10 things that will turn Rhode Island around

8 CALL A MEETING OF THE MINDS
8 CALL A MEETING OF THE MINDS

Rhode Island woke up on New Year’s Day 2015 with a groaning hangover from years of wallowing in bad economic news. Standing by the bedside was an energetic, dark-haired woman holding a spoon and big, old-fashioned medicine bottle. How bad would it taste?

Newly minted Gov. Gina M. Raimondo, known to both admirers and detractors as smart, bold and not one to run from a fight, will find one. Her administration is greeted by a projected fiscal 2016 state budget deficit of about $190 million; an unemployment rate of 6.8 percent; a large proportion of young adults undereducated for a 21st-century economy; and business leaders perpetually irate about what they say are crippling taxes and regulations.

Raimondo has been clear in her public comments that turning the state around will require consistent, concerted – and long-term – effort. She sees no quick fixes.

While that path is prudent, patience is thin and with good reason. Small steps with long time horizons are just not enough. After all, said M. Cary Collins, professor of business innovation at Providence College, “This patient is on life support.”

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There must be some specific actions that can be taken in a short time frame – say the next 100 days – that would make an immediate difference in the state’s performance.

So Providence Business News has asked a number of seasoned observers to name 10 specific actions that state leaders could take in the next 100 days that could make a measurable difference in the Ocean State’s economy.

All those contacted agreed that, above all, the new governor must present a clear vision of the state’s economic future and describe how to get there. Equally important, she must rally followers to embrace the vision and stick out the journey even when it hurts.

“Stake out four real economic objectives for our state,” said Collins. “Not 50 different pyrrhic victories but four honest-to-goodness, mushroom-cloud … objectives. Never adopt the ‘Be all we can be’ or ‘We’ll do our best’ language. Do it or don’t do it.”

Gary S. Sasse, former director of the Rhode Island Public Expenditure Council and the R.I. Department of Administration, and the current head of the Hassenfeld Institute for Public Leadership at Bryant University, agrees.

“The governor must lay out a transparent program,” he said. “You’ve got to tell people what the problems are and how to solve them or else you just have a bunch of government programs.”

A subset of this advice is that Raimondo needs to tell the truth about the condition of the economy, not to fall victim to unrealistically rosy predictions that mask the extent of the problem.

“This economy needs transformation, not tweaking,” said Saul Kaplan, founder and chief of the Business Innovation Factory and former head of the R.I. Economic Development Corporation, the entity currently known as the R.I. Commerce Corporation.

One component of that program must be optimism. “Rhode Island’s psychology of cynicism and defeatism has to change. We have to begin to believe we can be good and better than good,” said Kaplan.

Another element is togetherness. “A leader needs followers,” said Cheryl Merchant, president and CEO of Hope Global. “You’ve got to get everyone rowing in the same direction. If we keep fighting ourselves, we are going to be in trouble.”

Of course, it’s easy to put all the needed change on the shoulders of the new governor. But that is not only unfair, it is unreasonable. As Merchant says, the entire state needs to be rowing in the same direction, and powerfully.

So you want to make a difference? Here are 10 ways that the state can lift itself up by its bootstraps.

1 Support Small Businesses
Rhode Island is a land of small businesses. In March 2014, according to the R.I. Department of Labor and Training, companies employing fewer than 20 people represented 90.2 percent of all Rhode Island employers and employed 24.7 percent of the workforce. To support the many small businesses, the state should offer a tax credit for newly created jobs, said Brown University President Christina H. Paxson. “Waiting for big corporations to show up and begin hiring is not going to work.” In a similar vein, Higgins suggested eliminating the minimum corporate tax for the first five years of a new business’ existence.

2 Fix That Infrastructure
Right now, when gas prices are low, the state should create a 5 cent state gas tax to be used specifically for infrastructure improvements, said Mark Higgins, former dean of the University of Rhode Island College of Business Administration (he is now the dean of the John Cook School of Business at St. Louis University). To make it more palatable, the law could include a sunset provision for the time gas prices rise again. “Current low gas prices create a unique window for building an infrastructure repair fund because the price at the pump won’t hurt too much,” he said.

3 Start Bond-Financed Projects Now
Last November voters approved bonds for several infrastructure projects: a new home for the URI College of Engineering; a hub for mass transit in Providence and beyond; projects for clean water, open space and the development of brownfield sites. Also, there is money for investments in nine creative economy/arts groups. Get the work started, said Scott Wolf, executive director of Grow Smart Rhode Island.

4 Finance Historic Tax Credits
And speaking of getting started, one quick action that could offer the greatest opportunity for the long term is to restore annual funding for the historic-preservation tax credit, said William F. Hatfield, president of Bank of America in Rhode Island.

The credit has made possible the completion of more than 200 restoration projects since 2002, representing a total investment of $1.4 billion, said Wolf. He argues that, by allowing restoration of grand, old buildings, the credit adds value to the tax rolls, attracts tourists, inhibits industrial sprawl, and pays for cleanup of brownfields. In 2013, the legislature provided $34.5 million in new funding, but a 2014 proposal for more money was defeated.

5 Eliminate or Streamline Crippling Regulations
Quickly determine the top three regulations that businesses find most burdensome and pass laws to eliminate or at least streamline and coordinate them. For example, a business chief considering a move to Rhode Island has to study a welter of zoning regulations for the state and various municipalities, said Higgins. Make it easy and cheaper by getting all zoning under the control of the state, so people don’t need to sort through multiple zoning schemes.

6 Make Money for High-Tech More Accessible
Create a $100 million fund from public and private sources to be used for innovative projects in biotech, neuroscience, design and manufacturing, suggested Paxson. The state could grant land from the Interstate 195 corridor as its contribution to the effort. The fund could be designed as a revolving loan fund or managed in other ways.

7 Hang On To Our Grads
The state’s population is not growing. Keeping more college graduates rebuilds the tax base and increases the talent base for local businesses. The state should create a state income tax credit for recent college grads to help them pay off student loans, said Paxson.

8 Call a Meeting of the Minds
Call the presidents of all 12 Rhode Island colleges and universities into one room to talk about the state’s economic goals and how to get to them, said Kaplan. “This has never happened,” he said. “All the colleges are doing their own thing.”

9 Rein in Unemployment Insurance Benefits
Reform the excessive generosity of the state’s unemployment insurance benefits, said Higgins, who noted that seasonal workers or even a worker who stole from an employer are eligible to receive unemployment insurance in the Ocean State. According to a February 2014 report by federal Congressional Research Service titled “Unemployment Insurance: Programs and Benefits,” as of July 2013, Rhode Island had the fourth-highest maximum weekly benefit, of $566, behind only Massachusetts, Connecticut and Pennsylvania. (The figures rise steeply when dependents’ allowance is included.) This is a significant cost to employers, said Higgins.

10 Tackle the Budget Deficit
While this may be the No. 1 target for the incoming administration, it is also the most difficult to tackle quickly. But there is no question that the state budget deficit, now predicted at $190 million for the fiscal year beginning July 1, has to be brought under control.

Here are two simple actions that can make a difference:

• Reduce duplication of government services. Two examples would be fire protection and the Balkanization of tourism-promotion groups. “We have too many fire departments for our size. This is crazy,” said Kaplan. “These costs are too high for an economy of our size.”

• Plan to reduce spending on social services and, in particular, Medicaid, an area where Rhode Island is an “outlier” because of its exceedingly generous benefits, said John C. Simmons, executive director of the Rhode Island Public Expenditure Council. At issue – Medicaid eligibility, amount paid and levels and types of services. A July 2014 report by the Pew Charitable Trusts shows only Alaska, New Jersey and New York spend more per enrollee on Medicaid. •

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5 COMMENTS

  1. with Providence the lead city in our state, we need to find some way for Providence to reduce it commercial property tax. One of the highest in the country and $ 5 more per thousand than Boston.. No special deal for developers, but a much lower commercial tax to induce new businesses and construction in our capital city. This will draw the young employees that want an urban environment for work and living rather than trying to get them to go to a suburban setting.

  2. The number ten item on the list MUST be moved to #1 with a bullet… Not only should the Fire Departments be consolidated but this needs to include Police and most importantly School Systems. In the 21st Century there is no viable reason for there to be 39 different school districts within a geographical area encompassing just about 1 million people. There needs to be a shift to a minimum of County regionalization of the above services within Rhode Island for any permanent turnaround to occur within the State. There needs to be a shift from government employment to private sector employment within the State. This will be a painful process, but it has to be accomplished in order for RI to retain its young people. The brain drain that started in the 1970s will only continue and will worsen if the archaic administrative structure is retained. This is the time for bold changes in the way government is structured within RI. Is Governor Raimondo up for this monumental task or will she just kick the can down the road like her predecessors have done the last 40 years without making the structural changes that must be made.

  3. Cutting Medicaid is not a good place to start because of the direct loss of revenue any reduction of the expense would cause. As far as I can tell we have never calculated the multiplier effect of the Federal contribution, about 60 cents for every 40 cents we spend on Medicaid. The federal money goes to pay healthcare workers who in turn spend the money, etc. It is difficult to say that cutting Medicaid actually saves any money, especially when many of those who would be covered become uninsured but get treated anyway. The economic impact of spending on Medicaid might actually be positive.

  4. #1 Support Small Businesses

    On this first point, allow me to share a proposal to our state government, business community and citizens. It centers on a simple, yet far reaching initiative called Rhode Island First. This is an initiative to help improve our local economy by supporting Rhode Island businesses first. Please see the links below for details. Your input is welcome:

    http://rhodemapri.org/guest-blog-rhode-island-first/
    https://www.facebook.com/rhodeislandfirst
    www.1of52.net/blog
    #RIFIRST

    Thanks in advance for you attention, Steve Maciel

  5. Unemployment benefits are clearly out of control. The law must have been written during much better times. For example, a worker can voluntarily quit his or her job to follow his or her spouse to another job in another state, and collect unemployment from Rhode Island in that other state. That, to me, is too generous. There are many examples, some more notorious than others, of benefits paid to those without need. Let’s return the benefit to its original intent.