Category Archives: Economy

Another low ranking for RI

Not to sound like a broken record, but is this any surprise?  From Ernst and Young:  Rhode Island has the 49th worst “tax burden on new investment” in the country.

If you are a little sad because we came in second to the last, don’t worry, if Chafee’s proposal to increase taxes on these and other items goes through, we can achieve 50th! (or 51 if you count DC)


Somebody has to sell it

After yesterday’s showing at the State House where business leaders from all corners protested against the Governor’s proposed budget, it looks like EDC director Keith Stokes has the difficult job of selling it on the streets.  Here is the schedule for his chamber of commerce tour.  If you ever wondered if the EDC is looking out for the interest of the state or simply the salesforce for the governor’s “Winner Picker” agenda, you need look no farther for proof.

How Will Governor Chafee’s FY2012 Budget Impact RI Businesses? 

Businesses are asking how Governor Chafee’s Fiscal Year 2012 proposed budget will impact them.  The Rhode Island Economic Development Corporation invites you to learn more about the Governor’s budget and what it means for Rhode Island businesses.

RIEDC Executive Director Keith Stokes and a representative from the Rhode Island Department of Revenue will give an overview of the budget and provide detailed information and answer your questions about Governor Chafee’s Businesses Tax Competitiveness Proposal which includes:

a) reduction of the corporate income tax rate;

b) lowering and restructuring the minimum corporate tax/franchise fee; and

c) reduction and modernization of the state sales tax.
Some of the key questions that will be addressed include:

a) How will changes to the minimum corporate/franchise tax help small businesses?

b) How will the Governor’s tax proposal help retain and attract businesses in RI?

c) What are the impacts of the proposed change to the sales tax?

Speaking Engagements (scheduled to date)

April 21, 2011
Hosted by the Newport Chamber

Newport Harbor Hotel and Marina, 49 America’s Cup Ave., Newport
For more information or to register click here.

April 22, 2011
8:30 a.m.
Hosted by the  Central RI Chamber

NE Tech, 2480 Post Road, Warwick
For more information or to register, please contact the Central RI Chamber at 401.732.1100

April 27, 2011
8 a.m.
Hosted by the Northern RI Chamber

Kirkbrae Country Club, 197 Old River Road, Lincoln,
For more information or to register click here.

April 29, 2011
Hosted by the South Kingstown Chamber

South Kingstown Chamber, 230 Old Tower Hill Road, Wakefield
For more information or to register click here.

May 4, 2011
8 a.m.
Hosted by the North Kingstown Chamber

Pelly’s 19th Hole, 615 Callahan Road, North Kingstown
For more information or to register click here.

May 6, 2011
5:00 p.m.
Hosted by the East Greenwich Chamber

Location: East Greenwich Yacht Club
For more information or to register please contact the EG Chamber at 401.885.0020.

May 12, 2011
8:30 a.m.
Hosted by the Charlestown and Greater Westerly/Pawcatuck
Chambers of Commerce
Location: Shelter Harbor Inn
For more information or to register please contact the Greater Westerly Pawcatuck Chamber at 401.596.7761

May 18, 2011
8 a.m.
Hosted by the Narragansett Chamber

Location: To Be Determined
For more information or to register please contact the Narragansett Chamber directly at 401.783.7121

More dates and locations to be announced.

Event information is subject to change. Please register with the appropriate Chamber of Commerce to get updates regarding these talks.

Too risky for me but not for thee?

I’ve found our new General Treasurer, Gina Riamondo, to be very open and honest about our pension problems, as shown in last weekend’s article in the ProJo. However, her honesty also provides a glimpse at some underlying biases.

She considers 401(k)-style plans — widely offered in private industry — too risky. She favors a defined-benefit plan but one that is “sensible.” It’s not reasonable, she says, to expect to retire at age 62 with 80 percent of your pay, compounded by annual cost-of-living increases that will double the pension of a retiree who lives into his or her 80s. (emphasis added)

Riamondo thinks that the retirement vehicle that just about every0ne in the private sector uses is “too risky” for public employees.  Does Riamondo think public employees are not smart enough to handle their finances like those of us in the private market?  Or does Riamondo have more concern about the public sector workers (and the powerful union political machine they fund) than she does about the taxpayers who pay the bill.  Either way, this attitude won’t get us to where we need to be.

‘There are lies, damn lies – and statistics.’

‘There are lies, damn lies – and statistics.’

The difference between lies, damn lies, and statistics, is that the first two are attempts to convince, while the last is an attempt to deceive.  You got a great example of this in today’s paper.

Saturday’s OpEd, Taxophobic’ dubious claim about R.I., psychologist and “liberal” activist with the George Wiley Center, John J. Colby, defended the status quo, and indeed proposed more taxes for those creating jobs, by claiming that Rhode Island is NOT losing people and businesses because of our onerous tax structure.  He writes:

Data from the U.S. Internal Revenue Service show that over the last decade more taxpayers living in Massachusetts moved to Rhode Island than Rhode Islanders moved to Massachusetts.

The population of MA is 6.5 million.

The population of Rhode Island is 1 million (and has the second lowest growth rate in the nation – on this link you will also find rebuttal to other points Colby made in the article).

Doesn’t it make sense that “more taxpayers” would be moving from MA than from RI simply because they have 6.5 times more people than we do?

I’m not sure if Mr. Colby doesn’t understand how statistics should be viewed, or if the thinks the rest of us won’t get the slight of hand he is attempting, but it certainly shows the mentality of advocacy on the left.

From our friends in the US House


*  Staffs continued to work through the night to bridge existing gaps.  No agreement has been reached and talks will continue this morning.

*  The major reason no agreement has been reached: spending.  The need for substantial spending reductions is at the core of the disagreement.  For the most part policy riders are close to resolution.  The Speaker has been adamant that a bill that fails to include legitimate and substantial reductions in spending will negatively impact job growth by sending the signal that Washington is still not serious about dealing with its spending addiction.  Both the size and the composition of the spending cuts are still unresolved.

*  The troop funding bill passed Thursday by the House is noncontroversial and the president’s veto threat is petty, partisan and evidently intended to shut down the government.
There’s nothing in the House-passed troop funding bill that won’t largely be encompassed in a final package.

If RI citizens were Red Sox fans!

Why don’t we demand a winner?

Rhode Island is a last place team. The Red Sox (for the time being) are a last place team. Most of our RI citizens are resigned to doom. Red Sox nation is outraged. If only RI citizens were like Red Sox fans.

In the race for people, wealth and business, RI simply is not competitive with other states. Yet we find little leadership from our elected officials and far too few jeers from the public. Most reform advocates debate less important issues. Nobody seems to be focused on winning!

With the budget debate in RI and the Red Sox season now under way, we can clearly see why RI never improves its standing. The contrast is stunning.

The current tax reform policy will actually make Rhode Island LESS competitive. In RI, we debate balancing our budget and how to raise enough revenues to do so. We debate the merits of trading this tax rate for that tax rate. We debate whether we should keep funding this promise or amend those rules and regulations. We keep debating everything as a one-off item, yet we do not have a master plan or a strategy to win. And we always seem to end up in the same place … last place.

We all know that RI ranks at or near the bottom in far too many areas when it comes to education and economic outlook. Our perpetual poor rankings indicate the utter failure of the status quo team. But, we cling to what we have, we put the same players back on the field with the same rules, and we seem pleased with ourselves if we can just figure out how not to worsen the situation.

But we are indeed worsening the situation. OSPRI’s revealing “Leaving Rhode Island” study proves that our current collective, oppressive tax structure is driving people and wealth out of our state. Recent headlines about our education are equally disturbing. To build a sustainable economy, we need educated, productive citizens as well as capital. To successfully compete with other states, we need more of both. Maintaining the status quo means we will continue to hemorrhage even more of these valuable resources.

Even the Governor half-agreed with our study’s findings on a recent television show, stating that raising taxes on the wealthy would cause them to move. True. But our study also showed that non-rich Rhode Islanders will also go to other states if they are over taxed. The same is true, I’m sure, with businesses and consumer purchasing.

Raising taxes – any taxes – in order to balance our state budget will only server to make us LESS competitive!  We will continue to lose citizens and money;  and we will squander yet another opportunity to improve our chance of winning. Balancing the budget is the wrong game.


Are Red Sox fans settling for a last place team? Would they be mollified if the team could only balance its books? Would they really care how much players were paid? Would they be satisfied if the manager merely shuffled the same old lineup? Would they accept increased ticket prices for a perpetual last place team? Nothing else would matter much if the team were a winner. But this is exactly what our public officials want us to accept about the state of our state.

In RI, little else should matter unless we grow the economy and reform education for the prosperity of our citizens and the future of our children. The primary standard should be whether or not we are improving our competiveness with other states … not balancing the budget.

As long as we continue to play by rules that decrease our competitiveness, and because we lack a clear vision from our leadership, RI will continue to be a cellar-dweller, even if our economy recovers to some small degree.

In the sports world, where competition and free market principles mainly prevail, a last place team will embark on a “rebuilding” strategy, where it’s “out with the old” and “in with the new”. This may mean a few years of potential struggles here and there while the “new” takes hold, but when it does, if the plan is designed properly, the situation will improve.

Trouble is, in our ocean state world, we don’t seem to have many strategic thinkers with the courage to admit that long term reform can only happen with some near term pain. And you won’t hear much from our state’s ‘fans’ (we the citizens). Nor do we find cutting commentary from the media demanding a better team or an improved standing. Imagine the Boston Globe endorsing a perennial last place Red Sox team that refused make wholesale changes.

Red Sox nation demanded a winner and the Red Sox successfully broke its “curse” by winning two world championships! It took the vision of a young and talented GM. The state of RI must do the same … but we are left to wonder where we will find that kind leadership and that kind of public outrage.

How do we bring out the Red Sox fan inside each of us?

Mike Stenhouse is Executive Director of the Ocean State Policy Research Institute

Licht says Felkner got it wrong, but Walsh confuses issue

In OSPRI’s recent OpEd in the Providence Business News, “Rhode Island spending well above documented need,” we use a comment from Richard Licht to make the point summed up in the title. Here’s what we said:

Rhode Island Department of Administration Director Richard Licht nailed it at the New England Public Policy Center at the Federal Reserve Bank of Boston presentation recently, when he pointed out that the cost of government in Rhode Island is so far above the calculated “need” that if we just lowered it to that level, our deficit would be gone. (March 3, 2011, The Rhode Island Foundation) At that point, I considered the day a success.

Mr. Licht’s statement came in reaction to the presentation, “How does New Hampshire do it,” which diagrams the Granite State’s ability to operate at a cost 20 percent below the New England average. New Hampshire also spends well below the “Expenditure Need,” a metric calculated by a state’s poverty rate, prevailing wages and other demographics, weighed against the New England average. No surprise, Rhode Island spends well above that calculated “need.”

Licht quickly, with a back of the napkin calculation, said that the amount we spend above that need threshold is about the same amount of our current deficit – approximately $295 million. That’s right! Rhode Island spends more than we “need” to. But how do we spend less?

Much to our surprise, Licht took exception to this piece on the Dan Yorke show yesterday (podcast available here).  Compare the bold sections above where I paraphrase the comment made by Mr. Licht at the event to the bold section below where Mr. Licht describes on the Yorke show what he meant to say.

“First of all, I did not say what Mr. Felkner said, or, first of all I didn’t use the words he said- secondly, I did make a comment it’s totally out of context and has no, didn’t understand the tone of which I said. . . I did, without an envelope, because I didn’t need an envelope I could do it in my head, it showed a little, that we spend close to 8 billion, and it was a bar graph so it didn’t have exact, but the amount of space it looked like it was a $300 million difference, so I said, by the way, this difference of 300 million, I deal with every day, that’s our budget shortfall and if just had that I could solve our budget problems, I said it lightly, and I said it jokingly everybody laughed in the room, and I went on to say, really what my point was…  How do you define need?  I was giving an explanation that I’m hard pressed to repeat because I didn’t understand it. I went up to the women (who gave the presentation) afterwards, Dan, and said,  your numbers on need are based on 2007 fiscal yr, which was from July 06 to June 07, I said, that was at the height of the economic boom, have you done an analysis for 2010? “

YORKE: “Gotcha, so you’re suggesting that’s he’s completely misinterpreted your reaction to the presentation.”

I never said, nor did I imply, that Richard was deadly serious about using this analysis as a template for cutting the budget.  I  apologize if he took offense (but I’m not sure why).  Yes the observation he made was obvious and off the cuff — if not the back of an envelope.  But taken under the rule that one’s first intuition is best, it is clear that the presentation had an impact. Indeed he goes on to say he followed up afterwards looking for updated figures, implying that “need” may have risen as the economy cooled.

This doesn’t impress me as the response of someone who thought Rhode Island’s overspending relative to a low tax neighbor unimportant, or the comparative approach nothing but a joke. If you think people aren’t telegraphing when they joke, think again. Bob Walsh of the NEA followed up Richard’s comments by pointing out that Rhode Island fairs better by comparison to Southern New England, so maybe we should be spending $100 million more.  Yeah, people laughed at Bob’s comment too, but do you think he was kidding?

I’m not suggesting that Licht came into the room as a tax and spender and left as a fiscal conservative. But even a joking acknowledgment of the obvious relation of our deficit to overspending is a step in the right direction. I know that when he is not joking Licht is a consummate administrator and I hope he will take the message of state competition seriously as he helps guide the Chafee administration through budget negotiations.

It does appear that Mr. Licht, or perhaps the Chafee administration in general, wants to distance itself from the idea of cutting the RI budget by reducing the number of people we provide government services to – which was the point of my article. But, I didn’t imply the administration supported the changes to Medicaid eligibility I outlined. I did take advantage of the subject of spending beyond need being raised to open the tough discussion of trimming our priorities.

Even if the “need” is higher in 2010, I believe Rhode Islanders think it is no joke that we are overspending, indeed if our services, benefits and eligibility have been relatively generous, they should be trimmed in order to insure that our safety net remains available to those actually facing real poverty. To be faced with a proposal for $160 million dollars in structural tax increases with no structural cuts in expenses has not distinguished the Chafee effort coming out of the box. The general economic rule is that you can’t tax yourself out of a structural deficit. You must cut $3 for every $1 raised. I’m a no new taxes guy and I’m bidding against myself by pointing this out, but if frank discussion is necessary at this juncture, so be it.

I trust the administration is actually committed to the same. True, the figures at that presentation were for 2007, but are they willing to consider cuts based on 2010 figures?

PS. If they are interested, may we suggest reviewing our report on Medicaid spending – Doing Long Term Care RIght.