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Institute for Policy Studies

Blogging Our Grand Divide

A Promising Proposal in Rhode Island

The basic idea behind legislation now pending in our smallest state: The taxes we pay should bankroll quality public services, not grand fortunes.

The federal government alone, a new Congressional Budget Office report calculates, is now annually spending $500 billion — half a trillion dollars — to purchase goods and services from private companies. State and local governments spend many billions more.

We’re not talking trickle here. We’re talking cascade. Over recent years, our elected leaders have been rushing to privatize services that public employees previously provided.

This massive privatization — of everything from prisons to public education — hasn’t done much of anything to make the United States a better place to live. On the other hand, this privatization has paid off quite handsomely for America’s most affluent. They’re collecting ever more generous paychecks, courtesy of the tax dollars the rest of us are paying.

Now before lawmakers in Rhode Island: a landmark bill that would tie, for the first time, government contracting to a corporate bidder's CEO-worker pay ratio.  Photo: flickr/Conall O'Brien.

Now before lawmakers in Rhode Island: a landmark bill that would tie, for the first time, government contracting to a corporate bidder’s CEO-worker pay ratio. Photo: flickr/Conall O’Brien.

In Washington, D.C., for instance, top officials of the private companies that run many of the city’s charter schools are taking in double, triple, and more what their counterparts in public schools take in. The CEO at one company that runs five of these charter schools, the Washington Post recently reported, pulled in $1.3 million in 2013, nearly five times the pay that went that year to the top public official responsible for the District of Columbia’s over 100 traditional public schools.

CEOs in America’s taxpayer-funded defense industry would, of course, consider D.C.’s lavish charter school executive paychecks no more than chump change. The CEO at Lockheed Martin, for one, personally pocketed over $25 million in 2013.

So how do you feel about all this? Do you like the idea of executives in power suits raking in multiple millions, all thanks to your tax dollars?

Rhode Island state senator William Conley certainly doesn’t. He and four of his colleagues have just introduced legislation in the Rhode Island Senate that would stop the stuffing of tax dollars into the pockets of wildly overpaid corporate executives.

Conley’s bill directs Rhode Island to start “giving preference in the awarding of state contracts” to business enterprises whose highest-paid execs receive no more than 25 times the pay of their median — most typical — workers.

Back in the middle of the 20th century, only a handful of top corporate executives ever made more than 25 times the pay of their most typical workers. Today, by contrast, only a handful of top execs make less than 100 times America’s median pay.

Last year the Rhode Island Senate passed a bill similar to Senator Conley’s new proposal, but that bill never made it to the Rhode Island House for a vote. If Conley’s 25-times bill should have better luck this year and become law, the ramifications could be huge.

That’s because we may soon know, for the first time ever, the exact ratio between CEO and median worker pay at every major American corporation that trades on Wall Street.

Five years ago, legislation that mandates this disclosure passed Congress and made it into law. Incredibly intense corporate lobbying has been stalling this new legislation’s enforcement, but the stall may soon end. The federal Securities and Exchange Commission finally appears about ready to issue the regulations needed to enforce full pay ratio disclosure.

CEO-worker pay comparisons for individual companies will likely start hitting the headlines the year after next. With these new stats, taxpayers will be able to see exactly which corporations feeding at the public trough are doing the most to make America more unequal.

With this information, average taxpayers could then do a great deal. They could, for starters, follow Senator Conley’s lead in Rhode Island and urge their lawmakers to reward — with our tax dollars — only those corporations that pay their workers fairly.

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