(Editor’s note: This exclusive interview with Gov. Daniel J. McKee is part of a two-story package on Rhode Island’s business climate that will be published in the Nov. 24 edition of PBN.) Gov. Daniel J. McKee has long positioned himself as a champion of small business, both in his six years as lieutenant governor and
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GOV. MCKEE says business owners are beginning to see improvements in the state's business climate. / PBN PHOTO/MICHAEL SALERNO[/caption]
Have you felt the reaction? Do you feel like the business community recognizes the difference?
Yes, it’s starting to really sink in. Clearly, people know I’m interested in small business. Just look at what I did with [R.I. Commerce Corp.]. We can do blue-chip [companies] and small businesses at the same time. There is no reason that you can’t, yet we weren’t. Immediately, we made sure we got as many small grants as we could coming out of COVID-19. They know that I opened up the economy quicker than when we were supposed to by several weeks. So, I think every time you do something, the business community recognizes it. We lowered the penalty [interest rate on delinquent tax payments] by 6 points … going from 18%, because it was usury, down to what Connecticut and Massachusetts had in that 12%-12.5% range on interest and penalties. These are the kinds of things that might not surface in a CNBC poll, who have their own rigid strategy. But it definitely impacts the way that people feel about what we are trying to do to help the business community.
List those things out and put a dollar figure to it. Take a business that has 20 vehicles in their fleet that [is] no longer paying for that. Take a business that pays even $200 or $500 on their tangible tax and they are not paying that anymore. And we are preparing another small-business-friendly [budget] article this year. We are getting information from the small-business community and the business community at large about the types of things they want to see done. Run a poll. Ask [PBN readers] what they want to have done.
That’s a terrific idea.
[R.I. Commerce Secretary Elizabeth M.] Tanner and I have been visiting every community since I was lieutenant governor, asking the farmers … look what we are doing for the farmers. That [Local Agriculture and Seafood Act ] grant was being phased out. We accelerated that grant. So, the farmers now have the ability to access small grants to help them make yogurt on their farms down in Little Compton.
We are interested in knowing. It’s not about, “Well, what would you like to have happen? Well, we just want to be better.” Let’s be specific.
So, what are you starting with? You know you are putting something in, what are you starting with?
We are still working on the [fiscal 2025 state budget proposal]. It’s very early in the stages. We are really focused on making it a bare bones strategy for our budget.
Regarding small business, you are going to be putting something in your budget proposal?
How can we provide some type of tax relief in certain areas? The food trucks right now are certainly an area we are looking at, to provide them with a level playing field between us, Massachusetts and Connecticut. There are some issues that I’ve talked to the cannabis industry about to have them on a level playing field. We are evaluating that and seeing if we can absorb that in the budget.
We are making our list. I think it’s going to have some level of tax reduction that we are going to roll in there. But the biggest thing is we’ve got to be able to balance the budget. So, you know that I’ve asked for a sales-tax reduction. I’m still interested in that. We certainly have people suggesting a sales-tax holiday that other states have. So, everything is on the table.
The cannabis advertising?
That’s been taken care of.
Well, not with the cultivators.
Those are the types of things that we really want to hear and address. And there are some things that don’t have money attached to it. It’s more regulation and more a process. But we are making our list. I think it’s going to be some level of tax reduction that we are going to roll in there. We are talking about the pickup truck trade-in, that’s on our list. We will continue to have list items. But the biggest thing is we’ve got to be able to balance the budget. The budget has to be balanced. So, you know that I’ve asked for a sale-tax reduction. I’m still interested in that. We certainly have people suggesting a sales-tax holiday that other states have. So, everything is on the table; we are evaluating what we might be able to put in knowing there is going to be another budget in 12 months.
If you start layering from the very moment I got here, where we eliminated a small fee on the sales tax permit. I had 11 days to do the first budget. We [focused] on that; we wanted to take pieces one piece at a time.
Then the second year, we lowered the penalty [on delinquent tax payments] because we were coming out of COVID and there were companies that were struggling in that area. So, it’s a process.
I have visited every community on a small-business tour as lieutenant governor and still continue to do that. Went to a farm in every community, went to a manufacturer in every community, asking those questions. Went to used-car dealers and asked them those questions and helped them with ombudsmen at the [R.I. Department of Motor Vehicles]. There are things that you never hear that are really important to these types of individuals … and then the other piece is the work we are doing, just look at the RI-2030 plan. Really look at it. It’s an interactive website. People can actually go and say, “This is what I would do in this or that area.” And all these things we are working on will impact the economy, which will impact the ability for the business community to prosper.
[caption id="attachment_453320" align="alignleft" width="277"]
IF YOU HAVE ideas to help the state's small businesses. Gov. McKee says he's interested in hearing them as his administration prepares his fiscal 2025 budget proposal. / PBN PHOTO/MICHAEL SALERNO[/caption]
The last state budget was a record $14 billion, a lot of which was federal dollars. Do you plan on any major cuts in your next budget proposal?
I’ve asked my departments to put budgets in front of me that just satisfy legal and contractual obligations. And then we will take it from there. But I would expect this next budget to be one of discipline and with a continued strategy on the three things I am focused on, which are raising academic outcomes, raising incomes and personal wealth, and raising health and fitness levels. And that is explained in the Rhode Island 2030 plan. We are in the process now of updating that plan in a really strong way because we don’t want that document to be stale.
There are certain things we don’t control. We don’t control what is happening in Washington, D.C. We don’t control what the Fed does in terms of interest rates. We focus on the things we control. But those factors could have an impact on long-term revenue, and we must make sure we are smart about and have the discipline to budget properly.
So, if revenue comes in as projected, all things being equal, is there any place within the state government that you might target for a reduction? And then maybe fold that into some relief for business or economic development?
We are not looking to raise any taxes and we are not looking to raise any fees. So, we will take it from here and see what we’ve got. We are trying to do what we’ve done in previous budgets. There are so many areas of investment. Let’s talk about life sciences. We are building a new state health lab. And we are putting a public-private partnership together right down on [the former I-195 land], which we are starting to put some businesses down there and jobs. That’s going to be 200,000 square feet of life science space, both public and private.
So, we are going to continue to find ways to use one-time revenue whether surplus or federal dollars to invest in projects that put people to work. You haven’t even touched on the fact we still have the lowest unemployment rates that we’ve had over an extended period of time in the history of Rhode Island. So much so that’s it difficult for us to hire into the government side because there are better opportunities out there. So, we are going to figure the same strategy. Invest in projects that put people to work at the prevailing wage so that they have enough money in their pocket. And then have those projects pay dividends to us for decades to come.
You’ve touched on some of the progress you think you’ve made …
Well, I know we’ve made progress. It’s not a ‘think.’ I know we’ve made progress.
Part of measuring business climate and the perception of that is, do other people agree and see it. So, let’s try and clear the air on one matter -- the tax on [Paycheck Protection Program] loans. This is a state that has struggled with the perception that it is not as open to businesses as some people would like.
[The PPP tax is] in the rearview mirror. And 95% of the businesses in the state of Rhode Island got the full benefit of the PPP. So, you are talking about a small group of people.
[caption id="attachment_453319" align="alignleft" width="397"]
ANYONE STILL concerned about his 2021 decision to tax large Paycheck Protection Program loans is living in the past, according to Gov. McKee.
PBN PHOTO/MICHAEL SALERNO[/caption]
But why did it make sense – knowing what the perception is – to say that even though more states did not do this, we’re going to tax PPP loans?
It’s history. And anyone who is still dwelling on that is living in the past. It was a budget decision that we worked through with the General Assembly. That’s where we landed. Ninety-five percent of the businesses in the state of Rhode Island – which never gets repeated, by the way, in your stories – who got a $250,000 exemption, were not impacted by that decision at all. A very small percentage were.
You worked hard to make that palatable. But I think the issue is when you are talking about the business climate relative to other states …
It’s in the rearview mirror. That was years ago. What people are worried and concerned about is what we are doing right now. And again, the conversations I was involved in were centered around a small number of those businesses. And we satisfied those businesses. Just as we satisfied 75% of businesses on the tangible issue. And every business got the full deduction that was allowed. So, every business saved money, not to the extent that some of them wanted. But individuals that are still singing that song are really … that’s water under the bridge.
You joined local officials in Cranston where everybody celebrated Top Golf opening. Yet there was an undercurrent to that that wasn’t so positive, where the mayor had an issue with the naming of the facility. And again, we are talking about the business climate. How can the state and municipalities cooperate to get more of a united front on the message you are trying to send? Wasn’t that a negative message to businesses: “Hey, leave if you don’t like what I’m telling you”?
No, I think it was a message that was delivered privately [before it went public] that should have been handled privately. And the fact of the matter is that it’s in Cranston. I think it was just a good, healthy exchange. I didn’t hear from Top Golf that they were upset about it.
What do you see your role as in terms of trying to improve the business climate and everybody’s perception of it?
Well, besides the fact you need to continue to be an advocate for small business, businesses are coming here. We are central on the offshore wind. So, my job is to continue to support renewables. The issue is big for our economy. We don’t have oil wells. We don’t have fracking; we don’t have a gas line. All those things are subsidized heavily in other states. We’ve never had the benefit of a subsidy. We’ve never had the benefit of a [White House] administration thinking that we are central to energy.
So, the question for me is where we need to move and where we need to make those investments. And continue to manage the budget in a way where we get the benefit of surpluses.
(Christopher Allen is a PBN staff writer. You may contact him at Allen@PBN.com.)
HOPEfully, the Ds will come up with a better candidate for the next gubernatorial election.