Why is R.I. always ranked last in business friendliness?

Rhode Island is competing with 49 other states to both attract and retain business. Without a vibrant business culture, it is difficult to envision how Rhode Island can sustain its fragile economy. I am reminded of the ending of the movie “Thelma and Louise” as our leaders appear to be aimlessly driving our state off the fiscal cliff.
I was reading the recently published Small Business Friendliness Survey report by the Ewing Marion Kauffman Foundation that ranked Rhode Island last in that category.
In addition, The Center for Freedom and Prosperity last year integrated many similar national reports, including the CNBC report that ranked Rhode Island dead last in business friendliness in each of the last two years. The center’s report displayed the Rhode Island national rankings in 53 separate line items in the following categories (with rankings):
• Tax burden – D-
• Business climate – F
• Spending and debt – D-
• Employment and income – D-
• K-12 education – D+
• Energy – D+
• Infrastructure – F
• Public sector – D
• Health care – D-
• Living and retiring in Rhode Island – F
If you question why businesses are not relocating to Rhode Island, the answer is listed in the report card above. Why would any company move to a state with this overall business climate? Unfortunately, this is the Rhode Island business brand.
Of even greater concern is that Rhode Island’s business community operates currently under these oppressive conditions.
Two months ago Ted Nesi, WPRI investigative reporter, issued a sobering report that 46,000 Rhode Islanders between the ages of 25 and 54 years old moved out of our state between 2006 and 2012. These are the prime earning years for a person and, as they left, they effectively lowered our tax base. This means that taxes, fees and other means of income generation must increase to balance the existing public budgets. The proposed toll for crossing the Sakonnet Bridge is a prime example of additional fees.
By the way, if those 46,000 Rhode Islanders reported to have left had stayed and were still looking for work, the unemployment rate in our state would be nearly 20 percent and not the 8.8 percent reported in April.
The unfunded pension liabilities for municipalities are staggering. Fifteen of our state’s 39 municipalities are 60 percent or less funded using a 7.9 percent presumed return. If a more conservative, and might I add realistic, 5 percent ROI were used, all of Rhode Island’s municipalities would be below the 60 percent threshold. If any company were considering moving to Rhode Island, it would certainly look at its financial exposure regarding these pensions and the high risk it represents. Our K-12 school-system performance, by all national rankings, is well below that of Massachusetts. If the head of household secured a job in Rhode Island, I suspect they would move to Massachusetts because of the superior K-12 school system. Yet, while the need for change in the Rhode Island educational system is apparent, teachers seem to want to shoot the messenger – Education Commissioner Deborah A. Gist – rather than roll up their sleeves to lead positive change.
Currently, lawmakers are considering a bill to rename the R.I. Economic Development Corporation. The EDC does not need a new name. What Rhode Island needs is a value proposition that has some substance and market value. Our leaders’ focus must be on the Rhode Island business brand and not rearranging the deck chairs on the Titanic.
Our current brand suggests that dramatic change is required if Rhode Island is to get off life support. There are solutions that our leaders could consider that would make a statement to the country that our state is “open for business,” but it will take courage to make it happen. Some suggestions might be:
• Integration of services to reduce costs. Perhaps have each of the five state counties have one fire department, one police dept, etc.
• Rhode Island becoming a lean state. The R.I. Department of Environmental Management has embarked on an impressive program over the last year to become lean, and the results to date have been reported to be most impressive.
• The NEA could drive change in our K-12 education system. I have never met Ms. Gist, but she is a change agent, and change agents are usually not warmly embraced. Massachusetts had a similar reaction 10 years ago, and now they have one of the top K-12 programs in the country.
We as taxpayers and business owners must demand a better performance from our leaders. Why does Rhode Island always seem to be at the bottom? What is our state’s strategic plan to lead us out of this pending dive into the abyss?
If you are a taxpayer and/or a business owner, you must ask the “Why?” question and demand viable solutions from our leaders and not rhetoric. Your fiscal future is at stake. •


Larry Girouard is CEO of The Business Avionix LLC, a business consultancy.

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1 COMMENT

  1. 100% correct. No large employer in their right mind is even considering moving into a state with such continually awful rankings for business climate. I don’t think the RIEDC should be so worried about bringing new companies into RI, but it should be very worried about keeping the companies it already has. Doesn’t the GA understand that businesses will only take so much before they find a better offer from a more business friendly state? In 10 years, this state could be a business wasteland. I hope the voters (rich and poor) undestand that the GA is stealing the future of RI by driving away employers. We can’t all live on public union jobs and entitlement payments.