Charting a course for a Rhody revival

PLAYING BALL? Raimondo says that the state must determine whether the planned Pawtucket Red Sox move to downtown Providence
PLAYING BALL? Raimondo says that the state must determine whether the planned Pawtucket Red Sox move to downtown Providence "helps really, truly to create jobs." / PBN PHOTO/?MICHAEL SALERNO

Rhode Island’s first female governor entered office in January with an intimate knowledge of both investment as a tool for growth and the state’s almost desperate need for it.

Gov. Gina M. Raimondo has wasted no time trying to use her venture-capital experience in private industry and four years served as general treasurer to build alliances with business and political leaders around the concept of job growth as the only salve for the still-open wounds left by the Great Recession on the local economy. That’s means everything from pressing for the revival of local manufacturing to exploring the possibility of a new baseball stadium in Providence.

But first she must tackle a potentially crippling budget deficit approaching $200 million. And the woman who garnered a national reputation for her work in leading an overhaul of the state pension system is now setting her sights on reining in Medicaid spending, which accounts for one-third of the state budget.

“Why are we behind [other states]? Lack of leadership,” she said pointedly in a recent interview with Providence Business News.

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What kind of leadership will she provide? The budget she will release March 12 will give an early glimpse of the course she’s hoping to set to turn around the state’s economy.

Medicaid is one-third of the state budget. Will you be able to make changes in that for fiscal 2015?

No.

So, we’re talking about 2016 and then the bigger changes in 2017?

Exactly. You know, I don’t think of it really as a budget exercise. This is about redesigning the way we provide health care for our most vulnerable, which makes the health care more accessible, but also more affordable. You’re right, it’s one-third of the state’s budget. It’s growing at an unsustainable rate. For the state’s fiscal health and to have a vibrant economy, we have to get a handle on our health care expenses. But really, what this is about is delivering care in a better way so people get better outcomes. Right now, in Medicaid, we’re not paying for outcomes. We’re paying for volume. And I’d like to move the system to a place where we pay for outcomes. Which I think will mean we will pay less and get more.

Are there any states that are doing it that way?

Some states are. It’s an innovation. I’m trying to move us to be on the cutting edge. Some states are, though. And they’re having success with it. Rhode Island is not unique. This is a problem all over America and every state’s dealing with it. I’d like us to be a leader in the way we deal with it.

When you’re looking at reductions in Medicaid spending, is it to decrease the amount of increases every year or is it a decrease in year-to-year amounts?

What we’ve done is we got together all of the stakeholders. Hospitals, physicians, behavioral-care providers, other commercial payers like [Blue Cross & Blue Shield of Rhode Island] and [UnitedHealthcare of New England], nursing homes, all the people, patients, families. We said, look, you all have a stake in fixing what is an underperforming system. And the hope is that over time, it’s actually going to bend the cost curve. But it does take time. Right now, 7 percent of patients account for two-thirds of the cost. Can you believe that? The 7 percent of the highest users, most-expensive patients, are two-thirds the cost. So what we’re talking about is really managing those patients better. Keeping them out of emergency rooms. Keeping them out of the hospital. Preventing them from falling and breaking a bone and winding up in the hospital. So the hope is that in two, three, four, five years, we’re actually going to see us bending the cost curve.

So it’s not about who qualifies for Medicaid, but about managing care for people who are on a constant cycle through hospitals?

Exactly. It’s not so much narrowing eligibility.

Moving on to economic development, new Commerce Secretary Stefan Pryor, in his initial confirmation hearing, said a marketing vision for the Interstate 195 lands had not been effectively articulated.

I agree with that.

What is your vision for that land? And has it changed, because of the recent proposal for the new AAA ballpark? Is an innovation center still the plan?

At the highest level, [the I-195 land] is an unbelievable opportunity to use this as a game changer, to stimulate our economy. The story of Rhode Island is we used to be a bedrock of manufacturing jobs, especially jewelry-manufacturing jobs. And more than almost any other state in the country, our economy has been hurt by the loss of those manufacturing jobs. The [Federal Reserve] just put out a paper showing Rhode Island was hit harder than most because we were dependent longer on it. We’ve lost all that, and as a result our economy is one of the worst in the country. We’re 48 out of 50 in job growth.

We need to create a new economy, based on high-scale, high-wage jobs. And a lot of that is underpinned with innovation. I do want to use that 195 land to start recharging our economy, to create the basis for a new economy. Bringing the colleges and universities together with industry, so we can have an innovation-based economy. Part of that could be an applied-science campus, which is a collaboration between one or more universities, and one or more companies, where we really start to underpin our economy and get some skilled jobs going. It’s exactly what they’ve done in Pittsburgh, with Carnegie Mellon [University], it’s what they do most beautifully in Cambridge, with Harvard [University] and MIT. It’s what you have to do. Every economic resurgence has been at that intersection of universities and companies.

And [whether] the ballpark fits is a question we need to determine, frankly. The answer is it fits if it helps really, truly to create jobs. In some places, ballparks can be a piece of the puzzle for economic development. And sometimes they attract more outside dollars. So, we need to figure that out. We need to have a structured analysis to figure out, does it make sense to use some of this land for a ballpark?

How would a ballpark attract other investment?

Like in Pittsburgh, for example, they’ve used ballparks pretty effectively as a piece of the economic development. Or in Hartford, right now, they’re moving a … AA ballpark to Hartford. And one of the conditions is that it’s also attracting $300 million in other, new development. The bottom line is we need a few sparkplug deals. Right now, Rhode Island’s economy is out of gas. We need a few big deals, anchor deals to get some excitement going and get some development going. And if this could be one of them, I’m open to it.

So, in terms of the acreage it would take up, will it all work together?

I haven’t seen a proposal. I don’t know if it can. I have to see the details. This is one where we need to … be excited, but also do the work, do the due diligence. There’s a lot of talk. I need to see the plans. What do you want? How big is it going to be? Where is it going to be? How does it fit in the whole picture? Does it cost the state anything? Of course I want them to stay in Rhode Island, don’t get me wrong, I really do. But it’s got to work for everybody.

My whole reason for running and my whole vision is we’ve been in decline, and we’ve got to start the comeback. We’ve got to get going.

In materials for the “Comeback RI” report, you describe a “virtuous cycle,” which is job growth increases revenue, increases job growth. Which is the chicken and the egg here? Where do you get the investment, which is money?

For a long time, all we’ve done is cut. Budgets are tight so you cut. You stop building schools. You stop investing in workforce training. The [R.I.] Commerce Corporation, our economic development [agency], all we’ve done is cut. We have no loan fund. We have no staff at the Commerce Corporation. We have no tourism [promotion]. So we have a really weak economy. We also have a huge deficit, a $200 million deficit. So it’s like the worst of both worlds. We have a weak economy and a $200 million deficit. So how do you do it? My vision, my plan, is to just thread that needle. You have to find cuts in areas where we’re spending too much and where we’re not getting much for it, and then reinvest that money into job growth. So, that’s why with Medicaid, we spend the second-highest cost per-enrollee in the country, so I’ve got to skinny that down and invest in job growth. There are places where we’re spending a lot and not getting enough for it. I need to skinny that down and then invest in tourism and workforce development, in infrastructure and attracting jobs.

And if you can’t find the resources, can government still be a force to spur the economy? Does it have to come with government investment?

We need a robust plan to turn the economy around. I am convinced the only way forward is to create jobs. We can’t just cut, we can’t just spend. We have to create good jobs, decent-paying jobs. The jobs we’ve been creating in this economy are low-wage jobs. They’re not family supporting jobs. We need to create decent, middle-class jobs, $60,000-a-year jobs. There is no one thing that’s going to do it. We have to attract, build skills and innovate. Attract means making Rhode Island a place where businesses want to be. What does that mean? Regulatory streamlining. The regulations here are too many, not transparent enough and, frankly, some of them don’t even make sense. I did an executive order, one of the first things I did, it’s a big, regulatory streamlining effort. The office of regulatory reform hasn’t had a person running it for a year. I put somebody in, it’s one of the first things I did. So, we have to do that. We have to keep our taxes competitive. That’s another problem I have. I can’t really raise taxes to raise revenue, because if you do, then you’re uncompetitive. Right now, we’re reasonably competitive in the region. You have to stay that way. Build skills. Every CEO I talk to, from the tiniest company to the biggest company, I say to them, what can I do to get you to add jobs in Rhode Island? You know what their first thing is? Skilled people. It’s amazing to me. As governor, I force myself every week, I carve out hours every week, to talk to businesses, from [CVS Health] and [Fidelity Investments] all the way down to laundromat owners. They’re all saying the same thing: we can’t find the talent we need, quickly enough and get them to stick around and perform.

Are you talking about building these skills in K-12 or in higher education?

My vision is to have industry-led workforce development. Right now Rhode Island spends tens of millions of dollars a year on workforce development, workforce training. It’s scattered over half a dozen different agencies and programs. And it’s not industry-led. Again, my vision is not to spend more, just get more out of what you’re spending. The center for workforce development should be the companies that are going to employ the people. Electric Boat, just to pick on them, but anyone XYZ company, they know what they need. I need them to tell me, what do you need? And then to hire the people I produce. Rhode Island is behind in this. Other states are doing this, and they’re getting the jobs.

Why do you think that is?

Why are we behind? Lack of leadership. The per capita income in Massachusetts is $57,248, in Connecticut it’s $60,000. We’re lower. … Almost 20 percent of all income in Rhode Island comes from some kind of aid. It could be federal, like SSI, federal disability, point of it is, it’s not a job. In Massachusetts, the equivalent number is 15 percent. We need to generate economic growth. We need to get our economy humming. We let it get too far. I don’t know why. Some of it is beyond our control, manufacturing left. We live in a world now with global competition. If you don’t have skills, you can’t get a decent job. And some of it is we just sat still. We didn’t position ourselves to get going.

Capital moves?

Capital moves. And now when you’re this depressed, you have to do some big things to re-attract capital. We’re past tinkering.

You have a different perspective. You were an investor. If you lose, you move on, you find a winner. As a governor, can you just move on? You’ve talked about how the experience of 38 Studios paralyzed the state. How do you break through that and bring more of an investor perspective to the political arena?

That’s what I have to do. I need to communicate to the people of Rhode Island that it’s in our best interest to move forward. Yeah, 38 Studios was terrible. It was stupid. It was a waste of taxpayer money. But we have no future if we can’t get this economy going. Our young people are leaving. We are an old population. Young people aren’t sticking around. We’re a poor population. We must muster the political will to make some investments. The alternative is worse. We’re living the alternative and it’s going to get worse.

Talking about political will, how will you work with the legislature to ensure the budget you present, but which is approved by the General Assembly, remains something you recognize?

It’s a lot of collaboration with the General Assembly, a lot of communication. The good news is we’re aligned. The General Assembly leadership and I have a shared vision, a focus on economic growth. I’m committed to working with them on finding common ground, because we have to. We have to. My goal is to give them a budget that is not surprising to them. I’m trying to develop as much buy-in as I can.

You’ve talked a little about what businesses have told you they need. What insights did you gain from the Jobs Summit, which you held in December?

Back to the regulatory [issues], you hear a lot from businesses that it’s too hard to get a permit, to get a professional license.

Even something as basic as a permit, could that influence a company to choose another state over coming here?

Absolutely. Capital can move. Businesses can move. If it’s easy, transparent and quick to get a building permit or a professional license in Massachusetts, and it’s cumbersome and complicated and not transparent in Rhode Island? Absolutely. They’ll go to another state. I went to Quonset [Business Park] a couple of weeks ago, [Greencore Group PLC], a food company, had just opened and they’re going to have 400 jobs. I was asking the CEO, why Rhode Island? And he said ‘We needed to move fast. We decided, as a business, we wanted to be up and running in America on such-and-such a timeline.’ They wanted to be in the Northeast, because they wanted to distribute their food in the Northeast. And we moved fast. So, Quonset got it done, quickly. … Government needs to move at the speed of business. And if I can actually make that happen, business will want to be here.

You’ve supported tax-increment financing on a state level and small-business loans. Are they on the table for this year?

I’m looking at [all the options]. We need to be in the game. We’re not in the game and as a result, our families are suffering. We need to create good jobs, decent, family supporting jobs. We’re going to have to get out of our comfort zone to do that. •

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1 COMMENT

  1. “We need to create a new economy, based on high-scale, high-wage jobs.”
    Agreed. However, what is the path to get there? How will we get there based on the jobs skills level our populous has now? Here’s a proposal for one partial solution. Not the end-all-be-all, however, a path based on current conditions, with an eye to the future.
    Your input is welcome: Rhode Island First Initiative
    www.1of52.net/blog
    http://rhodemapri.org/guest-blog-rhode-island-first/
    https://www.facebook.com/rhodeislandfirst

    Steve Maciel, Founder End Hunger Foundation, 401-368-1325, endhunger@cox.net