Raimondo: RI economy is still ‘stuck in neutral’

Governor: 'We've got to move heaven and earth to get industry here'

Governor Raimondo delivers a presentation about Rhode Island's economic problems at the State House on Feb. 18, 2015. (photo: WPRI/Ted Nesi)

PROVIDENCE, R.I. (WPRI) – Gov. Gina Raimondo used a gubernatorial PowerPoint presentation Wednesday to paint a dire picture of Rhode Island’s economic position and to preview some of the proposals she will offer to fix an economy she calls “stuck in neutral.”

Speaking in the State Room before her cabinet members and Rhode Island’s other four statewide elected leaders, Raimondo offered a long list of statistics that illustrated the state’s economic weaknesses, particularly compared with Massachusetts and Connecticut, and the dire fiscal outlook for state government.

“I decided to do this because as your governor it’s my responsibility to tell the people of Rhode Island where I think we are, the consequences of not changing course, and what I think the right thing is for the people,” Raimondo said. She said the presentation offered “a window into how I see our economy.”

Among the statistics Raimondo cited: Rhode Island ranks 48th in job growth, 4th-highest in manufacturing job losses and 3rd-highest in public-employee compensation. Its per-capita income of $46,989 is more than $10,000 below Massachusetts’ or Connecticut’s. Two-thirds of the jobs created since the recession are low-wage ones. About 20% of Rhode Islanders’ income comes from government programs.

“The sad reality is Rhode Island is a relatively poor state,” she said.

Rhode Island’s “single biggest problem,” in Raimondo’s view, is its relatively low-skilled work force. “We need to position ourselves for the industries that are growing,” she said, describing them as “advanced industries … that are global, that are traded, and that create more jobs.”

Raimondo’s presentation was long on diagnosis but short on solutions, which her aides said was done by design. She appeared to be pulling a page out of the same playbook she used in 2011 to successfully make the case for an overhaul of the state pension system, which began with a report called “Truth in Numbers” that outlined the problem.

“Today is about the beginning of a discussion,” Raimondo said, and Rhode Island will face “tough choices” going forward.

Raimondo did offer some specifics. She suggested the state should create three programs that subsidize private businesses – state-level tax-increment financing; refundable and transferable real-estate tax credits; and a state-funded loan program for small businesses – that neighboring states already have.

“I’m looking at all of them now,” she said. “I haven’t yet decided precisely what I will propose, but I do know as I’ve looked at Rhode Island compared to more vibrant economies we’re way behind, and if you look at our various metrics of state-sponsored capital programs, state-sponsored entrepreneurial programs, any kind of incentives – we’re behind.”

Stefan Pryor, Raimondo’s new commerce secretary, has similarly suggested he needs the General Assembly to put those sorts of “tools in his toolbox” to attract companies to Rhode Island.

Raimondo said the annual shortfall in Rhode Island’s nearly $9-billion budget is projected to grow from $190 million in 2015-16 to $496 million in 2018-19 as costs rise for the Medicaid health insurance program and casinos in Massachusetts compete with Twin River. The state may want to explore ways to expand managed care and to keep older residents out of nursing homes to reduce Medicaid costs, she said.

Raimondo said she expects to propose “strategic cuts” in her first budget, which she’s expected to unveil March 12, as well as new spending on other programs. But she reiterated her position that Rhode Island government’s fiscal problems cannot be solved only by cutting spending or raising taxes. She said the state’s tax rates are “reasonably competitive” right now.

“I have come to the conclusion that there is no way forward for this state other than to create thousands of middle-class jobs,” she said. “We’ve got to move heaven and earth to get industry here and [create] more middle-class jobs,” she added.

Raimondo noted Rhode Island spends significantly less money on its economic-development and tourism-promotion efforts than neighboring states, and suggested she will seek to increase spending in those areas going forward. “This is where we should be investing if we’re going to create jobs,” she said.

In another clue about where Raimondo may be planning to take Rhode Island’s economic policy, her chief of staff, Stephen Neuman, confirmed that Brookings Institution scholar Bruce Katz is visiting Rhode Island Wednesday for private meetings.

Raimondo brought Katz, a prominent national expert on economic development in urban areas, to the state in 2013 and hinted that the state should find a role for him and his Metropolitan Policy Program. Neuman said Katz has not been hired in any official capacity at this point.

Raimondo has long championed the idea of increasing the amount of advanced manufacturing in Rhode Island. “We got crushed when the manufacturing sector left America, more than almost any other state in the country,” she said, adding: “It’s scary to me that we’re ahead of Michigan.”

Raimondo noted the findings of a recent Federal Reserve Bank of Boston study that suggested Rhode Island manufacturers were poorly positioned to withstand the one-two punch of competition from Chinese imports and then the Great Recession. The author of the study told WPRI.com the problems in manufacturing, combined with a huge drop in housing prices, are the key reasons Rhode Island’s recession was so severe.

At the State House, the Raimondo administration has already settled on a buzzword to brand its efforts: “comeback.”

“I see a state that has tremendous potential, but we’ve been standing still for too long,” Raimondo said. “We’ve just allowed ourselves to decline for too long, and now is our moment to come together, think differently, change our culture and spark our comeback.”

“This government has to move at the speed of business,” she said at another point. “It’s that active, aggressive urgency that we have to take to create new jobs.”

Ted Nesi (tnesi@wpri.com) covers politics and the economy for WPRI.com and writes the Nesi’s Notes blog. Follow him on Twitter: @tednesi

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