Menus Subscribe Search
Facing a dire revenue shortfall, Providence, Rhode Island, has taken drastic measures to save money, providing only basic services to those in need. (PHOTO: SHUTTERSTOCK)

Facing a dire revenue shortfall, Providence, Rhode Island, has taken drastic measures to save money, providing only basic services to those in need. (PHOTO: SHUTTERSTOCK)

Analysis: We Should Rethink Who Funds Basic Services

• January 03, 2013 • 4:00 AM

Facing a dire revenue shortfall, Providence, Rhode Island, has taken drastic measures to save money, providing only basic services to those in need. (PHOTO: SHUTTERSTOCK)

Wealthy Barrington, Rhode Island, and needy Providence provide a case in point.

Barrington may be the only community in Rhode Island that not only did not cut back on library hours and services in 2011—it expanded them. What’s more, in 2012, it has continued to increase library funding.

The nearby city of Providence closed seven of its nine public libraries for a week this September because it needed to close a budget shortfall. Even before that closure, budget constraints had limited the hours at Providence libraries, making it difficult for people with full time jobs and their families to use this public service on most days.

This is just one example of how Providence and Barrington, located just nine miles apart, highlight the inequity of our locality-based budget system: The places most critically in need of the local services that facilitate economic growth and job attainment are the least likely to have the means to pay for them.

Rhode Island has 39 cities, each of which manages critical services (such as schools, public health, the promotion of tourism and business development, and law enforcement) needed for economic growth. As with most local governments in the U.S., the only taxation authority these cities have is a broadly defined property tax that covers houses, cars, boats, etc. (Such taxes make up 72 percent of Providence’s total revenue. Only 15 percent of the city’s revenue is funding from the state and the rest is made up of fees for services and the like). These sorts of “flat” taxes based on ownership are the norm for local governments across the country, with only a few exceptions.

A “flat tax” often seems like the most fair—everyone pays the same, based on how much they spend or own. However, in an era of unprecedented economic segregation, having a flat tax and fee system that is geographically limited to the local jurisdiction means that those cities and towns that are home to the poorest individuals (and, more importantly, have the lowest housing values) have the least ability to pay for vital services, let alone invest in the economic growth of the citizenry. Providence’s property tax rate is already three times that of cities in the rest of the state, and yet it still can’t generate the income needed to invest in essential services. Tying the funding for basic services to the locally available dollars is a perfect way to create inequality and stunt economic growth.

In Providence, where I live, the median household income is about $37,000. In Barrington, it is more than $90,000. Housing values mirror the money residents have at their disposal, and as a result Barrington can afford to invest heavily in all sorts of programs that benefit residents and the local (and national) economy.

Providence, on the other hand, is facing a dire revenue shortfall and has taken drastic measures to save money, providing only basic services to those in need. In one particularly rash move, the mayor fired every teacher in the city’s school system at the end of the 2010-11 school year so that he could hire back only as many as the city could afford (once they figured out how many that was). In the end, the city cut its education budget by about $28 million. The mayor closed six schools, eliminated scores of teaching and administrative positions, and substantially reduced the special-education budget. Because its property tax is already so high and its housing market is in continual decline, there are no good ways for Providence to increase its revenue. Providence has raised taxes several times over the last few years, but there is a limit to how much it can boost the property tax without hurting housing values even more. In time, the city may have to file for bankruptcy. And yet Barrington’s proposed budget for next year includes increasing expenditures on its schools by 2.7 percent (more than $1 million) without any tax hikes. Sure, these cities are also different in other ways, but those distinctions are irrelevant as long as their access to economic capital is so drastically different.

Most of us probably can think of two such contrasting cities within 20 miles of our own homes—one flush in cash with great services and another serving a poor population whose services seem to be forever under fire. The services cities need to provide—and how much is budgeted for each service—depend largely upon the population that lives there.

But wealthy or poor, people always seem to think that governments serving poor populations are somehow screwing up; few recognize that communities that are poor or have significant economic inequality (like Providence) are simply being screwed. When I talk to my neighbors and colleagues about the future of Providence, and how its growth is likely being crushed by the decisions of our political leadership, they often look puzzled. “Whatever it takes to balance the budget … the city has to manage its pocketbook,” they say—canned responses that could have been taken right from one of the mayor’s press releases. The thing is, they are right. Cities must balance their budgets or declare bankruptcy, as more and more of them are doing.

Because they have to fix their budgets using only the economic means available locally, the cities that need to spend the most on critical services to facilitate growth end up spending the least. Indeed, Paul Peterson, director of the Program on Education Policy and Governance at Harvard University, has found that communities with higher per-capita income spend more on welfare, health, education, unemployment benefits, and police, and fire—even though they need fewer of these services in the first place. What affects expenditures is not what a community needs to spend, but how much money it has available.

Economist Charles Tiebout is known for originating the concept of voting with one’s feet. Fifty years ago, he argued that officials at the local level know what services voters want and how much they’re willing to pay for them (i.e., taxes) by their willingness to live in a particular place. This concept is the cornerstone of competitive federalism: communities compete for residents, so they are driven to provide the best services for the least money.

His theory assumes a fictional utopia. The residents of Barrington were able to make these decisions and to buy expensive houses, the taxes on which guarantee good services. The people of Providence who would most benefit from high-quality schools, police officers on every corner, and access to great opportunities for job training lack the financial means to relocate to where those services are available.

Unfortunately, in tough economic times, states tend to pawn off more responsibilities to local governments, which exacerbates the opportunity gap between poor and rich communities and slow economic growth. It is large government entities—like states and the federal government that have the ability to distribute money in a way that makes up for local deficits. Maybe it’s time to rethink which level of government should pay for services that lead to economic growth.

Shanna Pearson
Shanna Pearson-Merkowitz is an assistant professor at the University of Rhode Island. Her academic work is published in some of the top political science journals including the Journal of Politics, the American Journal of Political Science, and State Politics and Policy Quarterly. Prior to entering academia, she worked in state and local government and electoral campaigns.

More From Shanna Pearson

A weekly roundup of the best of Pacific Standard and PSmag.com, delivered straight to your inbox.

Recent Posts

September 18 • 4:00 PM

Racial Disparity in Imprisonment Inspires White People to Be Even More Tough on Crime

White Americans are more comfortable with punitive and harsh policing and sentencing when they imagine that the people being policed and put in prison are black.



September 18 • 2:00 PM

The Wages of Millions Are Being Seized to Pay Past Debts

A new study provides the first-ever tally of how many employees lose up to a quarter of their paychecks over debts like unpaid credit card or medical bills and student loans.


September 18 • 12:00 PM

When Counterfeit and Contaminated Drugs Are Deadly

The cost and the crackdown, worldwide.


September 18 • 10:00 AM

How Do You Make a Living, Molly Crabapple?

Noah Davis talks to Moly Crapabble about Michelangelo, the Medicis, and the tension between making art and making money.


September 18 • 9:00 AM

Um, Why Are These Professors Creeping on My Facebook Page?

The ethics of student-teacher “intimacy”—on campus and on social media.


September 18 • 8:00 AM

Welcome to the Economy Economy

With the recent introduction of Apple Pay, the Silicon Valley giant is promising to remake how we interact with money. Could iCoin be next?



September 18 • 6:09 AM

How to Build a Better Election

Elimination-style voting is harder to fiddle with than majority rule.


September 18 • 6:00 AM

Homeless on Purpose

The latest entry in a series of interviews about subculture in America.


September 18 • 4:00 AM

Why Original Artworks Move Us More Than Reproductions

Researchers present evidence that hand-created artworks convey an almost magical sense of the artist’s essence.


September 17 • 4:00 PM

Why Gun Control Groups Have Moved Away From an Assault Weapons Ban

A decade after the ban expired, gun control groups say that focusing on other policies will save more American lives.


September 17 • 2:00 PM

Can You Make Two People Like Each Other Just By Telling Them That They Should?

OKCupid manipulates user data in an attempt to find out.


September 17 • 12:00 PM

Understanding ISIL Messaging Through Behavioral Science

By generating propaganda that taps into individuals’ emotional and cognitive states, ISIL is better able motivate people to join their jihad.


September 17 • 10:00 AM

Pulling Punches: Why Sports Leagues Treat Most Offenders With Leniency

There’s a psychological explanation for the weak punishment given to Ray Rice before a video surfaced that made a re-evaluation unavoidable.


September 17 • 9:44 AM

No Innovation Without Migration: Portlandia Is Dying

Build an emerald city. Attract the best and brightest with glorious amenities. They will come and do nothing.



September 17 • 8:00 AM

Why Don’t We Have Pay Toilets in America?

Forty years ago, thanks to an organization founded by four high school friends, human rights beat out the free market—and now we can all pee for free.


September 17 • 6:32 AM

Do Conspiracy Theorists Feed on Unsuspecting Internet Trolls?

Not literally, but debunkers and satirists do fuel conspiracy theorists’ appetites.


September 17 • 6:00 AM

The Grateful Dig: An Archaeologist Excavates a Tie-Dyed Modern Stereotype

What California’s senior state archaeologist discovered in the ruins of a hippie commune.


September 17 • 4:00 AM

The Strong Symbolic Power of Emptying Pockets

Researchers find the symbolic act of emptying a receptacle can impact our behavior, and not for the better.


September 16 • 4:00 PM

Why Is LiveJournal Helping Russia Block a Prominent Critic of Vladimir Putin?

The U.S. blogging company is showing an error message to users inside Russia who try to read the blog of Alexei Navalny, a prominent politician and critic of the Russian government.


September 16 • 2:00 PM

Man Up, Ladies! … But Not Too Much

Too often, women are asked to display masculine traits in order to be successful in the workplace.



September 16 • 12:00 PM

What Makes You So Smart, Brilliant 12-Year-Old?

Charles Wang is going to rule the world.


Follow us


How to Build a Better Election

Elimination-style voting is harder to fiddle with than majority rule.

Do Conspiracy Theorists Feed on Unsuspecting Internet Trolls?

Not literally, but debunkers and satirists do fuel conspiracy theorists' appetites.

3-D Movies Aren’t That Special

Psychologists find that 3-D doesn't have any extra emotional impact.

To Protect Against Meltdowns, Banks Must Map Financial Interconnections

A new model suggests looking beyond balance sheets, studying the network of investment as well.

Big Government, Happy Citizens?

You may like to talk about how much happier you'd be if the government didn't interfere with your life, but that's not what the research shows.

The Big One

One in three drivers in Brooklyn's Park Slope—at certain times of day—is just looking for parking. The same goes for drivers in Manhattan's SoHo. September/October 2014 new-big-one-3

Copyright © 2014 by Pacific Standard and The Miller-McCune Center for Research, Media, and Public Policy. All Rights Reserved.