Gencarella: Is RI ‘Economic Development’ Moving Us Backward?

Gencarella: Is RI ‘Economic Development’ Moving Us Backward?

So, as the 2016 legislative session came to a close, at 6:00 in the morning no less, RI reported that it lost 3,900 jobs in the last two months - April and May.  Juxtapose that with the governor touting her accomplishment of bringing into the state a paltry 100 GE jobs at a cost of $5.7 million to the RI taxpayer.  

What’s Atlanta Got That We Don’t?

At the same time, GE announced that it was relocating its North American headquarters to Atlanta bringing an initial 250 jobs with an expectation of more than 400 jobs over time. Oh, and last year Mercedes-Benz announced it would be leaving NJ, turning down a significant tax incentive package, and moving to Atlanta, bringing about 800 jobs.  While Mercedes will receive tax incentives  (an average of $28,740 per employee vs. RI’s average of $57,000 per employee), a New Jersey site selection consultant explained that there were reasons beyond the incentives for GE to choose Atlanta.  Basically, Atlanta has what Rhode Island doesn’t - low corporate taxes, well-maintained highways, low energy prices and low property taxes.  Note: It should also be noted, that the consultant cited Georgia’s standing as a right-to-work state, but I digress.  

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And did I mention that the Mercedes move to Atlanta is in addition to the State Farm Insurance company move to Atlanta that’s bringing an initial 3,000 jobs with an expected total of 7,000 jobs within 10 years.  There is real development going on in Atlanta!

What’s Massachusetts Got That We Don’t?

Jim Stergios from the Massachusetts public policy research organization, Pioneer Institute, explains why Boston was able to land GE Global and, guess what, it’s not because of the crony, state-targeted tax incentives.  Actually, Mr. Stergios explains that other companies have made much more lucrative deals with Massachusetts in the past.  He points out that GE was leaving not only a Connecticut Governor and legislature that created a lot of tax unpredictability, but also a lousy business climate for companies and a belief that the state’s budget situation indicated no long-term hope for the future.  If one didn’t know better, one would think that Mr. Stergios was describing GE leaving Rhode Island.

Mr. Stergios explained that the deal was sealed with Massachusetts because of a high-quality workforce, the highest quality educational system in the country, and a governor who has made clear that he wants a predictable tax and regulatory environment.  Seems like deja vu for Rhode Islanders.  A couple of years ago, CVS stood in front of the RI General Assembly and spelled out the four areas CVS looks at when deciding where to expand.  They included all of the areas listed above, plus one more - available infrastructure (ie. quality roadways and bridges).  

And what has RI’s legislature done in those two years to address the need for a high quality workforce, a high quality educational system and a predictable tax and regulatory environment?  Our elected leaders have severely walked back most of the educational reforms that mirrored Massachusetts reform, they have sent the idea of predictability in taxation into a tailspin with the creation of a new stream of toll revenue, and now they have proposed a RI Big Dig with the 6/10 Connector.  And, in creating one of the highest taxing states, legislative policies have driven much of the high-quality workforce out of state looking for job opportunities elsewhere.  Although it’s really nothing but another government giveaway, in desperation, our governor has resorted to bribery in an attempt to keep RI’s graduates in the state.

Instead of focusing on broad based improvements that would lay the foundation for companies like GE and Mercedes and State Farm to come to RI, our state government has handed out your money to targeted companies and individuals. CVS has received over $130 million in the past 8 years. Are we to believe that CVS has generated enough new jobs in 8 years to warrant over $130 million of your tax dollars?  And what about the $50 million the state has given to movie production companies over the past 8 years?  Do you think that money stayed local?  Where is the cost/benefit analysis of those tens of millions spent on creating a few temporary jobs in the movie industry? Then there is the historic tax credit program.  According to a 2012 RI Public Expenditure Council (RIPEC) report, the state of RI gave away $300 million in historic tax credits from the inception of the program in 2001 through its end in 2008.  In 2013, the General Assembly provided another $34 million in historic tax credits.  

More recently, it was reported that Governor Raimondo has given away $50 million in various tax and loan incentives since she took office and that doesn’t include the nearly $8 million in tax incentives slated for Job Lot’s Quonset expansion nor does it include the nearly $6 million for the 100 GE jobs!  This represents over $500 million in tax dollar giveaways yet your elected leaders say they couldn’t find money in the budget to maintain our roads and bridges.  And don’t even ask about the $2.5 billion RI received in federal stimulus money.  Remember that our President told us stimulus was for ‘shovel ready’ projects?  According to WPRI, less than 10% of it went to the RI DOT, and most of that went to the RI Public Transportation Authority (RIPTA).  All of this money and the wrong priorities. This is why our bridges are falling down!  This is why RI’s economy lags all other state economies.

RI still has not recovered the jobs it lost in the 2008 recession, and, as we have seen, we are actually moving in the wrong direction.  Meanwhile, Massachusetts surpassed that mark years ago and Atlanta was expected to surpass it last year.  It’s not surprising that Georgia ranks 11th in Forbes’ http://www.forbes.com/best-states-for-business/list/#tab:overall  Best States For Business and Massachusetts ranks 18th, leaving Little Rhody at the bottom, ranking 46th.  

Our legislators closed up shop in June, patted themselves on the back for a job well done and, as they have year after year, declared that they passed a ‘good budget’.  Is it too much to ask the General Assembly to stay in session until they come up with a budget and a plan that would put bridge repair as the highest priority, fix our down trodden education system, create a stable and predictable tax and regulatory environment,  stop giving our tax dollars to targeted companies, and put us squarely in the middle of the economic pack, maybe at 25th in the Best States for Business ranking?  

Reaching mediocrity doesn’t sound like much of a goal, but for Rhode Island’s economy, it would be a grand slam to move up 20 spots. When the legislative candidates come knocking at your door this year, ask if they will hold firm and only vote for a budget that aims to put RI on a path to being mediocre, a path that puts us in the 25th spot.