Raimondo Refuses to Comment on RI’s 50th CNBC Ranking, But Others Have a Lot to Say

Nicholas Mattiello 

RI Speaker of the House

“Having our rating drop even lower is disappointing but not surprising. In recent months, I have repeatedly called attention to the fact that our economy is losing ground compared to other states, despite years of major investment to reverse that. Government needs to do a better job of letting new and established companies conduct their business here in a timely manner. That means fundamental changes in the way state departments and agencies interact with businesses that need real regulatory relief from DLT, DEM and other agencies, not more fines and bigger hassles.

The Administration must look at the economy more comprehensively and not just pay for individual companies to locate here. The Commerce Corporation has to focus more on helping home-grown businesses improve their economic conditions.   The General Assembly has tried to address some of these concerns in the most recent budget, but much more work needs to be done. I hope this report serves as a stark reminder of the work ahead and government officials begin to act with more urgency.”

PHOTO: Richard McCaffrey

Dominick Ruggerio 

Senate President

"The Senate has focused on improving our business climate and taken many steps to address factors considered in surveys like the CNBC rankings, such as reducing business taxes and eliminating thousands of pages of burdensome regulations. However, considerable work remains, particularly with regard to the challenge of fixing our worst-in-the-nation roads and bridges. The state has an aggressive plan to repair Rhode Island’s transportation infrastructure, and that work is taking place across the state.

Additionally, the Senate President understands the hurdles many businesses face when trying to locate or expand in our state. He has worked to change policies and help companies invest here. This year we enacted laws to streamline building inspections to eliminate needless and costly delays, and to address discouraging roadblocks such as those imposed upon a developer seeking to invest more than a quarter billion dollars in Providence. The Senate remains focused on improving our business climate and fostering more robust economic growth."

PHOTO: Richard McCaffrey

Mike Stenhouse 

CEO of RI Center for Freedom and Prosperity 

“Sadly, this ranking means that the Ocean State Exodus will continue. The contrast with the booming national economy is stunning. If we cannot grow and attract more and better businesses that will create more and better jobs that will provide more Rhode Islanders with a better quality of life … then our state will continue to bleed productive residents.

For these and other reasons, Rhode Island families, students, retirees, and business owners have lost hope and are fleeing our state. People have lost trust in the political class and are fed up with betrayals from state lawmakers who have forgotten them, who cater to special interest groups, and who make it harder to live and take care of their families and businesses - and to continue to reside in Rhode Island.”

At far too many family holiday dinner tables, there’s no-one left to eat gramma’s meatballs.”

Edinaldo Tebaldi

Hassenfeld Institute

"The Rhode Economy faces significant challenges, particularly in infrastructure, workforce, and education. However, CNBC’s ranking is a hodgepodge of a simplistic and, somewhat, misleading basket of metrics to gauge the economy.  A 5-position rank change in any direction is meaningless and most likely reflects noise instead of a true signal about economic conditions and business climate in Rhode Island."

Rachel Flum 

Economic Progress Institute 

Today’s release of CNBC’s “2019 America’s Top States for Business” reminds us once again of the unreliability of such efforts to rank states for business-friendly environments. The CNBC report measures something, though exactly what remains unclear.

Despite distributing 2,500 points over ten areas, the ranking fails to measure actual business activity, such as the opening and closing of businesses. This year’s ranking of Rhode Island is suspect if only because CNBC grades the state with a D+ for Quality of Life. One of the state’s top grades is for Education.

The CNBC report figures as one among five or six such rankings, include that of the Tax Foundation. Just within this group of reports, the rankings vary wildly. For example, the CNBC rankings place Virginia in the number one spot, whereas the Tax Foundation’s 2019 report ranks that state at 35. Yet, the Tax Foundation rates Alaska as tied for first place, while the CNBC report places Alaska at 47 out of 50.

Because such reports rank not business activity, but instead an arbitrarily defined “business climate,” they are more tools for business organizations to advocate for lower corporate taxes than to tell us what business owners actually seek and do. Those individuals starting and growing businesses take many factors into account, and different businesses have varied needs. There is no evidence that the CNBC or similar rankings or the factors they weigh most heavily play significant roles in such decisions by actual business owners.

The report Grading Places: What Do the Business Climate Rankings Really Tell Us?, produced by the organization Good Jobs First, handily discredits such business climate rankings.

The website www.gradingstates.org provides insight into the specific CNBC rankings. As this website points out, CNBC does not share any of the statistics they use nor how they are weighted or scaled, making the ranking non-transparent. “The CNBC ranking is based partly on underlying factors thought to contribute to growth (such as the education level of the workforce, or the quality of roads and bridges), and partly on measures of actual state performance (such as measures of economic growth or rates of new business formation). This makes it difficult to understand the meaning of the ranking.” As the review concludes, “In other words, it is not a useful predictive measure since the outcomes it would predict are, in circular fashion, part of the index.”

Investing in job training and education will do more to attract and grow businesses in Rhode Island than will competing the score better on these mysterious rankings.

Matt Sheaff 

RI Commerce Corporation

“Just two months ago, Wallet Hub ranked Rhode Island in the top 10 states for jobs. It’s clear the CNBC ranking failed to account for significant investments we have made in recent years in infrastructure, workforce development and business growth – investments that have helped produce the largest drop in unemployment in the nation, the first positive labor force growth in over a decade, wage growth that is outpacing the nation, and a record-high number of jobs. While this ranking paints an inaccurate picture of Rhode Island’s economy, the fact remains that we still have more work to do. It’s critical that we keep our foot on the gas and redouble our efforts around education and workforce development, infrastructure, and economic growth -- to ensure every Rhode Islander is included in our recovery.”

Gary Sasse 

Hassenfeld Institute 

"In evaluating business climate rankings it is important to understand what the rankings are measuring, methodological soundness and built-in biases. For example, RI appears to be penalized in the CNBC ranking because it is not to be a right to work state.

What is concerning about the CNBC rankings is Rhode Island’s economic performance is rated 48th, meaning only two other states are doing worse.

This ranking also confirms the analysis of economic activity in Rhode Island compared to national trends over the last five years. During this period Rhode Island’s labor force declined by about one percent while growing nationally by five percent. During this period US real gross state product increased over ten percent compared to Rhode Island’s 3.4 percent, and productivity per worker declined in Rhode Island by one percent while it grew nationally by two cents. 

Given this and other data it should not surprise that the Ocean State’s relative business ranking would decline. The reasons for this decline include demographics challenges such as aging and labor quality mismatches, and problematic public policy choices. Instead of focusing like laser on structural reforms our economic strategy has emphasized development incentives. 
State economic competitiveness is based on how productivity a state uses its human resources. States compete to offer the most productive environment for business. This has not been the primary focus of Rhode Island’s development strategy.

If Rhode Island’s economy is to keep up with the rest of the nation a rebooting of public policy choices is in order. This might start with an independent evaluation of the effectiveness of CommerceRI."