Photo by Lydia Davison Whitcomb
Charles Chieppo: Providence stadium bogus 'economic development'
BOSTON
As long as governments are made up of human beings, we can't expect them to be perfect. But they should learn from their mistakes, such as the whopper that Rhode Island state officials made in 2010 when they plowed $75 million into 38 Studios, a now-defunct video-game company started by former Boston Red Sox pitcher Curt Schilling.
Fast-forward five years, and another proposal that combines baseball, business and politics is on the table in Rhode Island. The owners of the Pawtucket Red Sox, Boston's top farm team, are asking for millions of dollars in taxpayer subsidies as part of a plan to build a downtown ballpark in neighboring Providence.
Under the proposal, the owners would spend $85 million to build the stadium and a parking garage. The state would take out a 30-year lease on the stadium land, for which taxpayers would pay $5 million annually in rent. The team would lease the stadium back from the state for $1 million per year, leaving state taxpayers on the hook for $4 million a year, or $120 million over the 30-year lease term.
The team is also asking city taxpayers for help. They want Providence to sign an agreement that would exempt the land from property taxes for 30 years.
The owners are following what has become a well-worn script for teams looking for stadium subsidies, warning that they will likely leave Rhode Island if the deal isn't approved. They've also commissioned the requisite economic-impact study, which estimates that the stadium would generate $12.3 million a year in direct spending for the local economy and about $2 million annually in state tax revenue. As usual with such studies, the owners call the projections "conservative."
Perhaps Holy Cross College economist Victor Matheson said it best when he told The Atlantic that, when it comes to these impact studies, "take whatever number the sports promoter says, take it and move the decimal one place to the left. Divide it by ten, and that's a pretty good estimate of the actual economic impact."
Building a minor-league baseball stadium in Providence would add little net new money to the local economy. The majority of fans would come from close by, meaning that they would likely spend their entertainment dollars at an area movie theater or restaurant if they weren't going to a game
As for benefits to businesses around the stadium, they tend to be limited to just a few blocks. And with 72 home games, what happens during the other 80 percent of the year?
The last time that Rhode Island leaders dabbled at the intersection of baseball, business and politics, it cost their constituents $90 million (the $75 million in principle invested in 38 Studios plus $15 million in interest). Some may conclude that such non-economic benefits as local pride or entertainment value would make a Providence stadium worth the investment, but they should know better than to view the proposal as genuine economic development.
Charles Chieppo (Charlie_Chieppo@hks.harvard.edu) is a research fellow of the Ash Center at Harvard's Kennedy School. This piece originated at governing.com.
Robert Whitcomb: Oregon points to better Medicaid
Unsurprisingly, Rhode Island Gov. Gina Raimondo is getting pushback from interest groups against her goal of “reinventing Medicaid’’ – the federal-state program for the poor. The Ocean State’s Medicaid costs are America’s second-highest per enrollee (Alaska is first) and 60 percent higher than the national average.
Many in the nursing-home and hospital industries will fight the governor’s effort to cut costs even if it can be shown that her plan can simultaneously improve care. After all, the current version of Medicaid has been very lucrative for many in those businesses. The Affordable Care Act has brought them even more money.
As we watch her plan unfold, let’s be very skeptical when we hear lobbyists for the healthcare industry and unions asserting that reform would hurt patients. Lobbyists are adept at getting the public to conflate the economic welfare of a sector’s executives, other employees and owners with its customers’. Ambrose Bierce called politics “a strife of interests masquerading as a contest of principles.’’ Often true!
So “nonprofit’’ Lifespan, the state’s largest hospital system, has just hired eight lobbyists to work the General Assembly to defend its interests. (And beware healthcare executives’ citing their businesses’ “nonprofit’’ status. Many of these enterprises take their profit in huge executive compensation.) Some unions are also on the warpath. They worry that reform to reduce the overcharging, waste and duplication pervasive in U.S. health care might reduce the number of jobs.
But economic and demographic reality (including an aging population, widening income inequality and employers’ eliminating their workers’ group insurance) make Medicaid “reinvention’’ mandatory as more patients flood in.
Oregon provides a model of how to do it.
There, in an initiative led by former Gov. John Kitzhaber, M.D., an emergency-room physician, the state has both improved care and controlled costs. It did so by creating 16 regional coordinated-care organizations (CCO’s). The state doesn’t pay for each service performed but gives each CCO a “global budget’’ of Medicaid funds to spend. The emphasis is on having a range of providers work with each other to create holistic treatment plans for patients that include the social determinants of health (such as access to transportation and housing quality) as well as patients’ presenting symptoms.
Oregon’s “fee for value’’ approach rewards providers for meeting performance metrics for quality and efficiency and punishes them for poor outcomes and increased costs.
Oregon CCO’s have great flexibility in spending Medicaid money. For example, they could use it to buy patients air conditioners, which may make it less likely that they’ll show up in the E.R. And Oregon CCO’s pay much attention to how behavioral and mental problems can lead to the more obviously physical manifestations of illness. After all, many in our health-care “system’’ “self-medicate’’ through smoking, drinking, drugs, eating unhealthy food and lack of exercise. You see many of these people again and again in the E.R. –wheezing from smoking and obese.
In Rhode Island, 7 percent of Medicaid beneficiaries account for two-thirds of the spending; many of these “frequent fliers’’ have mental and behavioral health problems best addressed through Oregon-style coordinated care.
Unlike the Oregon approach, the “fee for service’’ system that’s still dominant in U.S. health care encourages hospitals and clinicians to order as many expensive procedures as possible, prescribe the most expensive pills and do other things to maximize profit – and send the bills to the taxpayers, the private insurers and the patients.
But “evidence-based medicine’’ -- as opposed to “reputation-based medicine’’’ -- has helped to show that doing more procedures does not necessarily translate into better outcomes; indeed overtreatment can be lethal. I recommend Dr. H. Gilbert Welch’s book “Less Medicine/More Health’’.
Meanwhile, Oregon points the way:
Among the Oregon Medicaid reform’s achievements: a 5.7 percent drop in inpatient costs; a 21 percent drop in E.R. use (which is always very expensive), and an 11.1 percent drop in maternity costs, largely because of hospitals not performing elective early deliveries before 39 weeks of pregnancy. Thus Oregon officials assert that the state can reach its goal of saving $11 billion in Medicaid costs over 10 years.
Rhode Island can achieve similar successes.
Robert Whitcomb (rwhitcomb51@gmail.com), overseer of New England Diary, is a Providence-based editor and writer and a partner in Cambridge Management Group (cmg625.com), a national healthcare-sector consultancy. He's also a Fellow of the Pell Center for International Relations and Public Policy.
Some fixes for R.I.
Some of the best things that Rhode Island could do to improve its economy: Get rid of dozens of its excess taxing authorities while making its state taxes as similar as possible to Massachusetts's.
Emphasize German-style vocational education as well as the usual academic courses. The biggest complaint that present or potential employers have about the Ocean State is the inadequately educated population.
Clarify/simplify its confusing and contradictory regulations. Throw out some of them. Enact "sunset laws'' to eliminate outdated and/or redundant statutes and regulations.
Speed the runway extension. Traffic has been dropping at T.F. Green Airport for one major reason -- the delay in getting a longer runway that will allow NONSTOP trips to the West Coast and frequent flights to Europe. (And get more European businesses here! Vive la France, etc.)
Traffic will surge when the runway is extended. The delay in that extension can be blamed on the extreme localism of some constituencies and the spinelessness of some political leaders in the face of it.
Make Quonset Point the major seaport it is designed to be.
Get rid of the state estate tax. It loses the state more revenue than it gains. It hurts the marketing of the state to CEO's and directors who make location decisions for their companies. And while it's far from onerous, it still sends fleeing some rich retirees.
More goodies for the elderly
"Untitled,'' by HELEN PAYNE, in the "Helen Payne: Becoming Four Women'' show at the New Art Center, Newtonville, Mass., Nov. 21-Dec. 20.
Rhode Island politicians are falling over themselves to pander to the high-voting elderly by promising them that they'll pass a law to exempt the old folks (I'm one of them) from having to pay state income taxes on Social Security and pension money.
This means another goodie for the most affluent part of society and another transfer from those who earn their income to those who live on investments of various kinds, in which I'd include pensions and Social Security.
The lost tax revenue will have to be made up by younger, poorer people. If more of the latter bestirred themselves to vote, there would be a lot less of this growing inequity between the age cohorts. Serves them right.
This is what you get in a country where in the election last week, only 36.4 percent of eligible voters bothered to vote and the national outcome was decided by about 20 percent of eligible voters.
-- Robert Whitcomb
Champagne weather; politics and state wealth
This has generally been a beautiful summer in New England -- not too hot, not too cool and soothing breezes most days.
Of course, as the mutual fund companies are compelled to note in their marketing, past performance should not be taken as assurance of future success.
It's tough to think of weather that could be nicer than nice weather in this corner of the world.
xxx
The story this week about Rhode Island's unemployment rate, at 7.7 percent, now the third highest in the country, got me thinking about how little effect state tax and other policies may have on prosperity. Or rather, in some places, they may have effects that surprise ideologues.
For instance, Georgia, Mississippi and, somewhat less so, Nevada have long had regressive taxes -- disproportionately hitting the poor. They tend to be light on environmental and other regulations and to give lots of public money to companies promising to locate or expand there.
Mississippi now has the highest jobless rate in the nation, at 8 percent. Georgia is second, at 7.8 percent. Rhode Island is in third place, tied with Michigan and Nevada.
Rhode Island's median household income is ranked at 17th in the nation, Georgia's at 33th, Michigan's 34th (post collapse of car industry), Nevada's at 27th and Mississippi's at 50th.
The governors of all the states listed except Rhode Island are conservative Republicans.
After a half century of huzzahs for the alleged prosperity-fueling effects of Sun Belt tax and regulatory policies, the states there remain at the bottom of the household-income pile. The richest states are in the Middle Atlantic and Northeast -- as they have long been. And they have high taxes and lots of regulations. But some of these states have clearer, simpler, better written regulations than others. Clarity and predictability of regulations seem to be quite important in encouraging businesses to expand.
Rhode Island lags in wealth rankings for its region. It does that because of its absurd smallness (which skews its numbers), slowness in moving to new industrial models, dense and badly written regulations exacerbated by an excessive number of jurisdictions (39 cities and towns!) that discourage business creation and expansion and corruption, or, probably more, the perception of corruption .
Corruption is doing well in other states, too, including Connecticut and Massachusetts. It has, however, always seemed to me, from decades of observation, that Rhode Island had a disproportionately high number of particularly petty grifters. But of course, there's no way to prove that. That the "colorful'' Vincent Cianci is considered a serious candidate for mayor of Providence may also suggest either a suicidal or a bread-and-circuses mentality in too much of the state's electorate.
Anyway, if the eastern third of Connecticut were a state, its jobless rate and household income would look a lot like Rhode Island's.
But that Rhode Island is a "liberal'' state per se doesn't seem to be a problem. Other "liberal'' states in the region --- e.g., Massachusetts and Maryland --- do very well indeed.
--- Robert Whitcomb
The rise and fall of Rhode Island
Aaron M. Renn has written a fine piece for City Journal about the rise and fall of once dynamic and rich Rhode Island. You may not agree with all of Mr. Renn's policy prescriptions but I think that you'll agree that it's one hell of an engaging history of a very strange little jurisdiction.
Stupidity more than corruption
Perhaps if Rhode Island were bigger, the larger pool of public-official talent made available would make such stupidities as the outrageous state investment in 38 Studios less likely. Also helpful would be if we in the media didn't make politics so unalluring for intelligent and civic-minded people to enter that too much space is left for stupid and/or corrupt people to fill. The low level 0f knowledge and intelligence of too many elected officials in Rhode Island has always struck me as a far bigger problem than out-and-out corruption, of which, yes, there's plenty in all states, including Massachusetts and Connecticut. In the RISDIC scandal, in 38 Studios and some other Ocean State outrages, there have been various forms of corruption (felonies or more minor) but stupidity, wishful thinking and not necessarily criminal taking care of pals were the biggest culprits.
Meanwhile, I have often thought that we should consider abolishing the state and splitting the land between the Bay State and the Nutmeg State, thus reducing the pathologies associated with too much political intimacy.
Life and death in N.E.
