Rhode Island's dismal financial condition is no longer news, and the state's economic problems have only worsened in recent months.
Last week, the governor's office issued a report projecting a $220 million deficit for the current fiscal year. Revenues from sales, income and business taxes fell below previous estimates, according to an article in last Tuesday's Providence Journal. State unemployment insurance taxes are set to increase for over 30,000 employers in January who are, by any measure, already overtaxed.
In September, the Tax Foundation, a Washington think tank, ranked Rhode Island 44th in the country in its 2010 State Business Tax Climate Index, behind every other state in New England. By our lights, the state has three options to address the budgetary crisis: raise taxes, cut spending or do both.
We favor the second approach, since high taxes account for many of the state's current difficulties. Amy Kempe, a spokeswoman for Governor Donald Carcieri '65, told the Providence Journal, "There are no easy decisions. There's no low hanging fruit."
We believe, on the other hand, that the state's dire financial situation presents a ripe opportunity for instituting changes that have been talked about for years. Rhode Island should substantially reduce its public spending by consolidating its excess of municipal governments.
There are now 39 self-governing cities and towns in Rhode Island, an average of one for every 27,000 residents. A recently gathered state senate commission on municipal services suggested merging tax collection and assessment services in the near future.
We would advise adding a few other services to that list — most prominently, firefighting, schooling and waste management. Combined services would lower average costs by taking full advantage of economies of scale. These reforms would also help Rhode Island cut the deadweight from its bloated public sector.
Fortunately, state legislators have come to realize that local governments are living beyond their means. Frank Ciccone III, D-Dist. 7, has said he will introduce a bill in January proposing the establishment of four or five county-level governments in place of the current 39.
If public sector unions, the main opponents of consolidation, are successful in blocking this reform, we suggest combining services first and cutting public employees loose at some time later. The state should implement other reforms to encourage municipalities to combine services in the near future.
Under current law, local tax increases are capped at 4.5 percent. We urge state legislators to freeze local taxes this year in order to force cities and towns to cut costs further. The consolidation of local government and services is long overdue and will hopefully make Rhode Island competitive with its neighbors long after the recession has abated.
Editorials are written by The Herald's editorial page board. Send comments to editorials(at)browndailyherald.com.
