State Report: RI’s Poor Business Rankings, Shakeup in the Governor’s Office & the Fiscal Cliff

This week, the State House Report centers on a pair of studies: the 2012 Edition of America’s Health Rankings and Forbes’ Worst States for Business list. Additionally, we examine how the fiscal cliff may impact the average Rhode Islander. Also on the docket are a pharmaceutical company settlement and a new vacancy in the Chafee administration. Keep reading to find out which Chafee cabinet member is vacating the State House.

Rhode Island has earned yet another spot on a “worst of” list. This time around the state received the dubious honor of being named the 49^th worst state for business, according to Forbes. The ranking is one spot lower than last year’s list.

 

The study indicates that one of the major factors behind the state’s poor business performance is its regulatory climate. In fact, the state had the fifth worst regulatory environment based on Forbes' criteria, which looked at labor regulations, health-insurance coverage mandates, occupational licensing, the tort system, and right-to-work laws.

 

“Rhode Island has one of the worst records on labor market freedom and health insurance regulations,” said William Ruger, co-author of Freedom in the 50 States, which Forbes incorporated into the study.

 

The article also delves into the 38 Studios debacle in which the state was left on the hook for a $75 million loan guarantee. “Rhode Island took a public beating this year when former Boston Red Sox pitching legend Curt Schilling laid off the 300 Rhode Island employees of his video game company, 38 Studios, and the company filed for bankruptcy,” said Forbes.

 

So how has this poor business climate affected the average Rhode Islander? According to Forbes, the state has experienced the second worst net migration in the country over the past five years. Not surprisingly, the state’s 10.4% unemployment rate is sending may Rhode Islanders leaving in search of jobs.

 

Here are the worst 10 states for business on Forbes’ list:

 

41. California

42. Wisconsin

43. New Mexico

44. Vermont

45. West Virginia

46. Mississippi

47. Michigan

48. Hawaii

49. Rhode Island

50. Maine

 

While Rhode Island may be one of the worst states to do business in, it is one of the healthiest states in the country, according to America’s Health Rankings®—2012 edition report. The report indicates that Rhode Island’s availability of primary care physicians and high immunization coverage accounts for its top 10 ranking. The Ocean State jumped three spots compared to last year.

 

“We applaud our partners and the primary care community for helping to make Rhode Island a healthy and safe place to live, learn, work, and play,” said Michael Fine, MD, Director of the RI Department of Health. “We are pleased by these steps forward for Rhode Island's health, but we are also reminded of the work that will help us get to number one.”

 

Despite the top 10 finish, Rhode Island finished last in New England. Neighboring states Massachusetts and Connecticut finished fourth and sixth respectively. Vermont topped the list, while New Hampshire finished third and Maine came in ninth.

 

Rhode Island is set to receive nearly $648,000 under a national settlement with Pfizer, Inc., alleging that the pharmaceutical company illegally promoted two of its drugs. The state’s portion is part of a $42.9 million judgment, which also included 33 other states. The suit claims that Pfizer utilized unlawful and deceptive practices when promoting Zyvox, an antibacterial medication, and Lyrica, a fibromyalgia treatment.

 

The judgment indicates that Pfizer’s advertisements for the two products made unsubstantiated claims pertaining to their effectiveness. As part of the ruling, Pfizer has agreed to reform how it promotes Zyvox and Lyrica.

 

“Patients and doctors must be able to trust the information provided by drug companies," said Attorney General Peter Kilmartin. "Misleading claims put patient lives in jeopardy, and pharmaceutical corporations' illegal promotion of drugs for off-label uses will not be tolerated.”

 

According to the Office of the Attorney General, the state has now gained roughly $5.7 million in 2012 in settlements with major pharmaceutical companies. Furthermore, the AG’s Medicaid Fraud & Patient Abuse Unit has recouped over $9.5 million from settlements and investigations for the state's Medicaid program this year.

 

The looming fiscal cliff could be disastrous for Rhode Island if a deal is not reached, according to Gov. Lincoln Chafee and several other state leaders.

 

Despite the prediction, Chafee said he’s hopeful that “cooler heads” will prevail in the end. House Speaker Gordon Fox added that the potential consequences of not reaching a deal should force Washington lawmakers to hammer out a deal before the Dec. 31 deadline. Democratic State. Sen. Louis DiPalma stated that he’s worried the fiscal cliff would damage the state’s already fragile economy and devastate programs intended for vulnerable residents.

 

If Congress and President Obama do not reach a deal, taxes will rise and billions in federal spending will be cut. Aside from higher taxes and decreased spending, student loans could rise as well.

 

As for how the fiscal cliff would affect Rhode Island, President Obama’s National Economic Council released a report last week detailing the impact. According to the NEC, roughly 400,000 middle class families would face higher taxes if a deal is not reached. Additionally, consumer spending could drop by $700 million in the state.

 

In order to circumvent tax hikes on middle-income households, President Obama has advised Congress to continue tax cuts for families earning less than $250,000 annually. The President has also urged lawmakers to expand deductions for families making under $250,000.

 

Stephen Hourahan, longtime friend and aid to Gov. Lincoln Chafee, has announced he is leaving the Statehouse to return to the nonprofit sector. Hourahan will be going back to his position at Family Service of Rhode Island, a job that he left in 2009 to help Chafee run his gubernatorial campaign. Since 2009, Hourahan has served as Chafee’s transition director and senior advisor.

 

Although Horahan is officially leaving Chafee’s administration, the governor said that their relationship would continue.

 

“Stephen has been a trusted advisor and friend to the Chafee family for many years," said Chafee. “He was a valued member of my father's U.S. Senate and campaign staffs, and for the past 14 years Stephen has played key roles for me during my time as U.S. Senator and Governor, as well as my campaigns for both of those offices. Although he has decided to return to Family Service of Rhode Island, an organization about which he is extremely passionate, Stephen will remain a trusted friend and advisor in an informal capacity. Stephanie joins me in wishing him success and happiness as he enters this new chapter.”

 

Family Service of Rhode Island is one of the biggest non-profits in the state. The organization serves a broad client base and provides services including child and parent education, facilitating foster care and adoption, and providing AIDS awareness.