Wednesday, June 29, 2011

We're #50, we're #50, we're #50!!!

Congratulations to Rhode Island on its recent ranking of #50, worst in the entire country, for "America's Top States for Business 2011" by CNBC (here is a link to an interview with CNBC's Scott Cohn about this). This designation is richly deserved. Our state's leaders should be very happy, as they have worked tirelessly over the last few decades laying the groundwork that would allow us to attain this prestigious designation. Think of all the publicity Rhode Island will now receive from this, something a substantially tourism-driven economy like ours thrives on!

Rhode Island actually "improved" its ranking this year, in the sense that we do things here, moving from "only" #49 last year to the number 50 this year. This shows that Rhode Island can lead the nation, just as it did a few years ago when it had the nation's highest unemployment rate, beating even Michigan. As I am writing this, Rhode Island's jobless rate is ranked third highest in the US, so there is clearly more work to be done. Let's get moving Rhode Island state leaders!

Forgive my sarcasm. It has a very substantial basis and long history based on my continual disappointment with the way things are done (or not done) here.

Looking at this survey, it is clearly the case that any such survey comparing all fifty states embodies elements of "apples and oranges." Yes there are arbitrary values and weights that are part of a survey that arrives at a single value or score to characterize the entirety of a state's economic performance. For Rhode Island, though, it is not that we scored among the lowest in all of the categories covered. We failed to score very well in any of the categories, something that I recall discussing going as far back as the 1990s. In fact, I even formulated a rule to anticipate Rhode Island rankings:

In any fifty-state economic comparison, Rhode Island will tend toward its alphabetical ranking of 39th.

Our state's best category score was 24th, a tie between Quality of Life and Education. As CNBC states for the Quality of Life category: "We scored the states on several factors, including local attractions, the crime rate, health care, as well as air and water quality." For education: "We looked at traditional measures of K-12 education including test scores, class size and spending. We also considered the number of higher education institutions in each state." Rhode Island ranked its worst in Infrastructure & Transportation (#49). 

What do the categories Education and Infrastructure & Transportation have in common? They both pertain to infrastructure. Infrastructure & Transportation pertains to our physical infrastructure, while education deals with our human capital infrastructure (training and skills of our population). Both remain seriously deficient. We have horrible roads and a labor force with grossly inadequate skills. It is important for us to own up to the fact that this information is hardly a secret to anyone, except perhaps any Rhode Island leader who chooses to live in a state of denial about Rhode Island's present economic realities. And, it shouldn't take very long for anyone to realize that Quality of Life, Education, and Infrastructure & Transportation are all interrelated, especially in an information based economy like that of Rhode Island. So, whenever we take actions to improve one of these categories, we indirectly move toward making improvements to all three. Does anyone want to argue that the above categories are independent of the cost of doing business here?

I'll let readers look at the survey results in greater detail, viewing all of the categories and the ranking for each state. But it shouldn't come as a surprise to anyone that Rhode Island ranked very badly on: Business Friendliness (#48); Cost of Doing Business (#46); and Cost of Living (#43). 

Let me finish by stating that the recent budget proposed by the Rhode Island legislature should not be viewed in the context of being "not as bad as the originally proposed budget," but in terms of whether or how it helps our state's national ranking problems and its business climate overall. As I have stated all too many times over the years, how we balance our state's budget is every bit as important, if not more so, than balancing it in general. Rhode Island did make some cuts to spending, but based on my strong suspicion that projected revenue growth has been overstated for FY2012, not enough spending cuts have been made. This will almost certainly result in yet another "January Surprise," as more budget changes will be required in January to ultimately balance the FY2012 budget. Let's hope our state's leaders prepare for this ahead of time, although that is exceedingly unlikely given their history. How can Rhode Island  be a "leading" state when the standard operating procedure of its leadership is entirely reactionary, not proactive. The answer has been that we do lead -- in things we never wanted to lead in, such as our state's worst business climate ranking.

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