Report: Improving biz climate requires ‘sustained, cooperative partnership’

THE RHODE ISLAND SENATE and the Rhode Island Public Expenditure Council have released the
THE RHODE ISLAND SENATE and the Rhode Island Public Expenditure Council have released the "Moving the Needle" report, which offers recommendations to begin improving Rhode Island's overall business climate. / COURTESY R.I. SENATE POLICY OFFICE AND THE RHODE ISLAND PUBLIC EXPENDITURE COUNCIL

PROVIDENCE – Improving Rhode Island’s business climate will require a “sustained, cooperative partnership,” according to Senate President M. Teresa Paiva Weed. The Rhode Island Senate and the Rhode Island Public Expenditure Council released a report on Tuesday issuing recommendations on how to improve the state’s business rankings.

The report, “Moving the Needle,” was a joint effort by the Senate and RIPEC. It reviewed the individual factors that often cause Rhode Island to rank poorly compared to other states on business climate comparison rankings, and made recommendations to begin improving the state’s overall business climate.

“Successfully moving the needle and improving the business climate will require a sustained, cooperative partnership,” said Paiva Weed in prepared remarks. “Just as this report was a partnership between the Senate and RIPEC, our economic development efforts must be a collaborative effort that includes the voices of the Senate, the House, the Governor and his administration, the nonprofit sector, academia, and the business community.

“Working together, we will make Rhode Island more attractive to entrepreneurs, improve our image within our state and outside our borders, and help companies that are here to grow and create jobs,” added Paiva Weed, who said improving the state’s business rankings will be a major goal of the Senate this year.

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In the fall of 2012, Paiva Weed directed the Senate Policy Office to examine the metrics looked at by those who produce business ranking surveys, including: CNBC, Forbes Magazine and the Tax Foundation. When the Senate discovered that RIPEC was working on a similar project, they decided to combine forces.

“Moving the Needle” established benchmarks and statistical baselines based on Rhode Island’s current conditions in the economy, workforce and education, transportation and infrastructure, cost of doing business and quality of life.

According to a release, these indicators use independent data that “has been deemed fundamental to an economically competitive state by national ranking bodies and site selection services.”

The report also calls for an annual review of Rhode Island’s standing on the particular benchmarks in order to determine progress.

“Not only does ‘Moving the Needle’ contribute to the discussion by providing baseline measures of economic performance, it also details specific action items for reform,” RIPEC Executive Director John C. Simmons said in prepared remarks. “Perhaps more importantly, it can be used as a tool to evaluate legislation, as one of the ways bills should be evaluated is by whether or not they have a positive effect on these types of indicators.”

Under “economy,” Rhode Island ranked competitively on per-capita income, year-to-year state budget deficits and per-capita gross domestic product, but the state continues to struggle with its high unemployment rate.

The report recommended “reinventing” Rhode Island’s approach to economic development by developing a written, long-term strategic “economic development vision,” and enacting programs that help close the skills gap and connect employers to qualified workers. The report also recommended reauthorizing targeted historic tax credits and reviewing the feasibility of a statewide arts district.

In the “workforce and education” section, Rhode Island was average, ranking 30th and 34th, respectively, in math and science proficiency and 31st in high school graduation rate.

The state’s results were mixed for overall educational attainment. Although Rhode Island ranked 13th in the country for working-age adults with at least a two-year degree and 11th for those with a bachelor’s degree, the state also ranked 15th highest for the share of a population without at least a high school diploma.

The state also ranked poorly on the cost of higher education, with college tuition ranking the 11th highest in the nation.

Rhode Island fared well in both the “transportation and infrastructure” and “quality of life” sections. The small state offered a lower-than-the-national-average commute time and more than 81 percent of the market has Internet speeds greater than 4Mbps. Rhode Island was the third best in the nation for broadband adaptation. “This is an important factor in a growing, knowledge and technology-based economy,” said the report.

However, Rhode Island fared poorly on road and bridge conditions. Only New Jersey and Hawaii have worse road conditions; and only Pennsylvania, Oklahoma and Iowa have a higher percentage of structurally deficient bridges, according to the report.

The report recommended, among other things, that the state reinvest savings from retiring transportation bond debt in maintaining and upgrading roads, and ensuring that the business community is involved in the development of a state transportation plan.

The Ocean State scored well on crime and safety, and health and wellbeing, though a Brown University survey found that the perception of the state was negative overall among Rhode Islanders. In the survey, 61 percent of respondents said they thought the state was headed in the wrong direction.

Rhode Island really struggled in the “cost of doing business” category. While it ranked 18th nationally in the “access to venture capital” category, it scored well in no other benchmark.

Rhode Island was in the bottom seven in the categories of business tax climate, regulatory burden, energy costs, and health insurance costs. Forbes Magazine even ranked Rhode Island 50th in the category of regulatory environment.

The Tax Foundation ranked Rhode Island’s unemployment taxes 50th, property taxes 46th and corporate taxes 42nd.

Regionally high energy costs also affected the state’s rankings, as did the average private employer health insurance premiums, which ranked fourth highest in the United States.

The report recommended, among other solutions, that the government resist increases in broad-based taxes and maintain the 2010 income tax reforms, review the corporate tax structure and work in cooperation with the Office of Regulatory Reform in order to “reduce bureaucratic hurdles.”

“Moving the needle begins with an honest assessment of what we do well and what we do poorly, and concerted, cooperative efforts to build on our strengths and improve on our weaknesses,” said Paiva Weed. “We are taking a frank and candid look at the factors that impact the state’s economy and laying the foundation for significant action, legislative and otherwise, to improve Rhode Island’s business climate.”

In a separate release, Gov. Lincoln D. Chafee announced the next step in a multi-agency effort to develop an integrated approach for Rhode Island’s land use, transportation, housing and economic development.

The R.I. Economic Development Corporation and the Division of Planning’s Statewide Planning Program have selected a consulting team to compile economic data, analyze the state’s regional performance and identify strengths and possible ways to improve Rhode Island’s economy.

The economic data and assessment results are expected to be received in a report and series of recommendations in February 2013.

To view the full RIPEC, Senate report, visit: www.rilin.state.ri.us.

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