Looking to solve major challenges

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Gov. Donald L. Carcieri talks like a man on a mission. Among other things, he wants to change state government by shrinking and streamlining it and to make the state a haven for the burgeoning wind-energy industry. At the same time, the state is suffering from a weak economy.
With so many challenges and such a far-reaching agenda, the governor sat down for an hour-long interview with Providence Business News and talked about the challenges – and opportunities – he sees for Rhode Island.

PBN: The unemployment rate hit 8.5 percent last month, the second-highest in the country after Michigan. How concerned are you about the job situation?
CARCIERI: I’m very concerned about it. As I’ve said, we felt it early because, frankly, a big driver for our economy since 2001 has been real estate. We’re not unlike Florida, California … so when that collapsed, we felt it.
When you look around the state, the good news is we haven’t had yet – and hopefully, we won’t have – major employers talking about big layoffs. So that, to me, is a positive. The question is, going forward, where do we see the growth coming from when we come out of this? And I think [the R.I. Economic Development Corporation (EDC)] has got the right strategy. … There are a lot of pieces in place, but to really make the state prosper, we need to be seen as a place for business.

PBN: What are you hoping your Strategic Tax Policy Workgroup will focus on in its report in December?
CARCIERI: My broad mission to them is to come back with suggestions on tax changes that will position us to grow the private sector. … How that shapes out, I don’t know. They’re looking at the corporate tax in relation to other states, because we’re high. … One [concern] of mine is the estate tax, because there’s no question I see that we’re driving people away, out of the state, who are people who over their careers accumulated wealth. Yet, I know that people want to be here … but right now the message is, “Don’t die in Rhode Island.” … And I think we need to continue to bring our total tax burden down.
You don’t have a low-tax environment unless you have a relatively efficient state and municipal government structure. Now, I can’t control the municipal side – although we’re putting a lot of pressure on them – but we’re doing everything we can at the state level. … When the dust settles [on how many employees retired before the deadline for retirement benefit changes], my guess right now is we’ll be down maybe 1,500 to 1,800 people.

PBN: Is it possible that could be a problem?
CARCIERI: Sure it is. … My message to the directors – and this isn’t easy – is that this is an opportunity now to reorganize and restructure what you’re doing.
When you look at state government, there are three buckets of money: it’s people, it’s social services – the welfare-Medicaid budget – and then it’s the money that goes through to all the cities and towns, so just a pass-through. And this year, out of the $3.3 billion of the general revenue budget funded by all the taxes we pay, $800 million, roughly, is people and benefits.
So my strategy has been, we’ve got to figure out how to run the state with fewer people, and the pay and benefits should be comparable to the private sector. … In the last three years we got modest changes to the pension plan – the unions would say they were huge; you would think I asked for their first-born – but by private-sector standards, these are relatively minor, modest. There’s still more to come.
So what I’m saying to you is, we’re attacking the personnel issue from a numbers standpoint, from a benefits standpoint, and from the retirement piece. … This has never, ever been done. So that piece, we will get there – we’ve got battles with [Council] 94, but we will get there.

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PBN: Were you able to get the amount of savings from the retirements that you needed?
CARCIERI: I don’t know that, and that’s why I’m saying we’re not going to hire [replacements for any retirees] until we see, at the end of October, where we are. … My judgment right now is, we’re pretty close.

PBN: Your administration is negotiating with the federal government a “global Medicaid waiver,” which would restructure the state’s health care system for the poor. How are those talks going?
CARCIERI: My sense is that it’s going very well. … We would like to get a decision on that as soon as possible. … Now, there’s opposition, because we will be the first in the country.
What we want is the flexibility now to decide the best use of this money. The classic example I give is the nursing home issue. We don’t have the flexibility to put more money into assisted living or to put more money into keeping people in their homes, because Medicaid doesn’t pay that. … You know, where [nursing home care] is needed and appropriate, it’ll happen, but what happens is the system is biased, right now, to do that. But there are a lot of cases where assisted living would be fine, or even in-home support.

PBN: How large do you think the coming year’s budget shortfall is going to be?
CARCIERI: It’s too early to know. … I’ll be surprised if it’s a huge number, because we’ve really contracted the spending base significantly. .. If it’s $100 million, plus or minus, it’s still going to be tough.
We need the cities and towns to do the same thing [as the state] – that is, they’ve got to figure out how to be more efficient.
When I taught at Rogers High School, when I got out of Brown, there was only one high school – and it wasn’t that long ago. Rogers serviced all of Aquidneck Island, plus Jamestown. And now you’ve got three school districts.
You don’t need three school districts, you don’t need three police departments, you don’t need three fire departments.
But [this year] we maintained the [local] aid level. So while we cut $130 million out of the whole health and human services [budget] … we really did nothing in the biggest piece. … That, this last budget, pretty much stayed intact. … They came out of this last budget, the cities and towns, for all the wailing and gnashing of teeth, actually better than anything.

PBN: Is there a role you can play, to sort of get that sense of urgency to develop?
CARCIERI: You’ve got to use, as they say, the bully pulpit. You’ve got to talk about it. … There’s been this mindset – not mine, but I think in the public sector – that the rest of the world can go through these ups and downs but we just keep … doing what we’ve always done, and just send us the money. Well, I’m sorry, but that’s not the way the real world operates.

PBN: Last month your administration chose Deepwater Wind to develop the state’s first offshore wind-energy farm. Why do you think this project is so important?
CARCIERI: We don’t have oil. We don’t have natural gas. We don’t have large areas on land where we could then build wind farms.
Our only option, frankly, that we can control – absent nuclear, something that’s pretty dramatic – is wind, and it’s offshore wind. … So I’ve been really pushing it, because I believe it’s the one thing we can do to stabilize our energy costs.
Clearly, the biggest obstacle right now is not that we’re unwilling to do it – it’s the permitting. You’ve seen what Cape Wind has run into, for different reasons. … I decided that this was the right strategy – I don’t want it to be sequential, so I said, let’s do parallel tracks – do all the [permitting] at the same time that we’re going through the process of seeing, is there anybody interested in spending their own money – not the state’s money, their own money – to do this on a utility scale, that would look like they’ve got the wherewithal to do it.
And then when we went out, as you know, we got seven responses and the team went through a process, and then Deepwater came out the highest. Now, nobody has done this. You hear the criticism [that] they don’t have experience – well, nobody has done this, except the Europeans. Now, they know wind because one of their partners is First Wind, which has done projects in Maine, New York, Hawaii, and they’ve got a number of other things.
The key factor was the deep-water technology, because … being deeper, further out, means you’ve got better winds.
The other thing is the whole economic-development side, because what really excites me and our team is that Rhode Island will be the base for all of Deepwater’s offshore activities, from Delaware to Maine.
By the way, all the other New England states and the other Northeast states are in the same position we’re in. … As a whole region, deep-water wind is the best renewable alternative for all of us, so that’s why I think, if they’re right, and I believe they are … you’ll really start to see the thing snowball.

PBN: Would you like to see a wind farm as your legacy?
CARCIERI: I don’t really think of it that way. People will judge my tenure as governor by all kinds of different factors. I just believe, as I said, in my heart of hearts, that it’s the biggest issue we as a nation – not just as a state, but we as a nation – face, and we need to get serious about it. And I’m happy to have Rhode Island show it can be done, and lead the way here. And that’s all I care about. •

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