EDITORIAL

Governor’s bleak presentation on economy pulls no punches

Posted 2/24/15

“Our economic engine is out of gas.” So reads one of the first slides from a PowerPoint presentation Gov. Gina Raimondo unveiled last week – one that painted a bleak picture while imploring …

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EDITORIAL

Governor’s bleak presentation on economy pulls no punches

Posted

“Our economic engine is out of gas.” So reads one of the first slides from a PowerPoint presentation Gov. Gina Raimondo unveiled last week – one that painted a bleak picture while imploring Rhode Islanders to collectively rally behind efforts to “stop the decline and spark the comeback.”

The data included in the presentation reinforced the conventional wisdom regarding the Ocean State’s current straits, although that makes the specifics no less disconcerting.

The state’s unemployment rate remains among the worst in the nation, and both its short- and long-term job growth figures also rank among the lowest in the U.S.

Rhode Island jobs are disproportionately found in low-growth industries. Middle-class jobs have been replaced with low-wage jobs in the decades since the decline of manufacturing, which hit Rhode Island fourth worst of any state in the union. Students, meanwhile, are not being effectively prepared to compete in the 21st-century economy.

As a result, the state is comparatively poor, with per capita income well below that found in neighboring Connecticut and Massachusetts. Nearly 20 percent of all income in the Ocean State is tied to aid, assistance, benefits and similar sources. One in six Rhode Islanders relies on food stamps, according to the presentation.

As if those facts and figures are not sobering enough, the governor’s presentation also included projections that the state’s structural deficit will grow to nearly $500 million by fiscal year 2019. The shortfall for the coming fiscal year is pegged at nearly $200 million.

Contributing to the structural fiscal woes, according to the presentation, are several areas in which Rhode Island has among the highest costs in the nation, including spending per Medicaid enrollee (second), first safety costs per $1,000 of personal income (second), public employee compensation (third), road costs per mile (fourth) and education spending (eighth).

The presentation cites several investment areas tied to job creation in which Rhode Island lags well behind nearby states, including tourism spending and funding for economic development agencies. It also points to tax policies that deter business growth.

“Continuing on our current path leads to a vicious cycle,” the presentation warns – one of stagnant job growth, increased taxes and fees and budget cuts that preclude investments in job creation.

Neither cuts nor tax increases, the presentation asserts, will solve the problem. The sales tax would need to be raised from its current 7 percent to 8.8 percent in fiscal 2017 to close the projected budget gap. Meanwhile, the $255.6 million shortfall foreseen for that year significantly exceeds the total budgets of 21 combined state agencies.

The governor’s presentation proposes instead a shifting of resources to focus on job growth, creating a “virtuous cycle” in which those investments in education, infrastructure and property tax relief expand employment opportunities and thus grow the state’s revenue base.

“The choice,” reads the presentation’s final slide, “is ours to make.”

The governor’s presentation was scarce on specific proposals, aside from strong hints that a handful of tax initiatives will be considered. Her budget plan for the coming year will, undoubtedly, provide far more clarity in that regard.

Hanging over all of this is the legal limbo surrounding the landmark 2011 pension reform law that Raimondo, then the state’s general treasurer, shepherded through the General Assembly. Lawyers for the state and public unions are currently wrangling in court over the start date for a trial, and over whether the different plaintiff groups should make their cases at separate proceedings. Following the failure of a proposed settlement last year, hope for a new agreement seems slim. At stake is approximately $4 billion the pension reform saved Rhode Island taxpayers – an enormous sum that, if the challenges prove successful, could go back on the books, with devastating results.

We appreciate Raimondo’s willingness to step forward and lay out the hard truths facing the state, as she did with the pension reform effort. We eagerly await further recommendations, and a more full outline of her plan of action. Bold leadership, more than ever, is sorely needed.

Comments

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  • falina

    More taxes. More spending. More of the same.

    Tuesday, February 24, 2015 Report this

  • jb2817

    Keep electing democrats folks, 70 plus years of dem majority in the General Assembly has brought us this panacea.

    Monday, March 2, 2015 Report this