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Ranglin: How Many RI Jobs WIll $11 Million Dollars Buy?

Monday, March 17, 2014


Rhode Island state economic development leadership has turned its back on Rhode Island based small businesses. Rhode Island leaders pledged $11 million dollars, almost 85% of $13 million in federal funds to help new start up technology firms instead of lending the funds to existing RI small businesses to help keep their doors open, stabilized and create new jobs for RI workers. At best, technology is not labor intensive - RIDLT forecasts about 75 new technology jobs each year between 2010 and 2020. Rhode Island has lost 40,000 jobs, 8% of its workforce. The unemployment rate is 9.2% overall, the worst in the nation with 13% among African Americans and 18% among Latinos. How many jobs for Rhode Islanders will that $11 million pledged to start up technology companies buy?

In other parts of the nation, 63% of net new jobs from 2009 through 2012 are the result of hiring in small firms, the acknowledged driving force behind employment growth. In Rhode Island 93,000, 96% of all businesses are small businesses employing 55% of the private sector workforce. How many Rhode Island small businesses couldn’t get loans to keep their doors open and pay their workers while the Rhode Island Commerce Corporation was lending State Small Business Credit Initiative funds intended to support local small business, to new and untested startup technology firms, including out of state and even a foreign business? What were Rhode Island’s leaders thinking?

Nationally, black owned businesses are among the fastest growing segments of the economy showing rapid growth in the number of businesses and in total sales. With support from state and federal lending resources, these small black and minority owned businesses are creating jobs in their states in record numbers. In the latest survey, US Census data shows 9,823 minority firms in Rhode Island with 6,400 employees. How many Rhode Island black and minority companies couldn’t get loans from the federal funds held by the Commerce Corporation that could have supported increased hiring and decreased the extremely high unemployment rates among black and Latino workers?

The $13 million in federal funds were allocated to Rhode Island to build and develop capacity for small businesses to create new jobs and hire more workers. But that $13 million allocation under the Small Business Credit Initiative is pledged to pay out $9 million to the Slater Fund and $2 million to Betaspring to fund new technology companies. Just $2 million will go to existing, economically challenged Rhode Island small businesses. 

The Rhode Island Black Business Association has a solution – change the priority to focus on lending to existing small businesses. Modify the state’s application for the State Small Business Credit Initiative – the source of these funds – establish a microbusiness loan program and a collateral support program targeted to existing Rhode Island small businesses – those employing less than 20 workers. Use the fund to sustain and grow existing Rhode Island small businesses and minority businesses - and create more jobs - now - for Rhode Islanders.

Lisa Ranglin is the President of the Rhode Island Black Business Association. To learn more visit http://www.ri-bba.com.


Related Slideshow: New England States Battle Over Jobs

Here are several examples of business and job raiding by and against New England states, according to the Good Jobs First report,

Shell Game: Ending the Wasteful Practice of Subsidizing Companies that Move Jobs From One State to Another


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States pirating other states for existing businesses and jobs is nothing new.

The 1950s saw heightened concern about the growing number of footloose companies that were abandoning long-standing industrial locations in the north to take advantage of benefits being offered by states such as Mississippi. Then-Sen. John F. Kennedy of Massachusetts decried southern “raiding,” especially in the textile industry. Organized labor took notice. In 1955, then-named American Federation of Labor published a pamphlet with the title “Subsidized Industrial Migration: The Luring of Plants to New Locations.”

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In Massachusetts, the free market-oriented Pioneer Institute likened interstate lures to “playing the lottery” in examining the National Establishment Time-Series Database for 1990-2007.

Although the Bay State has had a small net loss of jobs to interstate moves, it loses and gains jobs from mostly the same states (New Hampshire, New York, Rhode Island and Connecticut all rank in the top 5 for both directions). In addition to some cautionary findings about the Bay State’s trends, the Institute concluded, “The majority of establishments that moved to the state did not receive special incentives from the state to do so. Therefore, public thinking and public policy with respect to economic development should be reoriented to place less emphasis on interstate relocation.”

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Ballooning state-budget deficits are costing millions of jobs, affecting every state, with no regard for region or corporate tax or incentive regimens.

For example, a study of job loss due to the growing trade deficit with China names New Hampshire, California, Massachusetts, Oregon, North Carolina, Minnesota, Colorado and Texas among the 10 most affected states - proportionally, and in that order. That should be a sobering fact for states such as New Hampshire (that so shamelessly pirates jobs from Mass.) and Texas (that openly lures companies from Mass. and other states).

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Several states have rules prohibiting subsidies for intrastate job relocations. Among them, are two in New England:

  • Connecticut:

o Enterprise Zone and Urban Jobs Tax Credits

o Urban and Industrial Site Reinvestment Tax Credit

  • Maine:

o Employment Tax Increment Financing

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Several states have major state-subsidy programs with restrictions on intrastate job shifting. Among them, are two in New England:

  • Rhode Island:

o Corporate-income tax-rate reduction for job creation

o Enterprise-zone tax credits

  • Vermont:

o Economic-advancement tax incentives

o Employment-growth incentives

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In 2011, the Boston Globe published a profile of the State of New Hampshire’s top business recruiter, Michael Bergeron, labeling him a “full-time thief.”

Bergeron, who was said to have removed the state seal from his car to be less conspicuous when visiting prospects, claimed to have lured dozens of firms from Mass. to the Granite State. Brazenly, he posted the Globe profile on his agency website.

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In 2010, Connecticut Governor Jodi Rell faced allegations of inciting a border war by writing to New York City-based hedge-fund managers.

“I am personally inviting you and a few of your colleagues to meet with me. We have much to discuss!” Rell added. “The meeting will be intimate, direct and private.”

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Art Imitating Life

Connecticut’s use of a tax credit to lure media-production companies was satirized, in 2011, in the I Heart Connecticut episode of the popular TV show “30 Rock.”


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