Friday, January 11, 2008
Johnson & Wales University,
Culinary Archives and Museum
299 Harborside Boulevard Providence, RI
Summary Report - 2008 RECOMMENDATIONS
Introduction: More than 150 small business owners, business leaders, and state elected officials participated in the Second Annual Economic Summit held January 11, 2008, at Johnson & Wales University. This forum clarified problems and recommended solutions regarding five key business environment issues: Taxes and Budget; Health Care; Regulations; Education/Workforce Development; and Energy. Summit participants designed, approved and documented this comprehensive small business advocacy package for the 2008 legislative session.
This summary report is the outcome of the consensus building facilitated by the following five committee chairs:
Taxes and Budget: Grafton H. “Cap” Wiley, I, TOFIAS PCAccountants &Consultants
Health Care: Philip Papoojian, Metachem Resins Corp.
DMS Mereco Technologies Group Cos. Inc.
Regulations: Gary Ezovski, ATC Lincoln Associates
Education & Workforce Development: John C. Gregory,NRI Chamber of Commerce
Energy: Miriam A. Ross, Esq., Law Offices of Miriam A. Ross, Esq.
Committee recommendations are presented here to sustain our meaningful dialogue with legislative leaders that will support real systemic change as the foundation for the economic prosperity and community health of all Rhode Islanders. We look forward to the urgent and vital work ahead that is required to improve the small business climate and secure a better future for our greater community. As you consider our recommendations, please feel free to follow up with us to help you with your decision-making.
Taxes & Budget Committee
The State of Rhode Island is facing a structural budget deficit that has reached a crisis stage
Current Year deficit $151 Million
2008-2009 Deficit $450 Million
Growth in expenditures has exceeded and is projected to exceed the growth in revenues which is unsustainable.
Balancing of prior year budgets often used one-time gimmicks, such as using tobacco moneys that did not address the structural deficit and postponed dealing with the real budget issues.
The 2008-2009 budget deficit is projected to be over 10% of the total budget. On a percentage basis that makes the RI budget deficit among the largest of the 50 states.
Rhode Island is among the top two or three highest tax burden states. Raising additional taxes is not the solution.
The Potential Silver Lining: Small deficits lead to patchwork solutions. Large budget deficits that put the state in crisis mode should lead to difficult discussions, tough choices and hopefully real solutions.
The Rhode Island Tax System:
The RI tax system is not competitive in our global economy and puts us at a distinct disadvantage when we compete with other states to create a positive business climate. It has been described by some as “Tax Hell.”
The difficult but correct decision would be to completely redesign the personal income tax system that would have the following characteristics:
Lower marginal tax rates-not to exceed 6.5%
Broader tax base and flatter tax brackets
Standard deductions and exemptions that protect lower income taxpayers
Few if any tax deductions
Fewer Tax Credits
If a complete restructuring is not undertaken it is critical that the recent tax changes that were enacted and are currently being phased in are not reversed. These have improved our tax competitiveness somewhat. These include:
Priority #1: Rhode Island must cut its government expenditures and entitlement programs.
Per capita government expenditures in RI are among the highest in the country. RI entitlement programs are among the most generous in the country. We can no longer afford these luxuries.
The Tax and budget breakout session overwhelmingly voted that we needed to cut government expenditures and entitlement programs as their highest priority. They challenged the government leaders to make the tough choices that needed to be made in this area and resist the public pressure from the various special interest groups.
Priority #2: Rhode Island should not solve its deficit problems by raising taxes and should maintain the recently enacted tax reforms that have helped our tax competitiveness.
RI already carries one of the highest tax burdens in the country and our high taxes have hurt our economy and competitiveness in trying to create a good business climate. Our state is so small and our population is so mobile, that given an opportunity, higher income taxpayers can easily move to avoid our high tax burdens. When they leave, they take their tax payments and their support of the local economy. We cannot tax our way out of this problem.
The highest priority in this area was maintaining the cap on increases in the property taxes followed by reducing the high marginal income tax rates.
Priority #3: Rhode Island municipalities must seriously look at savings that can be achieved by consolidation and regionalization of municipal services.
Historically, RI citizens have been very parochial when it came to looking at municipal services. We have 39 cities and towns, 38 police departments and fire departments, 35 school districts and so forth. From recent surveys and from the attendees at the summit there appears to be a willingness to look at consolidation and regionalization as a way to institute savings at the municipal level. We cannot afford the multiple layers of administration that we have had in the past.
Priority #4: Rhode Island needs to make economic investments that will grow our economic base.
The only way to successfully increase revenues without raising taxes is to grow the economic base of the state. We have been losing jobs and losing population (one of only two states). We need to improve the business climate and make RI a competitor in the global economy, not an economic backwater. To accomplish that we need to make smart governmental investments in assets that will grow our economic base.
These investments must be looked at for the overall benefit of the State which may mean that some of the local population may have to suffer some adverse impacts. Too often in the past a small but vocal opposition has hindered economic development that would significantly benefit the State as a whole. A prime example is the expansion of the airport. Investments in economic development that should be considered are:
Quonset Point
Airport expansion
Mass Transportation
Highway & bridge infrastructure
Investments in the new Knowledge-based economy
Small Business and venture capital revolving loan funds
Education
Regulations Committee
Reg-Flex:
Support Secretary of State’s Office initiative to clarify and streamline rulemaking and notification process coming from Reg-Flex.
Communication is key to making Reg-Flex perform as intended. The best regulatory solutions will come from better interaction between regulators and the regulated entities.
Business training for regulators may be an important step in that process.
Fire Code:
Support and reinforce the Chamber Coalition’s Fire Code position statement adding the requirement that tax relief be provided for businesses that have already complied with the current code. (See Appendix 1.)
Upgrade and Streamline Regulations and Processes:
Encourage full implementation of the “Fast Start” initiative.
Support for Rhode Island Economic Development Corporation to review and update regulations and laws in order to be consistent with current business practices.
Health Care Committee
Support legislation pertaining to the implementation of small group community rating with a reinsurance component for small business. Evolve to a “pure” community-based health insurance rating for all Rhode Islanders.
For the short term, the Health Care Subcommittee will lend its support to legislation sponsored by Senator Josh Miller which incorporates a reinsurance component for certain age categories.
Long-term, the Subcommittee will continue to investigate the merits of a “pure” community rating system for all Rhode Islanders. Pure community rating is defined as all Rhode Islanders in the same pool with consistently applied rating rules. We cannot solve the problem for small business unless we solve the problem for everyone.
Accelerate the development of a technology-based health information exchange.
Accelerate the implementation of currently available health information technology via a health information exchange to improve record-keeping and communication of health records between physicians, pharmacies, hospitals and government.
Funding is critical and a source needs to be identified. Software compatibility or interoperability is also critical and needs to be resolved at this time.
Investigate the impact of state mandates on increasing healthcare costs.
While the initial Summit Healthcare Committee proposal was to advocate consideration of a moratorium on state health insurance mandates and establish a state Mandate Review Commission to study the impact of mandates as premium cost drivers, the Committee now prefers to wait for the results of a Mandate Study now being conducted by the Health Insurance Commissioner’s Office, before recommending a course of action. The study should be available in the near future.
Investigate and discuss the inequality that exists between businesses who self-insure (ERISA plans that are exempt from state mandates) and the general business community.
Encourage creation of statewide universal health insurance policy for all Rhode Islanders.
Using a “pure” Community Rating as the “trigger mechanism,” establish universal health insurance coverage which will help minimize the most significantly increasing costs of emergency and catastrophic medical services and bad debt caused by uninsured customers. This coverage should incorporate subsidies for those who cannot afford to pay for coverage at up to some level of the FPL. This can be accomplished by one of the following four options:
Individual Mandate
Funding via a “sin tax” that is specifically allocated to be used for this purpose and distributed through a quasi-government “connector-like” organization.
Funding via a payroll tax that is specifically allocated to be used for this purpose and distributed through a quasi-government “connector-like” organization.
Funding via a personal tax that is specifically allocated to be used for this purpose and distributed through a quasi-government “connector-like” organization.
Education & Workforce Development Committee
Charge the General Assembly with calculating a fair equity formula for funding.
Encourage regionalization.
Business-Education Partnership Link.
Recognize that there are secondary markets and alternative education options
Government mandates vs. real life needs
Engage stronger small business representation and leadership on the Governor’s Workforce Board
Sustain advocacy for the 1st Annual RI Economic Summit Recommendations repeated below:
Protect the integrity of the job development fund including exemption of the 8% cost recovery fee
Expand the use of tax credits
Energy Committee
Rhode Island has a clear priority to increase its use of clean, renewable energy. Despite Rhode Island’s Renewable Energy Standard (RES) and the energy reform package that promotes renewable energy and clean distributed generation, renewable energy development is proceeding at a very slow rate. Rhode Island needs to pick up the pace of investment and development initiatives to benefit all Rhode Islanders.
Develop A Comprehensive Renewable Energy Strategy
We recommend the legislature establish a state-wide mission and specific goals addressing the development of renewable energy sources within Rhode Island, including clear rules and standards for investing in renewable projects.
Likewise, city and town comprehensive plans need to address and incorporate the state-wide mission, and to the extent these plans do not contain the state-approved definition of a “renewable” project, the plans must come into conformity by July 1, 2009.
In addition, local zoning and permitting processes need to be created or updated to address the requirements of renewable energy projects, including small and/or micro projects. To that end, we recommend the legislature ensure the cities and towns have zoning and permitting regulations in place by July 1, 2009 that clearly articulate the rules and standards for the installation of renewable energy projects and a clear and prompt approval and cost-controlled permitting process.
Implement Tax Credits and Incentives
Facilitating and stepping up the pace of renewable energy projects, especially the small scale projects likely to be taken on by smaller businesses (which also provide the greatest opportunity in terms of job and wealth creation), requires resources and talent.
Accelerated cost recovery, tax credits for investments in renewable energy systems and continued subsidies by the Rhode Island Renewable Energy Fund for appropriate projects are critical to developing and sustaining this nascent industry.
We recommend the establishment of tax credits for investments in and the continuation of existing legislation to maintain incentives to help pay for and facilitate the purchase and installation of renewable energy systems, especially for smaller businesses.
Education and Outreach
Smaller businesses need direction, education and outreach programs on conservation and the availability of incentives, grants and other green options. We support programs that would provide smaller businesses with information on:
Currently available renewable energy technologies
Available renewable energy supply options, (e.g., on-site generation, electricity supply options from the grid)
Financial support for renewable energy purchases and buying group assistance.
Further, we recommend enlisting the assistance and participation of existing trade associations, small business development centers and other small business groups whose members would benefit from the installation of energy saving systems.
Establish Green Ribbon Commission
We need a clear understanding of the economic, political, and regulatory barriers associated with the development and implementation of renewable and clean energy businesses and projects by smaller businesses in Rhode Island. Securing funding sources willing to lend and/or underwrite renewable projects is typically not available to the smaller business.
We recommend that the Governor establish a “Green Ribbon Commission” as a partnership among government, the small business community and the financial industry. The Commission should address:
access to capital for smaller businesses; and
the creation of a stable, competitive, in-state market for green energy
with the objective of:
establishing mechanisms and opportunities for Rhode Island small businesses to access adequate funding, with appropriate incentives and financial terms.
developing and implementing renewable energy projects within the state as well as a dedicated market for the green energy produced.
Funded in part through a Cooperative Agreement with the U.S. Small Business Administration.