Pam Gencarella: Ethics is Good Business for Rhode Island
Thursday, April 03, 2014
When a 2004 University of Connecticut corruption study was released, the Hartford Courant reported the findings. While the study findings were enlightening, what was more interesting in that article was the prosaic manner in which the writer stated that if the study results held true, “states with longtime reputations for corruption, including Rhode Island and New Jersey, would apparently have the worst job growth and the worst economies”. Interpretation: as of 2004, everyone knows that Rhode Island and New Jersey are two of the most corrupt states in the country, and we certainly have one of the worst economies today.
In RI politics perception too often becomes reality
So, what has happened in RI since 2004? Oddly enough, an unusual twist in the 2009 case against Senate President William Irons is what happened. RI had its Ethics Commission castrated. The court decided that the relatively new Ethics Commission, provided by a 1986 amendment to the RI Constitution, did not have jurisdiction over General Assembly members.
Then, more recently, former Speaker of the House, Gordon Fox, had his personal residence and State House office raided by federal and state officials. In addition to the national attention RI has drawn resulting from the Speaker’s resignation, there are the usual campaign finance issues that pop up. Newly appointed House Deputy Majority Whip Almeida seems to have raised the ire of the Board of Elections, and, as a result, his campaign finance case has been sent to the Attorney General’s office, which, according to the executive director, “is rather rare”. If the general perception in 2004 was that RI was one of the most corrupt states, we wonder what the general perception is today, ten years later.
Ethics is a matter of jobs, economy and infrastructure
Ed Fitzpatrick’s March 27th column, published in the ProJo, quoted newly elected Speaker Mattiello as saying “I have to work on jobs and the economy. The Ethics Bill is a talking point. That’s a feel good issue”. Fitzpatrick called upon Speaker Mattiello to reconsider the necessity of passing ethics reform as part and parcel of a comprehensive plan to address job growth and the economy. He referenced the University of Connecticut corruption study, which, among other things, found that government corruption can create uncertainty for businesses and stunt job growth - even more than rising taxes. That is a powerful finding. If that is the case, how can one speak to a focus on jobs and the economy, yet claim that an Ethics Bill to provide for jurisdiction over General Assembly members is a “talking point” or a “feel-good” issue?
It seems intuitive that businesses consider the “corruption factor” when deciding on a place to locate their company, if for no other reason than because it would clearly mean a more difficult landscape in which to do business, especially for a relatively small company. After all, if you don’t know someone, how can you cultivate the appropriate “relationship”? If you can’t, what additional cost will be inherent in the ability to establish and then maintain your business?
The University of Connecticut study also stated that “businesses may begin to feel that to operate, they have to know the right people in government rather than just knowing how to do their job.” A former Connecticut House Democrat and University of Hartford economics professor agreed with the study and said that it makes sense. “Businesses want stability, and corruption implies instability in government. It’s not a level playing field. Some people are favored over others. You’re inflating the costs of doing business.” It seems one of Connecticut’s former Senators believed that business leaders simply refused to move to Bridgeport because they did not want to pay bribes.
There are many research papers, in addition to the research from the University of Connecticut, that studied corruption and its relation to economic growth. While many of those studies were performed at a national level, it would stand to reason that the research would hold true at the state and local level.
The International Monetary Fund, for example, has released a report that indicates that “the allocation of public procurement contracts through a corrupt system may lead to lower quality of infrastructure and public services. Corruption may distort the composition of government expenditure... it may tempt government officials to choose government expenditures less on the basis of public welfare than on the opportunity they provide for extorting. Empirical evidence suggests that corruption lowers investment and retards economic growth to a significant extent.”
While repairs and maintenance for RI’s roads and bridges have languished over the past 20 years, the benefits for public employees soared out of control, to the point that even the politicians had to agree the debt that was accumulating could not be sustained. Government made a choice over these years to invest in public union benefits over infrastructure maintenance.
A study by the George Mason University Department of Economics reported that “corruption is never good for growth, but its impact becomes worse the more invasive the regulatory environment.” We know how invasive Rhode Island’s regulatory environment is. To that point, our governor actually distributed a survey to engage the business community, providing them an opportunity to speak to the most egregious regulations their business must contend with and the cost these regulations add to their product or service. Just think about the current bills heard in committee hearings this week that may potentially shut out private contractors from bidding on public projects.
The vision thing
If the new Speaker of the House of Representatives is to put RI on the economic road to recovery, there must be a multi-pronged approach. The idea that the Assembly can only focus on one general concept at a time is very disheartening. This is where the whole ‘vision thing’ comes in. RI needs an all encompassing vision to improve its economic outlook, not tunnel vision that sees only incremental steps.
In order to deliver on the economy and jobs we must include ethics reform, which would give citizens a reason to trust their government again and would let businesses know that RI leadership wants to ensure a level playing field. The focus on creating an inviting economic landscape for businesses, big and small is vital. As CVS’ John Kennedy explained, his company looks at the state’s fiscal stability, the cost of doing business and the available infrastructure. And, because an educated workforce is critical in establishing or expanding business, full support for education reform is necessary to ensure our graduates are employable and to supply the labor force we will need once businesses begin flocking to RI.
Pam Gencarella is a member of OSTPA, a taxpayer advocacy organization in Rhode Island.
Related Slideshow: The History of Gordon Fox: From Camp St. to Speaker to…
In 1992, Gordon Fox ran for (then) House District 5 seat replacing Dr. Nick Tsiongas.
Fox, an ally of then-Councilman Josh Fenton and former College Hill State Representative Ray Rickman, won the seat easily.
Gordon Fox (D) 2,253
Michael Mitchell (R) 525
Jay Enderle (I) 407
Murphy - Fox Team 2002
Fox and GTech and the Ethics Commission 2003
Speaker of the House
2007 - 2010
Fox and 38 Studios
Fox and Gay Marriage
Providence Economic Development Partnership
Raid and Resignation
On Friday, the State House office of Gordon Fox was raided by RI State Police in conjuction with FBI and IRS agents. This was the first time a State House office was ever raided by law enforcement officials.
By end of day Saturday, Fox had resigned, here is his statement:
Fox Pleads to three charges of bribery, wire fraud, and filing a false tax return on March 3, 2015.
The charges stem from former Speaker Fox’s theft of $108,000 donated by campaign supporters to pay for personal expenses; his acceptance of a $52,000 bribe to advocate and move for issuance of a liquor license for an East Side restaurant while serving as Vice-Chairman of the City of Providence Board of Licenses in 2008; and his failure to account for these illegal sources of income on his tax returns.
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