Chafee, business leaders at odds on view of economy

Gov. Lincoln D. Chafee’s latest idea for repairing the Rhode Island economy may be his most controversial.
The drive to boosting state commerce by reforming the R.I. Economic Development Corporation has driven inquiry and debate in Rhode Island since the collapse of 38 Studios LLC last spring.
But in defending his decision to reshuffle, instead of restructure the EDC, Chafee rejected the premise that radical change is needed on the basis that the current structure is already working.
“For all the handwringing and ‘woe is us’ – it’s just not accurate,” Chafee told the EDC board of directors last month after nominating William J. Parsons, a 37-year veteran EDC staffer to lead the organization going forward. “We don’t believe that the EDC is broken; we don’t accept that. It might have been making bad decisions, but the structure itself can work and is working.”
Chafee described an “irrational negativity” in Rhode Island he attributed to the press and “group-think,” which he defined as seeking to “minimize conflict and reach consensus without sufficiently testing ideas.”
Members of the EDC board, which the governor chairs, accepted the analysis without questions.
Along with choosing institutional knowledge over change in the EDC leadership, Chafee passed on plans to subsume the quasi-state agency within a new secretariat as recommended by the Rhode Island Public Expenditure Council in a post-38 Studios economic analysis.
Chafee, who commissioned the RIPEC report, has acted on several less central conclusions of the report.
In making his case that the economy, although not fully cured, is healing, Chafee pointed to rising state revenue collections, a recent analysis of the state’s tax burden and a favorable September jobs report.
The September job numbers showed, for the first time since August 2006, five different monthly measurements moving in a positive direction: the unemployment rate, the number of unemployed residents, the number of employed residents, the size of the labor force and the total number of Rhode Island-based jobs.
The revenue projections showed property tax receipts growing from approximately $1.1 billion last year to $1.25 billion by fiscal 2018. And the tax analysis from the national Council on State Taxation showed Rhode Island in the bottom third of several key measures of the tax burden on businesses.
“We believe the economy isn’t strong enough,” said RIPEC Executive Director John C. Simmons. “When we looked at recent economic indicators, we had mixed reviews, with some things growing, some things shrinking and the Rhode Island economy still very weak compared with the national and regional economy.”
In its Rhode Island Data Book released last week, RIPEC found the state has made good progress in the last three months making up ground in economic conditions, but educational outcomes still lag neighboring states, creating drag.
Some of the things in the RIPEC report Chafee has pursued are a greater focus on helping existing companies within the state, an effort to improve the state’s place in business-climate rankings and more statewide planning and data analysis.
Chafee said the RIPEC report helped focus a streamlining of the EDC this summer that saw the seven departments within the agency reduced to four.
That reorganization and the focus on helping existing businesses have been well-received, but many business leaders worry they haven’t gone far enough.
“I think there is still a significant amount of work to do lowering unemployment, improving business rankings and growing the gross state product,” said Laurie White, president of the Greater Providence Chamber of Commerce, one of the strongest supporters of the RIPEC recommendations. “There is a general acknowledgement that the state has a long way to go.”
White pointed out that while Chafee was talking up the positives of the Rhode Island economy, the EDC last month released a request for proposals to conduct an economic-development study to figure out, among other things, why the state lags behind its neighbors.
White acknowledged that there is something to be said for inspiring consumer confidence with a sanguine outlook, but said it only works accompanied by a “full-court press” to improve problem areas. •.

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