Download REPORT ON THE 2009 HOUSE ECONOMIC FORUM

S Y N O P S IS O F P R E S E N TA T IO N S A T 2 0 0 9 HO U S E
E CO N O MI C F O RU M
D e c e mb e r 1 s t , 2 0 0 9
PREPARED BY THE HOUSE POLICY OFFICE
December 22nd, 2009
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TABLE OF CONTENTS
A National/Regional View of the Economy ........................................................ 4
I) Aaron Klein - U.S. Department of the Treasury, Deputy Assistant for Economic Policy ..........................4
II) Robert Tannenwald – Vice President of the Federal Reserve Bank of Boston; Director of the New
England Public Policy Center .........................................................................................................................5
III) Open Forum ..............................................................................................................................................8
Education and the Link to Economic Development ........................................ 10
I) Bryan Hassel, Co-Director of Public Impact ...........................................................................................10
How Other States are Addressing the Downturn ............................................ 12
I) Arturo Perez, Program Principal of Fiscal Affairs Program, NCSL .........................................................12
II) Christopher Whatley, Washington Office Director, Council of State Governments ...............................14
III) Open Forum ............................................................................................................................................16
A Rhode Island Economic Perspective ............................................................. 17
I) Edinaldo Tebaldi, Professor of Economics, Bryant University ................................................................17
II) Edward Mazze, Professor of Business Administration, University of Rhode Island ..............................19
III) Peter Howitt, Economics Professor, Brown University .........................................................................20
IV) Open Forum ...........................................................................................................................................21
The Growth of Rhode Island’s Knowledge Economy ..................................... 22
I) Laurie White, President of the Greater Providence Chamber of Commerce ............................................22
II) Edward Wing, M.D. – Dean of Medicine and Biological Sciences, Alpert School of Medicine, Brown
University......................................................................................................................................................24
III) Jack Templin – President of ...................................................................................................................25
IV) Allan Tear– Co-Founder of Betaspring ..................................................................................................26
V) Stephen Lane – CEO and Co-Founder of Ximedica ...............................................................................27
Rhode Island’s Green Economy ........................................................................ 28
I) Scott Wolf, Executive Director of .............................................................................................................28
II) Robert Leaver, Founder of New Commons .............................................................................................29
III) Chris Benzak, Managing Partner for Newport Biodiesel .......................................................................30
IV) Keith Hartley, CEO of ............................................................................................................................31
V) Open Forum .............................................................................................................................................32
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A National/Regional View of the Economy
10:00am – 11:00am
I) Aaron Klein - U.S. Department of the Treasury, Deputy Assistant for Economic Policy
Mr. Klein presented a snapshot of the national economy. He noted the positive trends of the economy,
indicating that Gross-Domestic-Product (or “GDP”) grew by three (3%) percent last quarter while private
expenditures rose for the first time since spring of 2008. Mr. Klein further discussed that consumer
demand appears to be improving and mortgage rates remain at historic lows.
Mr. Klein tied positive economic trends to several of the Obama administration’s American Recovery and
Reinvestment Act (“ARRA” or “the stimulus”). He estimated that approximately four-hundred-thousand
(400,000) families will be receiving two-hundred million ($200,000,000) dollars in tax cuts. Mr. Klein
also stated that nearly six-hundred-and-fifty thousand (650,000) American jobs were created or saved by
the stimulus efforts.
Regarding the impacts on Rhode Island, Mr. Klein announced that Rhode Island has received fivehundred-and-nine million ($509mil) dollars in stimulus funds. Furthermore, Mr. Klein indicated that the
Cash-for-Clunkers program has distributed an additional ten million ($10,000,000) dollars to the Rhode
Island economy.
Mr. Klein’s outlook on the national economy is:


2010: Expected Growth of approximately 2.5%
Unemployment rate to remain above 10% percent for the first half of 2010.
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II) Robert Tannenwald – Vice President of the Federal Reserve Bank of Boston; Director
of the New England Public Policy Center
Mr. Tannenwald discussed why Rhode Island’s recession is deeper than in surrounding states. He indicated
that the root cause of the recession was the combination of a severe liquidity crisis with a larger-thanaverage housing bubble that popped prematurely.
Mr. Tannenwald’s presentation centered on four (4) key economic areas: (1) Unemployment, Employment,
and Overall Growth; (2) Housing; (3) Prices and Consumer Confidence; and, (4) New England’s Fiscal
Situation.
Mr. Tannenwald indicated that Rhode Island’s poor labor market performance was precipitated by rapid
economic growth between 2000 and 20071. Consequently, Rhode Island’s economy peaked ten (10) months
early, and was therefore already suffering from a declining housing market and rising unemployment when
the larger financial crisis hit the rest of the nation.
Mr. Tannenwald further explained that the two-pronged nature of Rhode Island’s recession manifested itself
in greater and more broad-based contractions of its labor market (see Figure 1 - Slide #12).
Employment growth by industry: the pain is widespread
Percent Change, October 2008 to October 2009
Source: U.S. Bureau of Labor Statistics.
Note: Data are seasonally adjusted.
Figure 1 – Slide #12
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Approximately an eighteen (+18%) percent increase in economic activity.
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Mr. Tannenwald indicated that the severity of contraction in Rhode Island’s housing market can also be
attributed to the rapid growth it experienced between 2000 and 2007.
Mr. Tannenwald stated that Rhode Island experienced a more pronounced housing price bubble than other
New England states. As a result, housing prices in Rhode Island rose more steeply, and began to fall
sooner than in the other New England states (see Figure 2 – Slide #18).
Housing prices rose more steeply in Rhode Island and New
England than the U.S. and began to fall sooner
Percent Change from Year Earlier
FHFA Home Price Index
Through Q3, 2009
Not Seasonally Adjusted, 1980 Q1 = 100
Rhode Island
New England
United States
Source: Federal Housing Finance Agency.
Figure 2 – Slide #18
Mr. Tannenwald also indicated that while consumer confidence throughout New England fell dramatically
over the last year-and-a-half, the consumer-price index for both the Boston Area and the nation as a whole
appears to be on the rebound.
Mr. Tannenwald proceeded to illustrate that the year-to-year growth in total revenue collections offer
additional evidence of premature economic decline with Rhode Island being the only state to experience
three consecutive years of revenue contractions (see Figure 3 – Slide #25).
Figure 3 – Slide #25
Source: New England Public Policy Center at the Federal Reserve Bank of Boston, based on monthly revenue statements from respective state
revenue offices.
Note: Revenue collections for FY10 are through October of 2009, except for Maine which only has released data on collections through September.
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Mr. Tannenwald also stated that, contrary to the belief that Rhode Island’s fiscal woes stem from an
entrenched and swollen bureaucracy, government employment throughout the state has been reduced
significantly and remains lower than the New England average.
To conclude, Mr. Tannenwald reviewed Rhode Island’s tax climate, illustrating that while Rhode Island
ranks high in terms of state and local business taxes as a percentage of gross-state-product (11th overall)
for FY 2008, its business tax climate index ranked the lowest in New England (44th overall).
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III) Open Forum
Representative Baldelli-Hunt questioned Mr. Klein on whether or not the federal government will
consider loosening restrictions of annuity / retirement accounts to allow people earlier access to their
savings. Mr. Klein responded that the nation has witnessed a “tremendous rebalancing” of consumer
savings as a result of the recession and the policy approach of the Obama Administration surrounds
galvanizing economic activity through staggered increases in personal income as opposed to economic
stimulus through lump-sums.
Representative Ehrhardt then posed the question of what will happen when the stimulus funds runs out.
Mr. Klein reassured him that the stimulus’ aim is not to build in structural deficits but to jumpstart the
economy in the short-term.
Representative Trillo went on to ask why Rhode Island has such high unemployment and what policy
makers can do about it. Mr. Tannenwald reiterated his theory that the combination of the financial
meltdown and an abnormally large housing bubble put Rhode Island at a critical mass leading to a vicious
economic cycle of high foreclosure rates, followed by greater unemployment, followed by more
foreclosures ad infinitum. He recommended that lawmakers start at the household level and look for ways
to provide financial aid to people running the risk of foreclosure.
Representative Trillo followed-up by asking if laws should be considered that make it more difficult for
houses to go into foreclosure. Mr. Tannenwald responded that laws that offer greater consumer
protections should be considered though he did acknowledge that relatively high tax burdens continue to
hamstring government’s ability to boost revenues.
Representative M. Rice then asked Mr. Klein if there exists a critical index for underemployment. Mr.
Klein responded that there indeed was such an index.
Representative M. Rice further inquired into whether or not progress has been made in fixing the
regulatory system to prevent future housing bubbles. Mr. Klein responded that the Obama Administration
has called for much stronger regulation in this area including the establishment of a council with the
power to intervene in the housing market.
Representative Ferri then questioned both speakers on whether there are policies being considered that
look to encourage bank’s willingness to help struggling mortgage owners refinance. Mr. Tannenwald
responded that the Federal Reserve Bank of Boston recently held three conventions that brought lenders
together with mortgagees to help arbitrate refinancing. He went on to announce that one-in-three people
left these conventions with some sort of refinancing plan in place.
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Chairman Constantino then posed the following three-part question:
-
Part (a) – What happens when stimulus funds runs out?
Part (b) - Will this recession be a “double-dip recession”2?
Part (c) - When should we be concerned with the size of the national debt?
In response to Part (a), Mr. Klein acknowledged the difficulty of matching stimulus allocation with
recovery. Mr. Tannenwald added that the Obama Administration needed to act and that all of the options
available were limited.
Responding to Part (b), Mr. Tannenwald presented the analogy of manually downshifting when trying to
find the right gear, likening the hiccup-experience of the engine to that of the national economy as it
attempts to rebalances itself to full-employment parity.
Finally, in response to Part (c), Mr. Klein indicated that the best thing we can do for the deficit is to
jumpstart the economy in the short-term. Mr. Tannenwald responded by reassuring Representative
Constantino that the United States-China partnership is characterized by a mutually assured stability.
Lastly, Speaker Pro Tempore Lima inquired into whether there was federal authority to further regulate
the banking sector. Mr. Klein responded that there is a new regulatory regime in place that looks to both
expand consumer protections as well as expand the set of tools necessary to deal with these bubbles.
A “double-dip recession” refers to a recession followed by a short-lived recovery, followed by another
recession.
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Education and the Link to Economic Development
11:00am-11:30am
I) Bryan Hassel, Co-Director of Public Impact3
Mr. Hassel began his presentation by illustrating the magnitude of economic growth that can be achieved
through improvements in educational performance. He identified two areas in particular where small
improvements result in large payoffs:
EDUCATION IMPROVEMENTS
PAYOFF
(in terms of GDP output)
(1) Closing of the “Income Achievement Gap4”
$400-$670 BILLION
(2) Improving Education in Low-Performing States
$425 - $700 BILLION
Mr. Hassel then explained that the reason education improvements result in such large gains in economic
output is because more education directly translates into; (1) greater income for those being educated; and,
(2) lower enrollments in Public Assistance programs.
(1) Higher Median-Incomes
Figure 4 – Slide # 7
(2) Lower Enrollments in Public Assistance Programs
Figure 5 – Slide #8
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Public Impact is a national education policy consulting firm based in North Carolina.
“Income Achievement Gap” refers to the disparity in academic performance between low-income
students and high-income students.
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Mr. Hassel further stated that the quality of the education is also significant because it accurately predicts
future levels of education attainment as well as future earnings.
Mr. Hassel went on to discuss the fiscal payoff for individual states, indicating that higher average levels
of education attainment lead to greater lifetime tax revenues (see Figure 6 –Slide #15).
Figure 6 – Slide #15
Mr. Hassel explained that Rhode Island has one of the nation’s largest racial achievement gaps and even
small improvements in the amount/quality of education, especially for the poorer populations, can help
drive economic growth regardless of vicissitudes of the market.
He pointed to two specific areas of opportunity for Rhode Island where greater support of education
attainment and quality could lead to significant economic growth:
1. Closing the Racial Achievement Gap: $315 - $430 million of gross-state-product (or “GSP”)
2. Achieving the Regional Average: (1) Achieving Connecticut performance level: $800 million - $1
billion; and, (2) Achieving Massachusetts’ performance level: $1.5 – $2.1 billion.
Mr. Hassel concluded with the following policy recommendations he hopes the legislature will consider:






World-class standards to align assessments;
Robust data-sharing and transparency;
Intense focus on teacher and leader quality;
Vigorous new school creation;
Truly dramatic changes for failing schools; and,
Dynamic funding system5.
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Dynamic Funding System was described as having the following characteristics: (1) Transparency; (2)
Money following children; (3) Funding based upon needs; (4) Elasticity to enrollment changes; and, (5)
Incentives to get results (especially for poor children).
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How Other States are Addressing the Downturn
11:30am-12:30pm
I) Arturo Perez, Program Principal of Fiscal Affairs Program, NCSL
Mr. Perez presented a summary of state fiscal conditions throughout the country. He indicated
that the current revenue situation is nearly unprecedented (with the exception of the 1930’s),
with states reporting a total estimated budget gap of nearly $386.8 billion dollars.
He proceeded to illustrate the Pre-Enactment FY 2010 budget gaps facing individual states;
underscoring the fact that a total of eighteen (18 ) states hold double-digit deficits (as a
percentage of General Funds) with seven (7) states maintaining deficits over twenty (+ 20%)
percent. (See Figure 8 – Slide#6)
Pre-Enactment FY 2010 Budget Gaps
(As a Percentage of General Funds Budget)
Rhode
Island
Delaware
Puerto Rico
0.1% to 4.9%, n = 6
5% to 9.9%, n = 5
10% to 19.9%, n = 18
More than 20% n= 17
Not applicable or not reporting, n = 5
Source: NCSL survey of state legislative fiscal offices, 2009.
Figure 8 – Slide #6
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Mr. Perez went on to outline the following four approaches states have adopted to close their budget
gaps:
(1) Spending Cuts
(2) Use of ARRA Funds
(As a Percentage of Actions To Close FY 2010 Budget Gaps)
(As a Percentage of Actions To Close FY 2010 Budget Gaps)
17.0%
3.0%
48.0%
36.7%
VT- 25.0%
100.0%
33.0%
49.4%
22.7%
32.0%
43.0%
30.2%
24.3%
20.8%
48.0%
47.4%
40.0%
19.5%
45.1%
26.6%
Delaware
28.6%
13.0%
41.6%
68.4%
15.8%
30.7%
64.3%
43.0%
43.4%
61.4%
45.5%
21.0%
MA - 43.0%
Puerto Rico- 61.8%
30.0%
60.0%
25.0%
DE - 37.8%
MD - 28.0%
46.0%
Used spending cuts, n = 39
No Response, n = 5
Not Applicable, n = 7
32.9%
Rhode
Island
CT - 28.8%
19.1%
40.0%
3.9%
45.5%
57.3%
88.0%
26.0%
58.0%
36.4%
60.0%
4.1%
Rhode
Island
74.3%
27.1%
29.0%
54.0%
44.7%
96.7%
40.0%
NJ 38.7%
RI- 48.7%
WV- 60.0%
Source: NCSL survey of state legislative fiscal offices, 2009.
39.2%
VT- 62.0%
23.7%
44.7%
Used ARRA funds, n = 40
No Response, n = 5
Not Applicable, n = 6
Puerto Rico- 17.9%
Delaware
CT - 21.7%
DE - 29.0%
MD - 47.0%
MA - 34.0%
NH- 41.1%
NJ 27.3%
RI- 40.3%
WV 40.0%
Source: NCSL survey of state legislative fiscal offices, 2009.
Figure 8 – Slide #7
Figure 9 – Slide #8
(4) Tax Increases
(3) Tapped Rainy Day Funds and Other Funds
(As a Percentage of Actions To Close FY 2010 Budget Gaps)
(As a Percentage of Actions To Close FY 2010 Budget Gaps)
35.0%
VT- 8.0%
5.0%
6.8%
2.1%
18.3%
5.6%
1.0%
15.7
%
12.0
%
7.3%
3.0%
8.4%
4.2%
Rhode
Island
Rhode
Island
3.1%
28.8
%
3
39.3%
26.0%
3.8%
3.0%
Delaware
24.0%
0.7%
5.5%
7.0%
3
21.6%
CT - 17.3%
DE - 24.0%
MD - 0.3%
MA - 12.3%
NH- 22.6%
NJ 13.5%
RI- 9.5%
5.1%
7.6%
5.0%
Tapped Rainy Day Fund, n = 6
Tapped Other Funds, n = 12
Tapped Rainy Day Fund & Other Funds, n = 5
No Response, n = 6
Not Applicable, n = 22
Source: NCSL survey of state legislative fiscal offices, 2009.
Figure 10 – Slide #9
CT - 27.6%
MD - 11.4%
MA- 6.5%
NJ- 1.5%
15.0
%
8.4%
Puerto Rico
14.8%
12.1%
Raised Taxes, n = 22
No Response, n = 4
Not Applicable, n = 25
Delaware
Puerto Rico- 15.7%
Source: NCSL survey of state legislative fiscal offices, 2009.
Figure 11 – Slide #10
Mr. Perez announced that net state tax changes for FY 2009 totaled at approximately twentyseven billion ($27 billion) dollars, with the largest increases occurring in the categories of
Personal Income ($11.3 billion) and Sales & Use ($7.1 billion).
Mr. Perez concluded by underscoring the “cliff” effect facing most states as they consider their
post-stimulus budget projections. He concluded that most states will likely face budgetary
problems for at least twelve (12) months after the recession ends.
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II) Christopher Whatley, Washington Office Director, Council of State Governments
Mr.Whatley began by explaining that the “stimulus brand” has been bruised by its failure to
jumpstart the labor market. As a result, a new stimulus bill will be rebranded a “jobs bill”. The
bill is likely to include:



A mixture of both spending and tax cuts;
A total cost of between $200 billion and $400 billion dollars; and,
Much of its funding to come from unused TARP funds.
Mr. Whatley announced that the “jobs bill” will most likely provide additional fiscal relief for
states. The proposals being considered mainly surround Medicaid relief for the states through
the extension of enhanced Medicaid payments (or “FMAP”) for an additional six (6) to eighteen
(18) months beyond the end of 2010.
Mr. Whatley stated that such a proposal could deliver between one-hundred million
($100,000,000) and three-hundred million ($300,000,000) dollars in additional fiscal relief to
Rhode Island.
Mr. Whatley went on to outline the impacts the healthcare reform bill would have on the states:
Healthcare Reform Bills
State Impacts
(1) House Bill
- Extension of FMAP
- Freezing of Medicaid maintenance-of-effort (or “MOE”)
- Cost to the States: Approx. $60 billion over 10 years
(2) Senate Bill
- No Specific FMAP extension to-date6
- More flexible on MOE
- Cost to the States: Approx. $25 billion over 10 years
Mr. Whatley proceeded to discuss the relatively poor job creation by the stimulus package thus
far. He explained that the Obama Administration is especially disappointed in the small number
of green jobs created (approximately 13,000 new jobs nationwide).
Mr. Whatley illustrated the allocation of green jobs in New England as follows:
(1) Maine = 147
(2) Massachusetts = 112
(3) New Hampshire = 38
(4) Connecticut = 37
(5) Vermont = 24
(6) Rhode Island = 0
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Although Mr. Whatley did indicate that the Senate Leadership is still intent upon including FMAP
extensions within the bill.
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He then indicated that the coming jobs bill is likely prioritize its spending as follows:

Infrastructure Funding – Proposal to frontload a short-term transportation bill up to
$200 billion in spending;

Small Business Loans – Proposal to use $50 billion from remaining TARP funds to spur
small business lending;

State Fiscal Relief - $23 billion -$70 billion in enhanced FMAP;

Employment Tax Credits/Work-Share Credits;

Public Works Employment7;

Unemployment / COBRA Extensions; and,

Additional Energy Efficiency Funding.
Mr. Whatley stated that what these stimulus initiatives add up to in terms of specific state
development depends upon each state’s ability to merry their development initiative with those
of the nation’s. He listed three promising economic sectors for Rhode Island:
(1) Green Economy / New Energy - $20 billion in competitive grants
(2) Knowledge Economy – Over $18 billion in competitive grants
(3) Exports – Rhode Island exports are rising at a rate of twenty-nine (29%) percent8
Mr. Whatley concluded his presentation with two examples of transformative investments; (1)
The San Antonio River Walk, Texas (1937); and, (2) The Research Triangle Park in North
Carolina (1957).
Building off of his two examples, Mr. Whatley concluded that Rhode Island’s success will be
gauged by how effectively it can leverage its stimulus funds before, during, and after the
recession.
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Mr. Whatley gave the example of the state of Indiana who used $70 million of its flex money to create the
“civilian conservation core” which employs workers from a myriad of fields to undergo public works
projects.
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Mr. Whatley indicated that according to the World Bank, export promotion yields $40 in new exports for
every $1 in public investment.
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III) Open Forum
Leader Watson questioned Mr. Whatley on the failure to stimulate green job creation, asking
who is getting the green jobs that were created and how they are going about getting them. Mr.
Whatley responded that the main reason for the lack of green jobs to-date is simply because the
majority of stimulus funds allocated for green jobs have not been rolled out yet.
In terms of which type of jobs are being promoted through stimulus funds, Mr. Whatley
indicated there are between five (5) and six (6) different categories of jobs, the largest being
those jobs related to weatherization which encompasses nearly seventy (70%) percent of green
jobs funding.
Representative M. Rice then inquired into whether or not one of Rhode Island’s problems in
terms of leveraging stimulus dollars is the lack of match-funding. Mr. Whatley responded that it
is possible. He went on to five the example of the state of Oregon, which is experiencing similar
challenges (high energy costs, long-term unemployment), and how it was able to improve its
match-funding by getting the Governor and the legislature to work collaboratively on specific
economic initiatives.
Next, Chairman Constantino asked Mr. Whatley if now is really the time to share resources
between branches of government when so many department budgets are under strain. Mr.
Whatley responded that now was indeed the time, indicating that stimulus funding is reaching its
zenith with competitive grants rolling out the door each week.
To conclude, Mr. Whatley announced that Rhode Island’s legislative responsiveness will be a
driving factor behind its successful leveraging of stimulus funds.
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A Rhode Island Economic Perspective
1:00pm-2:00pm
I) Edinaldo Tebaldi, Professor of Economics, Bryant University
Professor Tebaldi opened with a discussion of past employment trends in Rhode Island and how
they compare with the current economic recession. He went on to indicate that the conditions of
the current recession are significantly worse than previous recessions (see Figure 12 – Slide #3):
Unemployment Rates
Figure 12 – Slide #3

Since February 2007, approximately 39,500 jobs have been lost in Rhode Island.

New England Economic Partnership (or “NEEP) forecasts that an additional
5,000 jobs will be lost in Rhode Island by mid 2010.
Professor Tebaldi stated his belief that the driving factor behind Rhode Island’s early and subsequently
more severe economic recession is its inability to attract and retain people and businesses.
Within this area, Professor Tebaldi pointed to two economic indicators underpinning Rhode Island’s
inability to attract and retain people and businesses:
(1) Competitive tax structure; and,
(2) Competitive regulatory systems.
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Professor Tebaldi further explained that Rhode Island’s failure in these areas reflects the state’s poor
entrepreneurial performance as both factors disproportionately burden small-business owners and
entrepreneurship.

2007 Small Business Survival Index Ranking – Rhode Island 48th overall
Professor Tebaldi then presented the following factors affecting the attraction and retention of people and
businesses. (see Figure 13 –Slide #14)
Infrastructure
Individual
Business
Good school system
Quality in public services
Health Care quality
Arts, Leisure, and natural
Taxes
resources
State income tax
Capital gain taxes
Estate taxes
Sales taxes
Qualified labor force
Corporate taxes
Access to Ports, Airports, connected Tax Incentives
highways
Manageable tax
system
Access to an expedited business
permit/license process
Institutional support for Small
business and for promoting access to
global markets
 Weaknesses  Areas of Improvement  Strengths
Figure 13 – Slide #14
Professor Tebaldi recommended that policy makers address Rhode Island’s weaknesses while at the same
time building off its strengths and taking advantage of its areas of opportunity.
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II) Edward Mazze, Professor of Business Administration, University of Rhode Island
Professor Mazze began by enumerating Rhode Island’s strategic assets, identifying five assets that comprise
Rhode Island’s comparative advantage:
(1)
(2)
(3)
(4)
(5)
Access to Markets;
Higher Education;
World-class Finance / Naval Community;
Small Business majority (approx. 90%); and,
Headquarters of several national/multi-national corporations.
Professor Mazze went on to discuss the necessary characteristics of a successful economic recovery in
Rhode Island. Specifically, Professor Mazze mentioned the need for focused economic initiatives, such as
business retention, which are carried forward by both the public and private sectors.
Professor Mazze went on to identify other characteristics of a successful Rhode Island economy which
include; a business-friendly environment; a full inventory of sites statewide; strong support for Education at
all levels; incentivized training / upgrading of labor skills; and tax incentives for specific businesses.
He then outlined eleven (11) policy recommendations that should be considered, which he divided up into
two parts; (I) General Policy Recommendations; and, (II) Specific Program Recommendations:
I) General Policy Recommendations:

Give small business economic priority;
II) Specific Program Recommendations

Modernization Tax-Credit Program
Distribution of a refundable state tax credit for a small business that
spends more than $100,000 in FY 2009 or FY2010 to modernize or
expand its business.

Improve site analysis / asset inventory

“Business Ventures” Tax Credit Program
Distribution of a “business ventures” tax credit to anyone who invests
more than $100,000 in an early stage business for precommercialization activity related to proprietary technology.

Improve education at the high school level;

Federal-Partnership Grant Program
Award grants to individuals and businesses that seek federal research
and development funds for development and commercialization of
innovative products, processes, and services.


Support legislation that is less restrictive of
infrastructure projects;
Capitalize on competitive grants for our Green
Economy

Jobs Creation Tax Credit Program
Offer tax credits of up to 10% of the amount of capital a business
invests in a qualified project that creates more than 10 jobs.

Property Tax Credit Program
Offer tax credits of up to 25% of pre-approved costs to local
businesses that make exterior structural / aesthetic improvements to its
building(s).

Vacancy Sales / Property Tax Rebate Program
Offer sales and/or property tax rebates to local businesses that locating
/ relocating in a vacant building.
Figure 14 – Table Representation of Professor Mazze’s Policy Recommendations
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III) Peter Howitt, Economics Professor, Brown University
Professor Howitt discussed the importance of the stimulus package in terms of jumpstarting both
the national economy and the local Rhode Island economy. He announced that the fiscal crisis
represents the most immediate problem for Rhode Island and continues to hamper recovery.
Professor Howitt went on to discuss the need for the fundamental restructuring of our economy,
referencing the following economic imbalances as indicators of an unsustainable economic
model:
Economic Imbalance #1) Fiscal Deficit
 2006/2007 Deficit: ~$70 trillion (before recent deficit spending)
Economic Imbalance #2) Overconsumption
 2007 Consumption: ~102% of Gross-National-Product.
In essence, Professor Howitt painted a picture of an economy living beyond its means, nurturing
a rising national deficit through nation-wide over-consumption.
Professor Howitt concluded by stating that while job creation is important to the economy’s
short-term recovery, in order to restore our economy to sustainable full-employment for the longterm, there needs to be a fundamental restructuring of economy.
20
IV) Open Forum
Representative Kennedy opened up discussion by asking Professor Mazze if the Governor’s
recent proposal to implement a net receipt tax credit will help grow the local economy and create
jobs in Rhode Island. Professor Mazze responded that implementing such a tax credit would
wind up hurting small businesses already heavily burdened by local taxes.
Representative Loughlin then asked the three speakers if there is any legislation being passed
elsewhere to help solve the housing crisis. Professor Tebaldi assured Representative Loughlin
that while it has become increasingly expensive to buy a house in Rhode Island, the trend
appears to be rebounding as housing prices continue to fall.
Following this, Representative Driver inquired into whether or not the small business tax credit
Professor Mazze alluded to in his presentation would help bolster state revenues. Professor
Mazze responded that any piece of legislation like this must be firmly vetted but he believes that
such a tax credit would definitely be a major jobs creator.
Chairman Constantino inquired into the efficacy of complete removal of all tax-credits in Rhode
Island. Professor Howitt responded that while that scenario appears unlikely in the short-term, a
similar but more plausible solution would be the selective trimming of tax credits. He stated that
the challenge in that case would be weeding out which tax credits are kept and which are
removed.
Representative Gablinske then asked whether there was anything policy makers could do,
beyond tax-credit manipulation to boost workforce development in Rhode Island. Professor
Mazze responded that what lawmakers could look into is the potential expansion of
biotechnology programs at places like Brown, Bryant, and URI.
Representative Newberry questioned the speakers on whether across-the-board tax cut would
produce better results than a targeted tax cut approach. Professor Mazze indicated that the best
approach is targeted tax cuts with a long-term, holistic, economic goal in mind.
Finally, Representative M. Rice posed the question of whether or not the guest speakers feel that
Jimmie Carter’s “Malaise Speech9” thirty (30) years ago was given slightly too early. Professor
Howitt responded that this sort of cultural amnesia represents the cyclical relationship
generations after generations of Americans continue to have with the ebb and flow of the
national economy overtime.
President Carter’s “Malaise Speech” was given July 15th, 1979. It represented President Carter’s
misgivings with an American culture he saw to be increasingly steeped in “self indulgence and
consumption” with little regard for civic responsibility or long-term sustainability.
9
21
The Growth of Rhode Island’s Knowledge Economy
2:00pm - 3:00pm
I) Laurie White, President of the Greater Providence Chamber of Commerce
Ms. White presented the long-term trends in state economic development, starting with Rhode Island’s
maritime economy nearly three (3) centuries ago (see Figure 14):
Maritime
Economy
1700’s
Early Industrial /
Late Industrial
Agricultural Economy
Economy
Economy
1800’s
Information
Economy
Knowledge Economy
Early 1900s
1980’s – 1990’s
Present
- Manufacturing
- Art
- Design
- Software
- Defense
- Discovery / Application of Ideas
Figure 15 – Graphic Representation of Mrs. White’s Timeline
From the launching of the industrial revolution in the early 20th century, to the development of the
information economy in the late 1980’s and early 1990’s, Ms. White illustrated that the adoption of the
“Knowledge Economy” reflects the next “natural” step in Rhode Island’s evolution as an economy.
Ms. White went on to define the “Knowledge Economy” as an economy powered by the discovery and
commercial application of new ideas. She went on to briefly summarize the recent developments since
November of 2007, illustrating that interest in pursuing the idea further lead to a data-driven analysis of
the knowledge economy within Rhode Island in March of 200810.
Ms. White then outlined the findings of the aforementioned study. The 2008 study highlighted the
following three areas of opportunity to develop Rhode Island’s national economy:
(1) Design ( both Product Safety & Design as well as Facility & Spatial Design);
(2) Environmental & Alternative Energy Technologies; and,
(3) Medical Devices & Preventative Healthcare.
10
See http://www.provchamber.com/files/NESProvidenceKnowledgEconomyPlan.pdf for full report.
22
Ms. White explained that the study further recommended the implementation of the following tactics to
effectively develop the targeted industries:
TACTIC 1:
TACTIC 2:
Strengthening Academic
& Research Alliances
Development of a
Workforce Continuum
TACTIC 3:
Cultivating a Culture of
Innovation &
Entrepreneurship
Ms. White noted that an analysis by the Census Bureau indicated that of the twelve-million (12mil) new
jobs created in 2007, eight-million (8mil) of those jobs were created by small businesses and
entrepreneurs.
To keep the momentum moving forward, Ms. White indicated that the Greater Providence Chamber of
Commerce created the Innovation Providence Implementation Council ( or ”IPIC”) comprised of privateindustry, education, and government leaders. To-date the IPIC accomplished the following:
 Disbursed over one-hundred-thousand ($100,000) dollars in Chamber Grant funding;
 Disbursed an additional fifty-thousand ($50,000) dollars in City grant funding;
 Evaluated eleven (11) different projects in the areas of design, entrepreneurship, product
safety, workforce development, and alternative energy; and,
 Secured an additional one-hundred-thousand ($100,000) in funding from US Department of
Commerce Economic Development Administration
Currently, Ms. White explained that the IPIC is evaluating nineteen (19) projects in various target areas of
opportunity.
To conclude, Ms. White emphasized the fact that these developments represent only the tip of the
proverbial iceberg. She then pointed to the following 2008 investments made towards Knowledge
Economy-related industry:




$376 million into capital investments;
$476 million sponsored in research;
$171 million secured for R&D funding; and,
25,000 Retained Jobs.
Lastly, Ms. White announced that states across the country are suffering from similar problems
facing Rhode Island and successful responses to these crises11 have been born from the
cultivation of innovation, entrepreneurship, and the power of new ideas.
11
Ms. White gave two examples: (1) Detroit, Michigan; and, (2) Pittsburg, Pennsylvania.
23
II) Edward Wing, M.D. – Dean of Medicine and Biological Sciences, Alpert School of
Medicine, Brown University
Dr. Wing began his presentation by briefly outlining the current structure of Brown’s Alpert School of
Medicine. Dr. Wing indicated that Alpert School of Medicine is divided into three specific programs:
(1) Brown
University
(1) Program in Biology – Location (1)
(2) Public Health
(2) Program in Public Health – Location (2)
(3) Clinical Programs – Location (3)
Jewelry
District
(3)Hospitals
Dr. Wing further explained that the transition of the Alpert Medical School to its new facility in the
Jewelry District represents the important alignment of Brown’s academic medical center connecting
Brown University with the Jewelry and Hospital Districts.
Dr. Wing then presented the important milestones achieved as well as those anticipated in 2010 and 2011.
Design builder interviews
Shortlist of three firms for Phase II RFP
City Plan Commission
Select Design / Build Team
Zoning Board
Corporation
Construction begins
Opening
November 2009
December 2009
December 2009
December 2009
January 2010
January 2010
March 2010
August 2011
√
To conclude, Dr. Wing summarized what this new development means for Rhode Island’s economy:
(1) Short-Term Impact (6 -18 months)
 Approximately 550 new Construction/ Construction-related jobs
 $26.2 million in economic output
(2) Long-Term Impact
 New Biotech Hub
 Retail growth around urban campus
24
III) Jack Templin – President of ThoughtCap LLC12; Co-Founder of Providence Geeks,
Co-founder RI Nexus13; Co-Founder of Betaspring14
Mr. Templin presented an overview of the success of public-private partnership initiatives such as RI
Nexus and Providence Geeks have had in bringing technology and new media entrepreneurs together to
share ideas and nurture start-up companies.
Mr. Templin explained that the purpose of the RI Nexus is interconnectivity and the sharing of ideas. He
went on to announce that Rhode Island has several unique characteristics that make it an ideal place to
develop Knowledge Economy-related industry:



Small Size;
Strength of Higher Education Institutions; and,
Strong Medical Industry.
Mr. Templin went on to state that in the past two (2) years, over nineteen-hundred (1900) events have
been held to discuss opportunities in entrepreneurship / technology start-ups. Mr. Templin further
explained that RI Nexus continues to host college tours to help inform students of the opportunities in
new/digital media within Rhode Island as well as hold regular panels / webinars on new and innovative
ideas.
Lastly, Mr. Templin outlined the need for educational improvements in Rhode Island. He explained that
Rhode Island’s per capita undergraduate population is the largest in the country and our retention of these
talented and innovative students is crucial to the growth of the Knowledge Economy.
12
ThoughtCap LLC is an internet consultancy that helps its clients leverage customer experience as a
competitive advantage and driver of profits.
13
RI Nexus is a public-private initiative launched by the RI Economic Development Corporation to
sponsor an online hub for technology stakeholders to connect, communicate, and collaborate.
14
Betaspring is mentorship-driven startup accelerator program for young technology and design
entrepreneurs.
25
IV) Allan Tear– Co-Founder of Betaspring15
Mr. Tear began by describing how successful Betaspring has been as a start-up incubator despite
the poor capital market and the company’s relative immaturity.
He explained that by August of 2009, when Betaspring was only twelve (12) months old, the
company had successfully launched seven (7) new start-up companies. Moreover, Mr. Tear
indicated that the company was able to do this during one of the worst business climates since
the 1930’s and with only a small amount of seed capital.
Mr. Tear went on to illustrate the importance of government sponsorship and incubation support
in creating a dense network of professionals and entrepreneurs which, in turn, lead to the
development of new startups. Mr. Tear indicated that the key to achieving this critical mass is to
provide continuous financial / administrative support for start-up incubation.
Mr. Tear also emphasized the fact that now more then ever, entrepreneurship is driven by
networks of individuals and there is a growing need to both support and actively retain these
networks within both his home state of Pennsylvania and within places like Rhode Island.
Mr. Tear concluded by identifying model incubators in other areas of the country:
(1) Jumpstart16 – Cleveland Ohio
(2) Benjamin Franklin Technology Partners17 – Pittsburgh, Pennsylvania
15
Betaspring is mentorship-driven startup accelerator program for young technology and design
entrepreneurs.
16
Jumpstart is a nationally recognized venture development organization that accelerates the progress of
high potential, early-stage businesses.
17
Benjamin Franklin Technology Partners is one of the nation’s longest-running technology-based
economic development programs. For more than 25 years, BFTP has provided both early-stage and
established companies with funding, business and technical expertise and access to a network of
innovative, expert resources.
26
V) Stephen Lane – CEO and Co-Founder of Ximedica18
After providing a brief overview of his professional history, Mr. Lane reiterated Mr. Templin’s
comments about Rhode Island’s unique assets concerning the development of a knowledge
economy.
Mr. Lane appealed to need for catalytic action in Rhode Island, underscoring the significant
momentum that is building behind the knowledge economy throughout the nation.
To conclude, Mr. Lane presented the following recommendations:
(1) Develop and support hospitals / private-industry / college collaborative;
(2) Remember that entrepreneurial success breeds more success; and,
(3) Encourage private-industry collaboration through targeted, ambitious, long-term goals.
18
Ximedica is an advanced manufacturing consultancy that provides research, product development, and
regulatory / manufacturing services.
27
Rhode Island’s Green Economy
3:00pm-4:00pm
I) Scott Wolf, Executive Director of Grow Smart Rhode Island19
Mr. Wolf began by explaining how the recession can be labeled a two-fold crisis; (1) a financial / economic
crisis; and, (2) a housing crisis. He went on to state that the key ingredient to a strong comeback is the
removal of pessimism that can shroud perspective during tough times. Mr. Wolf further stated that while
optimism is always positive, the only way for it to be constructive is if it is also realistic.
Mr. Wolf then recommended the following steps to be taken in order to revitalize Rhode Island’s
floundering economy:
Step 1) Identify Rhode Island’s assets – Specifically, Mr. Wolf pointed to the need to re-examine
development rights in North Kingstown.
Step 2) Invest in those assets – Specifically, Mr. Wolf recommended that Rhode Island invest more into
Public Transit to maximize our advantages in size and proximity.
Step 3) Develop an accessible site inventory
Step 4) Explore Marine Biology Consortium among Neighboring States
Step 5) Get Entrepreneurs More Involved in Economic Development – Mr. Wolf sited the
Deepwater Wind development at Quonset to be a move in the right direction.
Step 6) Promote our Tourism / Farming Sectors – Mr. Wolf indicated that these sectors have been
neglected by both the media and the public at large despite the fact that they represent important pieces of
Rhode Island’s economy.
Step 7) Expand our Ports / Airports
To conclude, Mr. Wolf recommended that law makers stick with an asset-based investment strategy when
considering economic development initiatives.
19
Grow Smart Rhode Island is an advocacy group for more decentralized, environmentally-friendly
economic development.
28
II) Robert Leaver, Founder of New Commons20
Mr. Leaver first introduced himself as the founder of New Commons. He proceeded to outline
the final format of the Economic Forum, indicating that he would be mediating the remaining
two (2) presentations and by posing each presenter the following questions:
(1) Who are you and what do you do?
(2) What are your company’s goals?
(3) What do you believe are Rhode Island’s core assets / capabilities?
(4) What would Rhode Island have to do to achieve these goals?
20
New Commons is a management consulting company based out of Pawtucket, Rhode Island.
29
III) Chris Benzak, Managing Partner for Newport Biodiesel21
Who are you and what do you do?
Mr. Benzak introduced himself as the Managing Partner of Newport Biodiesel, Rhode Island’s first (1st)
Biodiesel manufacturer. He further indicated that since its inception in January of 2008, Newport Biodiesel
has sold over half-a-million (500,000) gallons of diesel fuel with forty-million (40,000,000) gallons being
consumed locally in Rhode Island.
(2) What are your company’s goals?
Mr. Benzak announced that Newport Biodiesel’s long-term goal is to control one-hundred
(100%) percent of the Biodiesel market in Rhode Island. In the short-term, Mr. Benzak
explained that Newport Biodiesel is interested in acquiring an excise exemption for the “green”
nature of their operations.
(3) What do you believe are Rhode Island’s core assets / capabilities?
Mr. Benzak identified Rhode Island’s population density (2nd highest in the nation) and it’s
networking capabilities as its two major assets.
(4) What would Rhode Island have to do differently to achieve these goals?
Mr. Benzak indicated that Rhode Island needs to simply continue building off of its core assets
and natural advantages while ensuring continued enthusiasm for economic development through
renewable energy initiatives.
21
Newport Biodiesel is an alternative fuel producer that collects and recycles waste vegetable oil to
produce clean-burning, renewable and locally sourced fuel for vehicles as well as for home heating.
30
IV) Keith Hartley, CEO of Rhode Island Precision Company22
(1) Who are you and what do you do?
Mr. Hartley introduced himself as the CEO of Rhode Island Precision Company, an advanced
manufacturer of machinery for naval / medical companies.
(2) What are your company’s goals?
Mr. Hartley announced that Rhode Island Precision Company main goals are to expand their
operations and create jobs for the local economy.
(3) What do you believe are Rhode Island’s core assets / capabilities?
Mr. Hartley identify Rhode Island’s core asset to be its small-business majority in terms of
industry percentage.
(4) What would Rhode Island have to….in order to achieve these goals;
- (a) Keep Doing; Mr. Hartley pointed to innovation.
- (b) Stop Doing; Mr. Hartley identified wasteful investments.
-(c) Do Better; Mr. Hartley pointed to stronger support for existing small businesses.
22
Rhode Island Precision Company is an advanced manufacturer of naval and medical supplies.
31
V) Open Forum
Representative M. Rice questioned Mr. Benzak on what Newport Biodiesel’s next step would be,
if hypothetically, Newport Biodiesel represented a microcosm for the Rhode Island economy.
Mr. Benzak responded that Newport Biodiesel would continue pushing for scale (approximately
2mil gallons per year) and ensuring sustainability through market share in the long-term.
Representative Hearn then asked Mr. Hartley what the Rhode Island legislature could do to help
out small businesses like Rhode Island Precision Company. Mr. Hartley responded that what
continues to stifle small business growth in Rhode Island is access to low-interest capital.
32