Rhode Island: Fiscal Disaster

For some time now the "sewer state" as it was pegged by its uptight neighbors has been having massive budget battles and serious, the killer, housing and taxes. So after a boom and and being the vacation spot of the rich, they have come to this:

Today almost no homes, opulent or otherwise, are being built in Rhode Island. Only 16 permits for single-family dwellings were issued in February in the whole state. In March 633 homes were in foreclosure. The job front looks even worse. Last September Rhode Island had the highest unemployment rate in the country, exceeding even Michigan. In March the rate was the sixth-highest in the country, 10.5%, compared with 8.5% nationally.

People are leaving the state in droves to find jobs. Others are being taxed out. The state government has been putting more pressure on a dwindling pool of taxpayers. The state has only 1m residents, of whom only 465,000 are working. Some 8,300 families, with incomes of around $485m subject to tax, left the state between 2005 and 2006. Anecdotal evidence suggests that the exodus has continued since the downturn began.

The state’s budget problems are chronic. Deficits are not unusual. Rhode Island has a budget gap of $372m for the year that ends on June 30th. This is about 11.4% of the state’s total budget. According to the Council of State Governments, it is among the highest in the country. The future looks bleaker. Revenue collections are down by $13.8m. The Rhode Island Public Expenditure Council, an independent research group, says the state faces long-term deficits over the next decade. The 2011 fiscal year will probably show a $156m deficit. The gap will continue to widen to a potentially crippling $482m in 2014.

The Tax Foundation, a non-partisan public-education outfit based in Washington, DC, has consistently judged Rhode Island’s tax climate to be one of the worst in the country. Donald Carcieri, the state’s governor, is pushing a plan to phase out the 9% corporate tax rate. This would improve the state’s ranking from 46th to 16th in friendliness towards business—which might create job opportunities and retain talent. At present, though 80,000 students attend college or university in the state, few stay once they graduate.

So the government is a mess and driving people away, so what is the solution? Why Green Jobs of course!

The state’s Economic Development Corporation (EDC) sees Rhode Island as a leader in green technology. It is working with Deepwater, a windpower company that will manufacture wind turbines in the state. Michael Saul of the EDC thinks the skills of boat-builders (as Rhode Islanders used to be) will translate to building wind turbines, and hopes that these will eventually appear all along the eastern seaboard.

It won't work, but that's almost besides the point. But there is one thing we can learn from Rhode Island, Government will propose taxes on anything:

The state may have hit bottom already. Unemployment remained steady from February to March. As Mr Lardaro dryly notes, “We can see the light at the end of the tunnel. Let’s hope it’s not a train.” If things don’t look up, the state may reconsider a 1971 proposal to impose a $2 levy on each act of sexual intercourse performed in the state. Only men would pay.

Who the hell attached their name to that idea?