Reading the tea leaves for 2012


After an extended and significant year, our lawmakers will return next month to deal with a number of critical issues. Here’s a sketch of several of the issues that our part-time solons will have to deal with.

Municipal pension relief: The fate of a number of our struggling cities and towns is closely tied to crafting a reform solution, and fast, to the pension crisis at the local level, especially with regard to the grossly underfunded plans that don’t fall under the state’s municipal pension system. Legislators couldn’t include COLA relief for the local plans in the reform legislation that passed in November, much as the governor and several prominent mayors wanted. But that doesn’t exclude the need for a state provided solution.

Legislators need to take this issue up in January and pass relief legislation. Cities and towns can’t wait until collective bargaining negotiations over new contracts come up on the calendar. Virtually none of the local bargaining units involved will voluntarily concede COLAs, so what else is to be done? Like the state, cities and towns will have to face the issue, in the end, in the courts.

Governor Chafee’s intent to revisit the sales tax issue: Yes, it’s still alive! Despite higher revenue in hand and improved revenue projections for the state, Governor Chafee is still set on imposing a broadened state sales tax on all of us, even though his first proposal to do so was quickly and sweepingly rejected by the General Assembly earlier this year. In an interview last month, Chafee indicated that he would revive the sales tax plan for the next state budget, even as he acknowledged it would be a “politically difficult thing to do.” The governor wants to broaden the tax and lower it to 6 percent.

“We don’t know what the economy is going to do,” said Chafee. “It can go up and it can go down and sometimes you’ve embarked on spending programs that revenue won’t support.”

Perhaps the governor foresees an inevitable downturn in gambling revenue coming out of Twin River, with the fast-track opening of a nearby racino within the next year. That would be a reasonable conclusion, which needs to be dealt with, as gambling revenues from all sources (slots, lottery tickets and keno sales) represent Rhode Island’s third most significant revenue source.

But broadening the sales tax will be another tough sell, and will be vigorously opposed by businesses and residents alike. There’s got to be a better way than hiking taxes to pay for state government.

Move Twin River to full-casino status or think about a new alternative: Although this is intended to be a referendum issue on the November 2012 ballot, there’s renewed concern that Twin River’s future, even with table games, is not safe, so perhaps Rhode Island should take a new direction in preserving its long-term revenue stream from gaming. Proposals have been made recently for building a destination resort casino along the Providence waterfront or at Quonset Point, complete with an indoor waterslide park and moorings for cruise ships. As crazy as these ideas sound, perhaps Governor Chafee’s economic impact study commission will actually take a look at these alternatives. Legislators could then move to amend the referendum accordingly. There is a sinking feeling about Twin River’s fortunes once Massachusetts’ casinos open, centering on the notion that even with the addition of table games, its market position will remain that of a day-tripper venue. Hence, renewed interest in a grand casino like the one that was contemplated for West Warwick.

Separately, the problem with the new competition coming from Bay State casinos, coupled with the two established casinos in Connecticut, is that the landscape for available gambling dollars is going to get pretty dense in a few years’ time, and inevitably there will be winners and losers in such a crowded marketplace. A Rhode Island resort-type casino in either Providence or Quonset will have to compete with one planned for Southeastern Massachusetts, in either Fall River or New Bedford. Both cannot thrive in each other’s shadow. The reality, going forward, is that the Ocean State’s stake in gaming doesn’t look like the winner it historically has been, and budget adjustments will have to be made to recoup the lost revenue. A broadened sales tax, anyone?


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