Moving the Needle: Pro Business Legislation ... Could It Work?

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Wednesday, March 13, 2013

Paul J. Spetrini, GoLocalProv News Editor

Yesterday, as Senate leaders announced a comprehensive legislative package aimed at “Moving the Needle” and getting Rhode Island’s economy out of the cellar nationally, the mood in the room was a jovial one full of positively as speaker after speaker spoke of the ways in which each piece of the puzzle would help improve the state’s business climate.

But lawmakers have spoken optimistically about the future of Rhode Island’s economy for years.

What makes this particular package any different?

And it is?

According to Senate President M. Teresa Paiva Weed, this particular set of bills, which cover a wide range of topics from general commerce and the state’s workforce to education, codes and regulations, health, energy and tax reform, have all been tailor made to attack the factors that lead Rhode Island to consistently be labeled an unfriendly place to do business.

“If we can address these issues, some of which aren’t too [exciting] at all, this in the long-term will improve our rankings, move that needle and move the economy forward,” she said. “So much of what goes on in the economy, whether it’s on the national level or on the state level is about businesses and individuals having confidence in the economy and in order to do that, we need to improve the perception of Rhode Island as a place that’s not friendly to do business.”

As usual, the devil is in the detail and, according to at least one expert on the state’s economy, how much progress the Moving the Needle package will actually make will be determined by what, specifically, gets put into law and how it’s perceived from there.

A Long-term Plan

One of the signature pieces of the ‘Moving the Needle’ package is the idea that the state will begin long-term planning to chart out its economic vision to make it easier to guide policy and resources decisions appropriately.

“Long-term vision also results in long-term investments that may not bear fruit in the short-term, but position the state for continued growth and success in the future,” the Senate team said in their report. “Without a long-term vision, such investments are nearly impossible to visualize, promote, and implement.”

According to URI economist Dr. Len Lardaro, who issues a monthly report on the state of the state’s economy, the idea of a long-term plan is only as good as where it comes from and who puts it together.

“It’s important to keep in mind that even if a state has a long-term vision, that doesn't necessarily mean it is well suited to their particular needs,” he said. “What Rhode Island has to be very careful about is the composition of the “broad coalition of stakeholders.” Whoever those persons are, they need to focus on the actual situation Rhode Island finds itself in, and balance this against attainable long-term goals with an investment orientation.”

Lardaro says comparing Rhode Island to other states, as the Senate’s plan does to Massachusetts in this regard, isn’t helpful given that the Bay State is “light years ahead of where Rhode Island is at present.”

“The greatest challenge in this effort will be for Rhode Island's elected officials to end their culture of denial,” he said. “If this effort is to be successful, it will be necessary to acknowledge both our state’s strengths and weaknesses, and to implement long-term policies that either turn our weaknesses into positives or attempt to eliminate them overall. Therefore, the most demanding element of this particular point, will be a major change in the culture of Rhode Island's leadership.”

The EDC Conundrum

One of the bills that is most likely to spark debate is a measure by Senator James Sheehan that would “reform and rebrand” the Rhode Island Economic Development Corporation.

While Senate leaders say it would “increase transparency and promote a more customer-centric agency,” there remains doubt as to whether or not Rhode Island even needs an EDC in the first place.

Lardaro suggests the state look into implementing a council of economic advisers who would be responsible for the long-term vision mentioned above, particularly given the state’s history.

“It is very popular for people to say they want increased transparency, but how do you do that in a state that virtually never engages in due diligence?” he said. “Whether we change the EDC or have a Council of Economic Advisers, it is imperative that Rhode Island move to a culture where vision and due diligence are its centerpieces.”

Heading Back to Work

A promising bill that has been touted as one that won’t cost the state a dime is a measure by Senator Erin Lynch to introduce the “Back to Work” program into Rhode Island.

Modeled after successful programs in Georgia and New Hampshire, the idea is that residents currently receiving unemployment benefits could sign up to be matched with businesses who are seeking employees and, for six weeks, participate in a “trail employment” at no cost to the employer.

Lardaro says this measure has a great deal of promise in dealing with one of the state’s core problems but questions if it will have as big an impact as intended.

“The most glaring deficiency in Rhode Island's tax and cost structure is the lack of skills of its workforce,” he said. “Clearly, Rhode Island must prove to itself and its employers that it is capable of providing a highly skilled labor force in tune with the needs of today's economy. The suggestion to deal with the unemployed has a great deal of promise, but does it really treat the problem or the symptoms?”

Because K-12 education in the state has “failed to provide adequately skilled individuals” in the workforce, Laradaro says, Rhode Island needs to find a way to attack its skills gap issue at its source.

“Instead, this state with the highest unemployment rate continues to debate whether graduating seniors should possess partial proficiency at the 10th grade level as only part of their graduation requirements, and it appears that those proficiency requirements may well vanish,” he says, taking a swipe at the debate over high-stakes NECAP testing. “Add to this the continual defunding of public higher education over the past decade. An effective educational system from top to bottom should be a critical input into the planning and implementation of economic policy and the analysis. In Rhode Island, this is clearly not the case.”

Arts and History

Lardaro does believe that the Moving the Needle legislation is right in at least one of its targets … taxes.

If approved, the legislation offered would create both a statewide arts sales tax exemption and restore historic tax credits, two measures the URI economist says could really make a difference.

He cautions, however, that the state has to do its due diligence with both to make sure the benefits exceed the cost.

“And, all of these items should be put together, looking at their overall effect on our economy, not just in a piecemeal linear fashion as appears to be the case now,” he says.

Enough Movement?

Overall, though, Lardaro believes the legislative package offered is a good step forward and can work, if the individual details are ironed out and examined.

“It's nice that Rhode Island at long last has come to the realization that something needs to be done,” he said. “While the measures being proposed certainly sound reasonable, they are far too vague, not well integrated, and will almost certainly likely lack the guidance of due diligence. So, as is almost always the case for Rhode Island, there's only one way to find out if these will actually work.”

He does caution, however, that the state can’t implement these changes as though it lives in an isolated bubble.

“What Rhode Island also has to be cognizant of, however, is that other states have been reinventing themselves for quite some time now and will continue to do so into the foreseeable future,” he said. “So, even assuming that these potential changes might work, is Rhode Island prepared to sustain longer-term efforts in these areas?

Paiva Weed says she can think of at least one reason why the Ocean State is going to make a major dent in its troubled reputation with this package: cooperation.

“I believe because we have the unique ability in our state to work together, the governor, the executive branch and the legislature and I think we can do it quicker and faster than many other states,” she said.

Time will tell.
 

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