Dan Lawlor: Is it Time to be More Like Delaware?
Tuesday, June 12, 2012
Our rival in the small state business, Delaware, recently convinced a company to relocate into its border. Surely, Delaware must have enticed a start up, perhaps in the video game industry? Well, no.
Delaware's leaders attracted a successful company that had been around for decades: Sallie Mae Loan Company. I'm not cheerleading for high interest rates, but I am saying that if Rhode Island's elected officials want businesses to relocate here, look for ones with a proven track record.
I just want to mention a few highlights in RI financial mess-ups of the last several years for perspective on the 38 Studios decisions.
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In 2007, $3.8 million dollars was spent to knock down the Welcome Arnold Homeless Shelter in Cranston for a proposed police barracks. After knocking down Welcome Arnold, the state actually built the barracks at a site in North Scituate.
In 2008, a $52 million dollar Juvenile Prison opened that was too small for the existing prison population. Overcrowding had long been an issue at the old facility, particularly for adolescent boys. The fact that the state spent millions to construct a new facility, and yet continued the problem, is a bit staggering. An ACLU lawsuit and new laws passed by the Assembly have sought to keep the facility operating only to its capacity.
In 2009, a damning audit report found up to $75 million lost due to lack of accountability and monitoring at the Central Landfill Johnston. A particularly glaring example in the auditor's report reads, "Several major construction projects, many within the last decade, were undertaken without apparent consideration for future expansion of the Central Landfill." The Bureau of Audits report noted that several buildings, costing “ in excess of $41.2 million to build," are in locations likely needed for future landfill waste.
Letting alone the 38 Studios debacle, Welcome Arnold, the Youth Detention Center, and the Landfill are just some of the more recent examples of waste and poor planning.
Some say our small size is why we're a political mess and in economic pain. Yet, small size doesn't need to be a disadvantage. Consider these three other small states, all with unemployment levels less than 7%: Vermont, Delaware, and New Hampshire.
Vermont is rural by design. With a long bilingual heritage, Vermont is a rural state with an emphasis on local, town economies. Prominent businesses include agriculture, tourism, and green jobs. Vermont has a history of activist citizens, and is currently working on a single-payer health system for all state residents, in part to reduce costs for small businesses. Overall, citizens are trying to use heritage, imagination and the environment to promote a strong, inclusive economy. Despite severe flood damage in 2011, Vermonters have been able to maintain the best employment rate in New England, with only 4.8% jobless.
Delaware, the first state, is our second in small size, but bests us in economics. Delaware's economic fortunes are tied both to the Dupont Chemical Corporation, and, thanks to a series of laws enacted in the late 1970s and 1980s, to the credit card industry. Delaware's loose regulations of Credit Cards have made it a hub for the high interest charging industry. I guess Rhode Island's flaw was to be involved in illegal racketeering, as opposed to the legal kind. Delaware politicians tend to be socially liberal, and fiscally conservative (Christine O'Donnell excepted). Alongside the rise in high finance jobs, poverty remains a challenge in major cities like Wilmington. Delaware has 6.9% of its people jobless, but is currently one of several states - the others being Maine, New Jersey, New York and Oregon – experimenting to allow individuals to use unemployment funds to start their own businesses.
New Hampshire, where people live free or die, has a culture, as a friend describes it, where "opposition to taxes is a religion." The downside to that religion is a very uneven public education system. The plus-side is that the lack of income tax and sales tax helps attract business, with state revenue coming from, among other fees, a 9% meals and hotel tax and an 8.5% business tax for businesses that have a larger gross than $50,000. The overall low state taxes (not property taxes) have helped New Hampshire to attract businesses and entrepreneurs from Massachusetts, though pockets of poverty in former mill towns remain deep. New Hampshire's unemployment rate is 5.8%.
Even with our recent history of mismanagement, our small size clearly does not destine us to economic dysfunction.We have had some major flops in the last few years - but we can learn from them.
With fair accounting, and seeking out models to follow, we can grow. We can stop wasting $75 million dollars every few years, and start helping this small state become a dynamo.
