Republican Don Carcieri and Democrat Myrth York will square off next Tuesday (Nov. 5) in the race for governor. During this past week, Providence Business News discussed business, economic development and several other key issues with the candidates.
PBN: Rhode Island is infamous for having an unfriendly tax structure. What will you do to make the state more attractive to new and existing businesses?
CARCIERI: One of the things I have talked about during this campaign is that the state’s tax structure is too high and is anti-competitive. We have big financial problems right now. The deficit next year could be anywhere between $200 and $250 million – that is a huge short-term problem that needs to be dealt with without raising taxes. That is the number one imminent challenge. My goal over the next four years would be to get control of the budget, get it down, and then start a program to reduce the number of taxes. That is what we need to do to make ourselves more competitive. For example, during the decade of the 1990s we only grew employment by three percent. Employment growth in New Hampshire for the same time period was 20.3 percent – that’s almost seven times Rhode Island’s rate. Our total tax burden in Rhode Island, which includes local and state taxes including the property, sales and real estate taxes are the tenth highest in the country. New Hampshire is ranked 49th.
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YORK: What we need to do is to be more competitive regionally in terms of tax credits. We can’t try to compete with Florida, southern states or other countries. We need to make sure we are as competitive as we can be with Massachusetts and Connecticut. For example, there has been some concern about the corporate income tax in the fact that it should be a single-source apportionment, as opposed to the three sources right now, which Massachusetts has done. We should look at doing that and look at what Massachusetts has learned from doing it. That is just an example.
How do you plan to bail the state out of its impending budget crisis?
CARCIERI: Taxes cannot be the answer. We have been going down that path – we went down the path in 1990 and 1991 when we faced a similar deficit. This past year we raised the gas tax to solve problems. There is no room to continue doing this. We just can’t do it. It’s going to be a tough process. We are going to have to go through the budget in extraordinary detail looking to squeeze everything that we can. I don’t know how much that we are going to squeeze out. I am calling this squeeze “The Big Audit.” It’s not an outside audit; it’s me with a team around me, tearing apart every budget in the state with the goal of reducing spending.
YORK: I have called for performance audits of every department and agency, going through each looking for not just how the money is being spent but whether we are getting performance for the dollars that are being spent. We need to figure out what the objectives are, whether we are meeting those objectives, at what cost are we meeting those objectives and whether they are still viable goals and objectives. I don’t think we can afford to increase taxes, people are being squeezed everyday between taxes and the cost of health care.
Another area for savings I have identified is related to prescription drug purchases. The state purchases more than $180 million a year in medication, and different departments make those purchases. What happens is different departments pay different amounts for the same prescriptions…so we figure that the average range between the high and low cost for medication is about 30 percent. If we could save even 20 percent, we’re talking about $30 to $35 million. That is a concrete example why we need to do performance audits. We need to look for long-term changes.
Small businesses struggle to deal with health care costs in a state where there are only two health care providers. Do you think there is room for competition, and if so how do we go about bringing those companies to Rhode Island?
CARCIERI: Yes, we desperately need more competition. Essentially, the way it is now, Blue Cross has 70 percent of the market. What distresses me is that we had two small group insurers say they are leaving, alleging they are leaving because of the regulatory climate. I don’t know if that’s true, I would have to look into the issue. But it would seem to me if we want to encourage competition, we need to make sure that we aren’t driving people out. On the surface it seems with rates that are high and reimbursements that are some of the lowest in the country – that it should be a formula for an insurer to make a profit. Perhaps other providers are discouraged by Blue Cross’s dominant position. But it seems to me that if the state were interested in encouraging competition, it might not have been a good idea to give all of its health care contracts to one company.
YORK: A plan I announced is to allow small businesses to buy RIte Care through the state. The state would be the pass-through, so the small businesses would get the benefit of the state’s purchasing power. There is a big differential in price between commercial rates and RIte Care rates. One of the things that could happen through this plan is for the state’s purchasing power to be used to help create competition in the marketplace, as opposed to the monopoly that Blue Cross essentially has now. Another answer to the health care problem might be to allow small businesses to band together and purchase their insurance like a large corporation would, which means changing the risk pool, not just given discounts through a trade association or a chamber. It would give them the leverage that large corporations have already.
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