Chad Cimini, president of Cimini & Associates Inc., is a fan of Real Jobs Rhode Island.
The state workforce-development program has helped connect unemployed and underemployed workers with 400 Rhode Island companies, including Cimini’s manufacturing business based in Westerly.
“As a manufacturer, we have a high need for skilled labor,” Cimini said during a House Finance Committee meeting on March 6. “It’s difficult to fill these positions.”
Cimini, who has facilities in Cranston and Westerly and employs approximately 150 people, was one of several members of the business community to testify in favor of the state-run program, which faces deep federal funding cuts in the fiscal year beginning July 1.
The prospect of such cuts has state officials scrambling for ideas to keep the program afloat.
“Unless we want to stop, we have to figure out a way to keep the funding going,” said Scott R. Jensen, director of R.I. Department of Labor and Training. “Without a way to fund this work, it will really slow down, and I don’t think that’s a good idea.”
How Jensen wants to fund Real Jobs RI, however, is raising some concerns among budget watchers, who worry it could end up costing the Rhode Island business community – and the overall workforce – much more than jobs in the long-term.
“Why are we going into the unemployment trust fund to fund a governmental program?” asked John C. Simmons, executive director of the Rhode Island Public Expenditures Council, a nonprofit that provides budget and policy analysis.
“It’s a very bad idea,” he added.
State lawmakers – as part of Gov. Gina M. Raminodo’s proposed $9.4 billion fiscal 2019 budget – are mulling whether to allow the funding proposal, which would divert about $6.6 million from the state’s near-$500 million Unemployment Insurance Fund to pay for Real Jobs RI.
The UI fund is fueled by Rhode Island employers, who pay between $205 and $2,425 per employee for unemployment insurance each year. The money is used to provide temporary support to workers who have lost employment through no fault of their own.
A portion of the UI funding – about 0.25 percent – goes toward a separate fund, dubbed the “Job Development Fund,” or JDF, which pays for another job training-related tax-credit program first established in 1996.
The current program – designed to cover expenses associated with employee training – is used by fewer than six companies each year, according to Jensen.
The state director proposes codifying Real Jobs RI into law under DLT and to have the JDF pay for the program instead of the tax-credit program. Jensen argues Real Jobs RI, since it was established in fiscal 2016 as part of Raimondo’s job plan, has proven to be a better program that benefits a greater number of employers.
For Jensen, the $6.6 million diverting of funds – known better as a “scoop” – from the UI fund makes sense, as it accounts for less than 2 percent of the total fund balance.
“I would submit the money means very little to the [UI] trust fund, but it means a lot to workforce development,” Jensen said.
So-called scoops are common yet controversial funding mechanisms used by state officials to shore up budget holes. Rhode Island has come a long way since the trenches of the Great Recession but is nonetheless facing multimillion-dollar budget deficits in the current and upcoming fiscal years.
That means there isn’t a ton of extra cash laying around to pay for programs, which makes the seemingly unused UI fund look especially tempting. The House fiscal staff estimates – unabated – the fund would total about $479.8 million next fiscal year.
Simmons, who supports the Real Jobs RI program, argued the $6.6 million may not sound like a lot for one fiscal year, but repeated in subsequent years could quickly erode a trajectory of responsible fiscal planning.
“A set of principles [has] been established for the fund to pay for the benefits of unemployed workers. That’s how it should be used. It should not be diverted for another purpose, or reason, however noble,” he said.
Jensen points out there are safeguards in place that disallow future scooping should the fund fall below a certain funding threshold. Likewise, no money would be diverted if the fund failed to earn any interest income during the previous year.
But Simmons said there’s still risk involved, and as an example of what could happen, he pointed to the Great Recession when the fund ran out of money.
At the time, the state was forced to borrow emergency funds from the federal government to respond to unemployment that soared to the highest levels in the country.
The loan was ultimately repaid by Rhode Island employers and the state spent years replenishing the fund.
For Cimini, he’s comfortable with diverting the funds because he sees it as a much-needed investment into the labor pool.
“If you’re able to develop a labor pool that is competitive with other areas, you bring more opportunity to expand business,” Cimini said.
