Just weeks after one government advisory group warned Gov. Lincoln Almond of budget shortfalls in the coming years, the head of the University of Rhode Island’s College of Business echoed grave concerns about the budget’s effect on the state’s business climate.
After the release of the Rhode Island Public Expenditure Council’s evaluation of the governor’s FY 2003 budget last month, Edward M. Mazze, who also serves as the Alfred J. Verrecchia –Hasbro Inc. Leadership Chair in Business, said the state’s fiscal crisis now and in years ahead could have dramatic impacts on its ability to attract and retain business.
"We need to come up with a list of priorities," he said. "We are going to have a serious time in front of us if we don’t set priorities. I don’t want to see the residents of this state unscrewing their Rhode Island license plate and screwing on a North Carolina or Florida license plate."
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Of concern to RIPEC and Mazze is the state’s operating deficit, which is expected to continue for the next few years with an estimated shortfall of $151 million in FY 2004, and $375.9 million in FY 2007.
"It is difficult to conceive that only one short decade after the state’s worst fiscal emergency since the Great Depression we again have committed to spending levels that we cannot afford and again may be witnessing the fiscal health of the Ocean State unravel," members of the RIPEC board of directors wrote in a letter to Almond. "Since 1996 state spending has increased at nearly three times the rate of inflation, and has grown faster than the personal income of Rhode Island’s citizens."
For the governor and his staff, the proposed budget is the result of prudent fiscal planning in tough economic times.
"Rhode Island isn’t alone in having concerns when it comes to growth rate expenses versus growth of revenues," said Tom Kogut, a spokesperson for the governor’s office. "The message in a bottle is that if you sharpen your pencils, and work on basic principles you can do a great many things. We are doing everything possible not to diminish the business climate in the state."
The proposed FY 2003 budget, which would officially begin July 1, 2002, calls for a 5.4 percent increase in personnel expenditures, and a 1.8 percent increase in general revenue expenditures. In addition the proposed budget calls for a freeze on the auto excise tax phase-out which would result in an estimated savings of $30.1 million for the state.
But Peter Marino, director of policy, and other officials at RIPEC don’t support any decision that would eliminate the auto excise phase-out tax, and, instead, say that the state needs to look at its social programs that have received an estimated 42 cents of every new dollar generated in the state since 1996. In addition, Marino said the state needs to look at personnel expenditures, which are expected to increase by 5.4 percent in FY 2003.
"It’s not an easy process," he said. "There are tough decisions that need to be made both politically and economically. Given the magnitude of the situation, you need to put everything on the table and look at methodologies. You can put the brakes on just about everything if you have to, but I don’t think things need to come a complete stop."
Henry Shelton, executive director of the George Wiley Center, said despite the large cost of social programs, the state still lags behind in its ability to close the widening income gap – a statistic, in his opinion, that is startling enough to warrant increased funding.
"People from the top are benefiting and I think that Rhode Island’s lowest income residents are being targeted," he said.
According to Mazze the state needs to evaluate tax breaks currently given to special groups, which may not be money generators, and instead increase taxes where the state will benefit. He said the key is to support the state’s business industry.
"What we need to do is everything possible to not only attract business here, but keep it," he said.
