Bruce Sundlun: Honesty in Arithmetic

Bruce Sundlun: Honesty in Arithmetic

On Friday, I found myself mourning the passing of former Governor Bruce Sundlun. First the disclaimer: I did not support Governor Sundlun in many of the policy choices he made during his four years. In fact I worked against him in the 1994 Democratic primary that he lost. That said, there was much to admire, largely a sense of responsibility that I have found quite scarce among policy makers in the state house since then.

Most famously, on his inauguration day, Governor Sundlun closed all the credit unions and state chartered banks whose safety was endangered by the failure of the RISDIC private insurance scheme. The closure froze the bank deposits of a third of the state, including mine, and plunged the state into a quick and deep recession.

Unfortunately, Sundlun never tried seriously to resuscitate any of the institutions. Most of them were heavily over-leveraged on stupid real estate lending, but except for the two failures that brought down RISDIC, they were all going concerns, with huge numbers of depositors. You can understand the state not wanting to take the risk of trying to keep them open, but that downside risk was no greater than what we actually wound up paying to reimburse all the depositors. That is, Sundlun refused to put the state's credit behind keeping the banks open because it could have cost us over a billion dollars, but we closed them and wound up paying over a billion dollars anyway, getting nothing for our money. This was a tragic waste of resources and the closure of the banks caused long-lasting damage to our economy.

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The good news is that we did pay for it. Sundlun oversaw a deal by which a fraction of the sales tax was dedicated to paying back the depositors. With the boom of the 1990's, we paid that money back a decade ahead of schedule.

Bypassing voters, raising taxes

Another unfortunate choice was that Sundlun chose to bypass voters to expand Green Airport, by a lot. We borrowed a few hundred million dollars to build the new terminal and reroute traffic, all without voter approval. The airport neighbors, upset that traffic was expanded so much in an essentially undemocratic way, had little recourse. Worse, the precedent was set for Governor Carcieri to use essentially the same dodge to borrow more than twice as much to move I-195 in Providence, and three other high-profile projects.

The good news is that we did pay for it. Governor Sundlun arranged that the airport bonds would be repaid by airport income. The tax (pardon me, the surcharge) on passengers through Green went up, but the expansion allowed low-cost airlines to serve it, and the lower prices and increased competition made it cheaper all around. Contrast this with Governor Carcieri, who insisted that we could take on these big projects without paying for them, so he scooped hundreds of millions from other road projects and transportation priorities. Now we have a new bridge to be proud of, but the bridge near my house continues to crumble into the water and our bus system continues its decline.

Finally, Governor Sundlun inherited a busted economy, partly due to those closed credit unions, but there was a substantial national slowdown underway as well. Sundlun slashed a lot of the state's aid to its poor citizens, and reneged on its school funding promises to the cities and towns, but when he spoke of shared sacrifice he really meant it, and so the good news is -- again -- that we did pay for it. He raised the income tax to make up for the deficit caused by the slowdown. That was, in fact, the last broad-based tax increase approved by the General Assembly, almost 20 years ago.

It's fashionable these days to deny the evidence of our own experience, so you hear all kinds of rot about the folly of raising taxes during a recession, but that's precisely what we did between 1990 and 1992, both locally and nationally. So what punishment did we get from that folly? The economic boom of the 1990s, that's what. The boom was so boomy that Sundlun's immediate successor, Republican Lincoln Almond, had a budget surplus he could squander, and he did.

Where do you find honesty?

My inbox has been overflowing with encomia for Bruce Sundlun since Friday. Among them, I couldn't help but notice that Harry Staley and Harriet Lloyd, the chairman and director of the anti-tax RISC organization, praised Sundlun's "fearless leadership" and "uncommon determination to do what was necessary, however unpopular." Given the efforts they went to in order to shut down Governor Chafee's sales tax proposal this year, I wonder which of Governor Sundlun's tax increases they would have been willing to endorse at the time.

Since Sundlun's day, a succession of Republican Governors and Democratic Assembly leaders have told us we can have what we want without paying for it, and have cut state taxes over and over again. The result? Crumbling bridges, declining state and municipal services, perpetual budget crises, and ever-escalating property taxes. You're all familiar with the attempts to blame it all on greedy public employees, but the numbers simply don't support the tale.

In my opinion, Lincoln Chafee is virtually the only statewide public figure since Sundlun's departure with the same honesty about fiscal responsibility. Last winter he proposed a broader sales tax -- what he thought was necessary, though it was unpopular -- and the very same folks who now praise Sundlun's leadership crucified him for it.

So here's the question: do we only admire honesty when it's 20 years past and too late for our opinion to matter? If so, it will be a very long time before we see Bruce Sundlun's kind again.

Tom Sgouros is the editor of the Rhode Island Policy Reporter, at whatcheer.net and the author of "Ten Things You Don't Know About Rhode Island." Contact him at [email protected].
 

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