01/24/13 – Senate Improving Rhode Island’s Business Climate Summit
So, the Paff Auditorium at URI Providence Campus is much harder to access than Nazarian at RIC, but unlike the House, the Senate has provided peanuts and snack bars on all the tables.
Sen. President Teresa Paiva Weed welcomed everybody and noted that this is the seventh Senate economic forum.
Now URI President David Dooley is offering another welcome. “I appreciate the work that the Senate has done” to focus the state’s attention on the economy.
At first, the only other media was WPRI’s Ted Nesi, and he and I each had our own table. The Providence Journal showed up, though, and chose to sit with Ted.
Dooley says research universities, like URI, are unique in their role to create economic engines. He says URI can help (with reference to RIPEC’s “Moving the Needle” study) develop a strategic plan.
He especially supports RIPEC’s recommendation to increase funding for higher education (naturally).
Dooley wants to extend the commuter rail from Wickford to the URI Kingston campus. (Incidentally, nobody here appears to be wearing red… or orange… pants. That’s too bad.)
First panel is “State Rankings and Policy Recommendations,” featuring Marie Ganim, Senate Policy Office, and John Simmons, RI Public Expenditure Council.
Ganim is going over the “Moving the Needle” study. They looked for all of the “credible” national rankings and such and intend to go through them every year. Red is bad, yellow’s OK, and green is good.
“This is a sampling of some of the things we can do just to begin” turning the state around.
Simmons says the four measures they used to determine how we’re doing economically are per-capita personal income, state budget deficits, per-capita GDP, and total employment. The first two are green, the third is yellow, and the last is red. It seems to me the last one is the one that really matters. What do state budget deficits have to do with the economy? Rhode Island is its people, not its government.
Minor Leader Dennis Algiere shouted out, interrupting the presentation to ask what “deficient” means when it comes to roads and bridges.
Simmons jokes that he only has 30 seconds per slide, but all the slides are text only.
A note I’d offer on Algiere’s interruption: It seemed to me that he was implying that RI’s low ranking on infrastructure might not be “apples to apples.”
Meanwhile, Ganim has gone on to point out that RI is red for business tax climate, regulatory burden, energy costs, and health insurance costs, and yellow in access to venture capital. She downplayed some of that though, saying that we’re in line with New England.
She also highlighted that RI is high for energy efficiency, which doesn’t seem to me to be inconsistent with high costs. You’ve got to be efficient just to bring the bills down. Frankly, I’ve always figured that’s the reason folks on the liberal side like to drive costs up, human suffering be damned.
And then there’s the establishment-player favorite, quality of life. Green for crime and safety, green for health and wellbeing, and yellow for poverty rate.
I’ve suspected that the poverty rate ranking isn’t “apples to apples,” in the top Republican’s phrase a few minutes ago. Cost of living is high, around here, but the poverty level measures tend to be national dollar amounts. More dollars can be equal poverty, in this state.
Ganim says both RIPEC and the Senate are committed to looking into the “benefit cliff” that makes it less attractive for people on public services to find their own income.
Sen. Walter Felag notes that he was on a Senate committee a few years ago that investigated and made recommendations related to the Economic Development Corp., but none of them were heeded. The question is how vital EDC should be. Simmons says EDC is important, but “not necessary” as the end-all, be all.
Felag says EDC said “to heck with this particular report.” “Maybe we should just blow them up, because they’re not doing what the legislature wants them to.” (I’m not sure the public should take that statement at face value.)
Sen. Lou DiPalma says that fully half of the measures are red or yellow, and he asks if there’s “low-hanging fruit” they can focus on as a first step.
Paiva Weed says most of the lobbying activity of the business community is to try to stop things that the legislature is threatening to do, rather than for positive changes. She also says all of the interest groups lobby for their own narrow areas of concern. (I’d suggest that the legislature’s approach… tax this, not that, regulate this, not that… lends itself to that approach, and it seems to be a structural intention within the broken system that is our government.)
Paiva Weed’s answer to DiPalma, “we’re going to do as much as we can.”
Sen. Harold Metts refers to incarceration as the “new Jim Crow.” “I think as we move along this area… we can’t forget about that population.” He’s talking about the problem of recidivism of people who return to prison, having been released.
Paiva Weed concurs. Sen. Juan Pichardo notes that minorities’ unemployment rate is more than twice as high as the overall number. He wants Simmons to “highlight two things that can be done in the inner city.”
That question seems to be much beyond the scope of this study, but Simmons answers citing programs in the Department of Education to address the education gap between whites and minorities. And apprentice programs.
I’d offer the suggestion that eliminating the sales tax would create tens of thousands of jobs, many of them in lower-skill areas. Meanwhile, very strong school choice reforms have been doing wonders to close the gap in Florida and would work here.
Sen. Leonidas Raptakis raises the issue of regulation reform and taxes that hit small businesses.
Simmons, “The Senate and others actually did that last year.” He’s referring to the office of regulatory reform and Leslie Taito. “That needs to be done systemically.”
Sen. Daniel DaPonte asks how RI matches up with other states with similar personal income on the measure of disposable income.
He says he bumps into people who’ve moved just over the border, and they cite things like property taxes and car insurance as reasons that they moved.
Simmons says it needs more study.
Sen. Edward O’Neill says manufacturing trends suggest that jobs are returning to the U.S., and he wonders if Rhode Island can offer incentives to capture some of that.
Simmons answered by saying that there is a plan. The he segues into thanking Paiva Weed for her leadership and for bringing RIPEC on board for this study.
Paiva Weed says that questions such as O’Neill’s are “ideal research topics” for the government-university higher education collaborative the governor announced last week.
Next panel: “A Shared Agenda for Economic Competitiveness,” featuring Michael Sabitoni, Construction and General Laborers Local 271, and Laurie White, Providence Chamber of Commerce.
Paiva Weed says these two have “really been working together to move this state forward.”
White begins with statements of affection for Sabitoni and thanks to the Senate for their good work with this study.
White says the Moving the Needle study is by far the most important document related to economic development. The next best is a National Governor’s Association study that says that growing state economies requires essential policies to “put us into a growth mode.”
* Having a competitive tax and regulatory environment “sets the stage.”
* Putting entrepreneurial activity “at the very top of a state’s economic agenda.”
* Incenting large and small organizations to move into a “growth mode.”
I apparently missed one bullet point, but the last was focusing on businesses that are growing.
“The key” is having a lot of motivated and innovative people in your state. (I’m glad somebody actually studied that; I’d have never thought of it.)
Somebody in the audience asked her to repeat the catch phrase that she used. White says it’s hard to say because of all the Rs: “the iron law of the modern economy.” I count two Rs, but then again, I’m from New Jersey.
She says “our killer app” is “meds and eds.” Add in food services and oceanography, and “these are areas in which Rhode Island has a distinct competitive advantage.” Being a free-market kind of guy, I wonder why the state government should emphasize an area in which we’re already strong. If it’s advantageous to start a particular kind of business here anyway, people will do it.
Not everybody will want to (or be qualified to) go into government-specified areas. Why not just focus on making it easier for every Rhode Islander to live and work?
Lots of talk about “hyper growth mode,” “vision,” “a crying need for a long-term strategic plan.”
She’s going to put forward a “new idea” that everybody can “get excited about,” which she’s discussed with Dooley and Sabitoni.
It builds on the proposed joint nursing school between RIC and URI, and she challenges us to think even bigger and more inclusively: a health sciences facility, public-private partnership in the knowledge district opened up by the move of I-195. “A sprawling campus that really fosters an unprecedented degree of collaboration.”
She’s talking public-sector construction jobs. She’s talking “the big idea” of brain science, which is “the last frontier in modern medicine.”
I’ll give White credit: this is the most specific proposal that I’ve heard anybody make with respect to a “vision” for Rhode Island, but it therefore falls to the biggest problem with those sorts of “visions.” Why should elected leaders, organizational business organization leaders, and labor leaders be authorized to survey the universe of markets and economic activities, pick a massive project costing millions (billions?) of dollars, and commit the state to a very specific economic direction with a 38 Studios level of speculative risk, using up public resources, high-value land not the least?
She’s running through all of the illnesses related to the brain. I have to say this is kind of weird. Why is she marketing brain research? It’s like a bunch of insiders did some brainstorming (wordplay intended) and jumped up and danced around the board room when somebody struck on the Big Idea of the Brain.
Sabitoni’s up, and he’s emphasizing that jobs are great, but people need careers, including trades.
He goes on to explain why people with projects would look to a construction labor union as a sort of contractor supplying workers. He says it’s the consistency of the workers. (As a former non-union carpenter who worked with a lot of various guys, including some who had been in the union but couldn’t get work, I’ll reserve comment in this context.)
Sabitoni is disputing the notion that “government doesn’t create jobs,” and he’s listing a bunch of jobs that his members now have because of government spending.
I think the piece he’s missing is that government takes money from the economy in order to put it into the economy. All things equal, that’s a wash; I’d argue that government’s inefficiency (including mandatory union labor costs) results in a net loss of jobs and wealth. (Of course, there’s an asterisk for debt, where the government borrows money that nobody else could; then it’s taking wealth from the future.) What he means is, government creates jobs for his union.
Sabitoni is arguing for rebranding Rhode Island. (Status quo, status quo.)
He likes the brains idea.
I wonder if White’s unstated motivation is to put Rhode Island at the forefront of the global economy after the zombie apocalypse that I keep hearing about around the Internet. Not sure whether roads and bridges are as necessary in that environment.
These summits are lots of fun and all (especially when there’s free snack food on the table), but just once (once) I think it would be helpful for the hosts to find people who hold a fundamentally different view so that they could have a fruitful debate with the familiar voices that continue to call for mo’ money, mo’ money.
Sabitoni’s working toward wrapping up, and he says that we need to invest in higher ed so that they can build more facilities… smattering of laughter from the audience.
Paiva Weed takes the podium, saying it’s “exciting to hear from the two of you.” She says Sabitoni should be prepared to attend a lot of hearings, because in the Senate, everything is going to be addressed through the lens of economic development. (Actually, the bills submitted thus far support that characterization, even if most of the proposals are tepid, at best.)
We’re now in the dinner break. It’s funny: a few months ago, I attended a workshop on public speaking, and one of the spontaneous exercises was to grab a prop off a table and use it to talk about our home state. (It was in Philly.)
I picked up a rubber brain and said that if the whole room represented the land area of the United States, then Rhode Island was roughly the size of that brain. Perhaps I wasn’t the only Rhode Islander there.
Break is still on. Lots of nodding and smiling going on. Meanwhile, the good thing about being a small-government guy is that it’s harder to accuse me of being ethically compromised because I ate a bag of government peanuts and a complimentary carrot cake rectangle.
And we’re back to the final panel, “Business Reaction to ‘Moving the Needle.” Panelists: Hannah Chung, COO of Sproutel; Michael DiBiase, Senior VP of State Government Relations for Fidelity Investments; Tim Hebert, CEO of Atrion Networking Corp.; and Jonathan Fain, president and CEO of Teknor Apex Company.
Hannah Chung says she’s not from RI, but grew up traveling between the Midwest and South Korea. Her company specializes in interactive toys for disabled kids, like a teddy bear to help children with diabetes. She’s in RI now because her cofounder attended a conference here and came across a program to help them out if they moved to the state.
Once here, they came across Betaspring, which helped them stay in Providence (while they finished their courses at Northwestern via Skype).
It’s a good story for non-government activity, I’d say.
She highlights RI’s size as an asset, mostly for making contacts. The location between NYC and Boston is good, too.
One must wonder how hoppin’ RI’s economy could be if its government stopped abusing its natural advantages in order to leverage taxes and regulations for the benefit of inside interests.
By the way, I much prefer the teddy bear theme to the brains theme. Although, I can’t resist offering the suggestion that maybe RI should chase down the cutting-edge industry of teddy bears with brains.
Chung says it would be “awesome to manufacture our bears in Rhode Island.” It would be “really, really amazing” if there were a way to attract the manufacturing side of high tech to Rhode Island.
She says there should be a way to help people with “these small, creative ideas.” (In my right-wing world, we call that the free market.)
Chung also thinks it’d be a great thing if Rhode Island could devote some effort to attracting companies with female founders.
Jonathan Fain is up, and he’s saying that manufacturing is critical. “You should be chasing guys like me,” because manufacturers make products here, but 98% of their clients are out of state, so they bring capital into the state.
Fain: One of the things that makes manufacturing tough, in RI, is that the state is “very proud that we have the toughest fire codes in the country.”
He offers that as an example of the problems with RI’s regulatory environment. It makes it very difficult for the small tool shops and such to stay in business.
Fain calls for making the Port of Providence a “fast port system.”
“Rhode Island doesn’t exist in this big, global economy.” A port, he says, would help to connect to it.
This week, Green airport lost its only international flight, he says. “We’re going in the wrong direction.”
Fain wasn’t kidding at the outset when he said his message was going to be quite different from Chung’s. He’s going through all of the difficulties that make it tough going for businesses here and tricky to persuade people to come here to do business. Folks who live here know the list he’s working through… taxes, regulations, costs, education, etc. etc.
Manufacturing can move “a lot of those needles, but we’re not going to move any of them quickly.”
He thanks the legislators for creating legislation that lets his company go outside the state to bid for electricity. A moment before, he expressed concern that a small state like RI couldn’t get its hands around its healthcare costs… I think the two points might have a connection.
Fain says “thank you” to the idea of cutting the corporate income tax, but points out that the state tax is a small part of the national tax, so the real challenge, to be competitive globally, is to stop fighting state against state, but to change the national attitude.
Now Hebert says it took him 30 years to be comfortable calling himself a Rhode Islander. Wants to teach people to use the turn signals in their cars. Other jokes about Rhode Islandese. He moved from Woonsocket to North Providence to Cranston and realized that he needed a translator along the way.
Hebert has brought the “we need to be positive” vibe to the summit. He doesn’t think RI has an economic problem. We’re just too negative. “This is a belief issue.”
Got himself applause with that one.
He says Rhode Island chases “the next big thing,” and that’s a problem. “I believe we’re sitting on a goldmine, here.”
He says his own research shows that getting a new customer costs him twice as much as expanding an existing customer, and it’s twice as much again to enter a new market. The government should focus on small businesses. He mentions 38 Studios. “If just 1% of that money had gone to a company” like his, they could grow quickly.
He really emphasizes workforce development. “We need to adopt a model of lifelong learning.” (Sounds like he should advocate for school choice, to change the education model, letting people go where their interests, aptitudes, and life circumstances bring them.)
Michael DiBiase starts by lavishing praise on the RIPEC report.
He’s noting the importance of tax stability and reforms. Specifically, he mentions lowering the tax rate in 2010. (Even though, I guess, that amounted to a pretty substantial tax increase.)
DiBiase wants improved trains to get around the region… greater speeds, more room for baggage. (The slogan is taking shape… better trains for teddy bears with brains.)
Now he’s talking about the “national issue” (“this is not a Rhode Island problem”) of technology professionals, especially the shortage of women (apparently Fidelity doesn’t have binders full of them).
“‘Strategy’ does not only mean having a plan, it also means making decisions,” such as opting not to pursue some options.
You know, with all of the innovative ideas and unique, very specific, interests being stated, I have to wonder: How is it even possible that nobody looks at this varied group of people touting the need for innovation and comes to the conclusion: “Hey, let’s get government out of the way!”
Sen. Joshua Miller wants to know what the businesses use to attract young professionals to Rhode Island.
Hebert says they emphasize bringing in interns. (I wonder if that keeps his average salary up, by not having entry-level employees.) They also have a formal apprenticeship program to bring in career changers and such. Most of them are not from the state.
Chung says the initial funding is very important. Help them get funding and space; increase grant programs.
Now Senate Finance Chair DaPonte is offering closing remarks. He says they’ve heard some “pretty invaluable” suggestions.
DaPonte says the currently proposed budget is the best that’s been put forward in the past five years.
And he mentions that Moody’s outlook was more negative for RI in November than it had been in May. The “dysfunction” in Washington, D.C., is a threat, he says, and Rhode Island needs to focus on “sound, practical, and sensible budgeting.”
Wonder if that means no high-speed trains for teddy bears and brains. One hears the echo down the economic hole: “status quo… status quo… status quo.”