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Critics Blast RI Commerce Out-of-State Spending

Tuesday, June 20, 2017


Republican Cranston Mayor Allan Fung -- who ran against Democrat Governor Gina Raimondo last cycle - said Commerce should be more "RI centric."

Critics are questioning the exodus of state taxpayer dollars from the agency tasked with promoting economic development in Rhode Island, after a GoLocal investigation found that the Rhode Island Commerce Corporation spent two-thirds of its contract dollars on out-of-state firms during the past two years.

And while Commerce is defending its track record, political experts and party leaders are calling into question the state's strategy which saw Rhode Island-based companies receive just $4,482,234.48 of the $12,475,469.90 Commerce let in the past two years.

"During a time when the Rhode Island is experiencing revenue shortfalls, the Commerce Corporation's spending habits are sure to receive greater scrutiny and criticism from the public. The fact that the organization has spent so much money out of state (and contrary to its stated mission), will only add fuel to the fire," said Rhode Island College Professor of Communications Val Endress.  

"Look for this issue to emerge in the 2018 gubernatorial race.  Economic development plans orchestrated and/or endorsed by public officials need accountability. The best measure is one that demonstrates that this sort of spending has produced more jobs as well as a healthy environment for small businesses and start ups," said Endress. "Even if one argues that the benefits of [Commerce's] strategy will emerge slowly but will eventually come to fruition, the public deserves a thorough vetting and justification of the organization's spending habits now. Without demonstrative results or transparency, the Commerce's Corporation's spending will only become more of a political liability for state officials."

Commerce Defends Spending, Role of Assembly

Commerce defended its spending on Monday, including pointing to out of state interests having operations in Rhode Island. 

“Our top priority is growing Rhode Island’s economy and creating a business climate that gives working Rhode Islanders the economic stability they deserve," said Matt Sheaff, spokesperson for Commerce. "Due in part to the investments we’ve made over the last two and half years, Rhode Island’s unemployment rate is lower than Massachusetts’ and we’ve created nearly 13,000 new jobs. We’ve prioritized helping Rhode Island businesses through efforts like our Small Business Assistance Program, which is the first such program in at least 30 years. Since the start of CY15, $7 out of every $10 Commerce has awarded has been to vendors with an office or operation in Rhode Island."

Gary Sasse, former Rhode Island Director of Administration and founder of the Hassenfeld Institute for Public Leadership at Bryant, said that Commerce spending should be subject to oversight, however. 

"The General Assembly needs to conduct comprehensive oversight hearings focusing on the transparency and accountability of the Commerce Corporation's decision making process. Taxpayer need a better understanding of how the Corporation picks winners and loser in awarding millions of dollars in tax incentives, the cost of operating the Corporation and factors  considered in awarding contracts," said Sasse. "It is unrealistic to expect the agency to do a self-evaluation. The last thing Rhode Island needs is an EDC on steroids."

Speaker of the House Nick Mattiello's office declined comment on Monday.

Parties, Leaders on Record

"It's the same recurring theme with this Governor. She puts her out of state friends and donors first," said Republican Cranston Mayor Allan Fung, who ran against Raimondo for Governor last cycle. "How do people in London and Toronto know more about Rhode Island than firms here around Narragansett Bay? The Governor of Rhode Island should be investing our tax dollars in Rhode Island businesses every chance she gets."

Rhode Island House Minority Leader, Republican Patricia Morgan, criticized the practice as well. 

"Rhode Island’s economic climate is crushing our small businesses and making it hard for them exist, let alone prosper and grow. So what is CommerceRI’s answer? Give help to out-of-state companies!  It’s a slap in the face. Their strategy is foolhardy and ineffective," said Morgan. "We should be focusing on our local small companies that have roots and loyalty to our state, who employ Rhode Islanders and if given the help, will grow and employ even more. That’s how we can create more jobs here in Rhode Island, not just in New York."

And it isn't just the Republicans criticizing the state's economic development approach.

"I strongly support a decrease in Rhode Island's corporate welfare, but the overarching issue lies in our flawed economic development strategy," said Capri Catanzaro, the Political Director for the Rhode Island Public Democrats of America. "The Commerce Corporation makes multi-million dollar backroom deals yet offers an appalling level of transparency to the taxpayer.  Eliminating pet-projects and special deals is long overdue.  Every dollar gifted to large corporations is a dollar we denied to local small businesses."

Mike Stenhouse

"The unabated, generational record of failure is now on display, for all to see," said Pat Ford, the Chair of the Libertarian Party of Rhode Island. "The abysmal failure formerly known as the EDC hast wasted untold millions ... provided capital to politically connected out of state corporations at the direct expense both of and to Rhode Islanders."

Budget Bloat?

On Monday, GoLocal columnist Russ Moore dubbed the current budget "bloated"  -- and the Rhode Island Center for Freedom and Prosperity used similar language to describe Commerce -- who is already on the chopping block this budget. 

"On display is the blatant disrespect this administration has for Rhode Island taxpayers and businesses. When our hard-earned money is systematically handed-over to out-of-state cronies, it is an insult to the well-qualified vendors in our own state," said Mike Stenhouse, President and CEO of the Center. "Once again we see that our state's bloated budget - which leads to high taxes, dependence on government, wasteful spending, and fraud - is indeed the enemy of the people of Rhode Island. If the Ocean State can cut its spending to be more in line with that of New Hampshire and Massachusetts, we might start to be able to see the dynamic organic economic growth that our state so desperately needs."


Related Slideshow: FY18 House Finance Budget

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The state's community college is poised to be the sole beneficiary of the Governor's Promise scholarship program.

It would make Rhode Island the fourth state to have tuition-free community college, allowing every resident the opportunity to earn an associate's degree tuition free. There is no means testing for the program and few standards.

The cost would be roughly $3 million in the FY18 (for the first cohort of students) and then $6 million the following year there are two classes. 

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State Government 

As part of negotiations -- and the fiscal realities facing Rhode Island with a nearly $140 million shortfally, the Speaker announced Thursday that $25 million will be cut in general spending.

"It's something we discussed with the Governor and she thinks she can make [it] work," said Matteillo. 

Also on the chopping block -- funding for the legislative office to the tune of $2 million. 

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Elderly and Disabled Bus Riders 

After levying fares on some of the most needy RIPTA bus riders (the elderly and disabled) for the first time this past year, which resulted in strong public outcry, the House Finance budget contains just over $3 million  -- for each of the next two years -- to refund the program this coming year. 

WATCH: Opponents of RIPTA Fare Hikes to Rally at RI State House Wednesday Afternoon

Mattiello noted that after the two years is up, it is up to the Governor to find the funding. 

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Governor Raimondo

On Thursday, Raimondo learned she is poised to get a piece (jCCRI) of her free college tuition proposal, which had been a major focal point of her budget proposal - and political strategy. 

On the flip side, she is tasked with finding $25 million in government spending to cut, in order to balance the budget. 

Unlike the May estimating conference, where Rhode Island revenues were found to be off nearly $100 million plus, the Governor can't say she didn't see this  coming.

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Medical Marijuana Expansion

In June, Raimondo called for an increase in medical marijuana dispensaries and an increase in licensing fees to generate $1.5 million in revenue for the state. 

She called for "no less than six licensed compassion centers."

On Thursday, Mattiello said it was not in the budget, due the proposal's late timing.

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Davies High School

The House finance budget contains additional help for manufacturing, including $3.6 million to upgrade facilities at Davies Career and Tech.

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Commerce Corporation

While Mattiello made scant mention of cuts in the briefing Thursday - save for the $25 million out of government spending -- the question was raised as to where the rest of the $140 million shortfall will come from. 

"Millions in cuts came from the Commerce Corp budget. The budget kept the Rebuild RI funding, but money for several other Commerce programs were reduced," said Larry Berman, spokesman for Mattiello. 

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Mininum Wage Hike

Workers will be happy, employers might not. 

The FY18 budget proposal calls for a $.50 minimum wage increase as of January 1, 2018, and then an additional $.40 the following year.

Business owners have continuously fought against such hikes. 


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