day of paid sick,” Flum said. “They have to make decisions about whether to go to work sick, or not get paid.”

Flum continued: “When you’re living paycheck to paycheck, you have to go to work sick.”

Flum praised the work of Rep. Aaron Regunberg and his colleagues developing the “Fair Shot” agenda, which includes advocacy on behalf of the paid sick days legislation.

“We are thrilled that there is a Fair Shot agenda, and that there is an organized progressive group of legislators,” she said. Some 30 legislators have signed onto the Fair Shot agenda, Flum continued, which includes an increase in the minimum wage, the paid sick days legislation, and school construction, issues that the Institute is working hard on to get passed.

Flum said that there is some discussion underway to increase taxes on the wealthy in order to pay for elimination of the care tax, but that proposal has not yet revealed itself in actual legislation.

Other key issues as part of its advocacy on behalf of working families are efforts to increase earned income tax credits and increasing the minimum wage in Rhode Island. “We think we have a real shot this year to get to $10.50 an hour,” Flum said.

The disappearing middle class
When asked about the national trends related to the disappearing middle class and the increasing gap around wealth distribution, and whether those trends could be found in a snapshot of Rhode Island from an economic perspective, Flum wholeheartedly agreed.

“Absolutely,” she began. “We’ve seen that story play out here. I didn’t bring all the charts with me, from our visuals about income inequality, and how higher income folks have seen their income increase while lower income folks have seen it stagnant or drop.”

Flum tied the widening gap in income to the election of President Donald Trump.

“I think that it is really the crux of why Trump got elected, because while people were looking at the unemployment rates, and seeing that unemployment rates were going down, when you really dig underneath that, there are a lot of people who are not seeing their way up, seeing the American dream happen for them, and that their children are not doing better than they’re doing,” Flum said.

What’s hidden under those better unemployment rates, Flum continued, “is that there are still a lot of people struggling, and that is certainly true in Rhode Island.”

Questioning the value of tax incentives
Flum said that the Economic Policy Institute has been critical of using tax incentives as economic development policy.

In recent testimony before the Senate Finance Committee, the Institute’s Douglas Hall presented two reasons: the fact that $29.4 million in revenues were lost in FY 2016 because of tax incentives, and second, the lack of mandated reports assessing the number of jobs created, the revenues generated, and a cost-benefit analysis comparing the economic impact in comparison to the lost revenue.

“We are opposed to further expanding the number and range of tax credits until we can determine whether the existing credits are providing the ‘bang for the buck’ that has been promised,” Hall said in his written testimony. Extensive research, Hall continued, indicated that economic development tax incentives may not be the most effective way to spur economic development at the state level.

Flum expanded on the concerns voiced by Hall in his testimony. “We have real concerns about the blow that it does the state budget, giving away resources – and also that there are reporting requirements that have been put into place but that we haven’t seen yet,” she said.

Before the state gives out more tax credits, Flum suggested that it would be prudent to see whether or not those jobs are being created, and whether the industries that are getting the tax incentives are able to show return on their investments. “Otherwise, it is just handing out tax credits without any accountability.

By contrast, Flum continued, the R.I. General Assembly has done a lot of examination of the social services side of the state budget. “We think that same kind of accountability should be shown on the tax credits side.”

Messages delivered, messages heard
One of the biggest challenges in the work by the Economic Progress Institute is finding the right communications, according to Flum.

One of the important roles that Institute plays is an education piece about what is actually included in the budget, referring to the detailed, six-page analysis of the competing car tax plans, breaking down the costs by community.

Another important piece of the puzzle is engagement with the community, in direct in-person gatherings, which Flum called the organization’s most effective tool.

On May 20, Flum said, the Economic Progress Institute will be releasing a 60-page report as part of The Racial Justice Coalition, a group that includes: Rhode Island Jobs with Justice; NAACP Providence Branch; Cambodian Society of Rhode Island; Progreso Latino; Direct Action for Rights and Equality; Refugee Dream Center; OIC of Rhode Island; and the Providence Youth Student Movement.

The report, Flum explained, will explore the racial divide in Rhode Island, “detailing how Rhode Island families are doing, economically and health-wise, and who have been left behind.”

The coalition itself meets monthly; it is a place where “people can talk about what is happening, and finding the points [of convergence] where people can work together,” Flum said.

It’s really important, Flum continued, “for us to meet and talk together.”


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