Gary Sasse: RI’s Leaders Need To Connect The Dots

Wednesday, September 11, 2013
Gary Sasse, GoLocalProv MINDSETTER

GoLocalProv welcomes economist Gary Sasse as a GoLocal MINDSETTER. Well-known for his keen insights into business and policy, Sasse will offer insights into the local and regional landscape on every other Wednesday, right here on GoLocal.

Rebranding Rhode Island

If Rhode Island were a business, would your financial advisor recommend that you invest in Rhode Island Inc? Based on an avalanche of recent metrics about the State’s demographic, educational and financial outlooks my guess would be probably not. However, initiatives are underway which are aimed at making an investment in Rhode Island a wise business decision.

The Rhode Island Foundation is spearheading a campaign to enhance our self-esteem—“It’s All In Our Backyard”. Tug McGraw, the former New York Mets pitcher’s rallying cry “Ya Gotta Believe” helped propel the Mets into the 1973 World Series.

The General Assembly enacted a legislative package targeted at improving the Ocean State’s economic position in the future. Several of their proposals are aimed at correcting shortcomings in the way economic development decisions were made in the past. The success of these organizational changes will depend on the leadership of the governor who takes office in January 2015. Governor Chafee has appointed an experienced professional to head the State’s economic development function. Last week the University of Rhode Island launched a center designed to assist business connect with URI resources. These are just a few examples of the positive initiatives being undertaken to grow the Rhode Island economy and create good jobs.

Rhode Island By the Numbers

Recently several reports have been issued about the Ocean State’s demographic, educational and financial conditions that could have adverse consequences if not addressed with a sense of urgency. In August the Rhode Island Statewide Planning Program released its forecast of state demographic trends. The agency is predicting that Rhode Island’s population will increase by only two percent between 2010 and 2040. Nationally population is estimated to grow by 23%. Of greater significances our working age population will decline while the percent of total population over 65 will increase. Economic growth is problematic without an adequate supply of skilled workers.

Two other studies also released in August show that we are not maximizing our human capital. Harvard Professor Michael Porter tells us that “Competitiveness is the productivity with which a state utilizes its human capital and natural resources.” Roger Williams University’s Latino Policy Institute found that the Latino-- White achievement gaps in Rhode Island are some of the worse in the nation and Latino student achievement in Rhode Island lags the United States average for Latino students. A Rhode Island Office of Higher Education and the Department of Education study shows that we are not being successful in keeping Rhode Island high school graduates in college. These findings are particularly alarming because economic growth is problematic without an adequate supply of skilled workers.

The Tax Foundation estimated that from 2000 to 2010 Rhode Island lost $1 billion in personal income as a result of taxpayers voting with their feet. Both the lack of good jobs and relatively high estate and property taxes probably contributed to this loss of income and tax revenue.

The State Budget Office recently published its updated five- year financial projection. This forecast shows that growth in state spending will exceed the growth in the Rhode Island economy. By fiscal year 2018 we will have to deal with a structural deficit in excess of $400 million, or an amount equal to over 10% of anticipated spending.

Identifying the Trends

Rhode Island’s decision-makers must deal with these difficult challenges if they are to successfully position the Ocean State to compete for jobs and investments. Other states have dealt with similar issues, and the National Governors Association (NGA) identified six trends that characterize the efforts of state leaders to connect the dots and move their economies forward. These trends include states doing the following:

1) Focusing on the relationship between the state and its region in fostering economic development;

2) Emphasizing job creation from within the state by providing firms with customized services;

3) Strengthening support for advanced manufacturing;

4) Creating partnerships to meet business talent and manpower needs;

5) Raising expectation for colleges and universities to connect research and commercialization;

6) Enhancing business export opportunities.

There is probably not an item on the NGA list that has not been discussed or implemented in Rhode Island. However, when used, their effectiveness can be questioned. In July Rhode Island’s unemployment rate was the third highest in the United States and the Director of the Department of Labor and Training, observed that the State’s jobless rate seems to be “stuck in a trench”.

What Needs to Be Done?

In addition to the economic development strategies identified by the NGA, Rhode Island should immediately address the following matters:

  • Improve the business tax climate which the Tax Foundation ranks as 46th worst by setting a target that within three years we improve our ranking to 36th; 
  • Identify ways to lower unemployment insurance costs by reviewing utilization patterns and their impact on the cost of doing business by industry sectors; 
  • Create an infrastructure trust to revitalize an aging infrastructure and support private economic development initiatives.

 

A successful economic development program must be focused on the building blocks of innovation, workforce, investment climate and university –business connections. This will require Rhode Island leaders that have the ability to connect the dots. As Erskine Bowles said, “Leadership is the key to 99% of all successful efforts.” Leadership must be the issue that frames the 2014 gubernatorial election.

Gary Sasse is Founding Director of the Hassenfeld Institute for Public Leadership at Bryant University. He is the former Executive Director Rhode Island Public Expenditure and Director of the Departments of Administration and Revenue.