Perhaps the most honest statement to come out of the Senate Judiciary Committee regarding Paul Fogarty’s bill S3037A came in the hallway outside the hearing room after the vote, courtesy of Senator Leo Raptakis.

“What happened in there?” I asked.

“I don’t know,” replied Raptakis, “I don’t know why they brought it up for a vote at all.”

The confusion Raptakis felt was understandable. Normally, if you want to kill a bill in the General Assembly, you just never let it come to a vote. Eventually the session ends and the bill is dead.

So why bring the bill up for a vote? What was really going on?

Senator Paul Fogarty’s bill would have allowed the voters of Burrillville the opportunity to vote on any tax agreements made by their town council with any power plant located in the town. The immediate effect of the bill would be to allow voters to decide on a tax treaty being negotiated with Invenergy, which wants to build a $700 million fracked gas and diesel oil burning power plant in the town. The Burrillville Town Council has been repeatedly dishonest with the residents of the town, and has been actively working to bring the power plant into the town against the wishes of most residents. Residents of Burrillville want a say in the process and they want to prevent the power plant from being built.

The House version of the bill, sponsored by Representative Cale Keable, passed out of the House Committee on Environment and Natural Resources on an 11-2 vote and passed the full House on June 8. The Senate version, after a long, contentious hearing that pitted Burrillville residents and environmentalists against labor and business, was tabled without a vote.

The forces in favor of the power plant did not want this bill to pass. It is believed by many that this bill will make it impossible for the power plant to be built, because it will interfere with Invenergy’s ability to secure financing for the project. A stable tax treaty is important to Invenergy because without it, the company faces the prospect of paying full taxes on the power plant. No tax treaty, no funding, some say.

In an effort to kill the bill, Invenergy paid for a full page ad in the Providence Journal. An editorial and an op-ed were published in the paper as well. Pressure was brought to bear on the Senate from the Greater Providence Chamber of Commerce and the Northern Rhode Island Chamber of Commerce whose lobbyists testified against the bills. And labor, which wants the plant built because of the much needed jobs it will provide, lobbied the Senate hard.

Meanwhile, there was pressure being placed on Governor Gina Raimondo by environmentalists to not veto the bill, were it to be passed. Raimondo did not want to be put in the position of having to veto this bill. She wants the public appearance of being strong on environmental issues, even if she supports fracking and fossil fuels. For Raimondo’s purposes, the less known on the national scene about her true environmental  positions, the better. Vetoing this bill would create the wrong kind of headlines, the kind of headlines that might hamper her national political ambitions.

Satisfying these powerful players is easy. All that needed to happen was for the bill to never get out of the Senate Judiciary Committee, and the bill would die, never to be voted on. There’s only one problem: If that were to happen, Senator Paul Fogarty would have failed the community he serves, and though Fogarty, for political reasons, is opposed to the power plant and in favor of his bill, he’s a strong union member and supporter. Under normal circumstances he would be a reliable pro-union vote and a valuable ally.

A way to both kill the bill and save Paul Fogarty’s political career was therefore devised.

Four Senators, Frank Lombardi, William Conley, Donna Nesselbush and Stephen Archambault, presented legal-sounding arguments against the bill, all the while telling Burrillville residents watching the proceedings live or at home how wonderful their Senator Paul Fogarty is. They laid it on pretty thick at times.

“Kudos to Senator Fogarty for the concerns that he showed his constituency in the town of Burrillville,” said Senator Lombardi, “and [for] having the intestinal fortitude to bring forth the bill on the behalf of his constituents.

“And I mean this, Senator,” continued Lombardi, looking at Fogarty who was seated in the center of the room, “I think that the people of the town of Burrillville are very fortunate to have you as their Senator and the work that you do for them. Quite frankly you listened to them and you put forth what you thought was a very favorable bill for your citizenry.”

Not to be out done, Senator Conley said, “Senator Fogarty’s advocacy on behalf of the people of Burrillville on this issue was extraordinary. I’m just about at the close of my fourth year in the General Assembly and I can say without reservation that I’ve never seen one of my colleagues advocate in such a meaningful and, I don’t want to say aggressive but certainly in a strong way, on behalf of legislation. His heart and soul is behind this bill and whether you agree with one of your colleagues or not, it’s always that kind of advocacy in this building that often goes unsung. So it’s important to note that.”

Senator Nesselbush was more circumspect in her praise, saying, “Senator Fogarty has been a passionate supporter of this bill that he even convinced me to be a co-sponsor of the bill.”

Senator Archambault, who might run for Attorney General in 2018, also chimed in with praise for Fogarty, “I want to echo the sentiments of my brothers and sister with respect to Senator Fogarty. He’s been here for you all along, he’s put in a tough piece of legislation, it certainly hasn’t made him any friends on one side but he did it because he cares. I think his actions speak for themselves.” After this performance, I don’t think any environmentalists will be voting for him.

With Senator Fogarty properly lionized and hopefully protected, all the Senators needed was an excuse, any excuse, to vote against the bill. As it is, they produced three excuses. They also needed someone to blame. They couldn’t blame the business community, they couldn’t blame the Governor and they couldn’t blame labor.

Enter the Republican Burrillville Town Council with their press release turned resolution. At the original Senate Judiciary Committee meeting to discuss the bill, Senator Lombardi foolishly tried to pass off a press release against the bill from the town council as a resolution, but in fact the Burrillville Town Council didn’t get around to issuing an actual resolution until the committee meeting was almost over. But now, with a “proper” resolution in hand, Lombardi was able to produce a villain: the Burrillville Town Council.

In his statement after the vote, Fogarty expressed his disappointment at the bills defeat, but did not blame the vote on his fellow senators. Instead, he referred to the resolution, writing that the “last-minute opposition of the Town Council… [was] the equivalent of getting two torpedoes to the bow.”

“It’s a shame that the Burrillville Town Council does not have enough faith and confidence in the local citizenry to make an informed decision on a matter that will impact the future of their community,” wrote Fogarty, forgetting that it was the Senate Judiciary Committee, not the Burrillville Town Council that killed the bill.

Lombardi’s second excuse was that he was concerned about the precedent that passing the bill would set. He said that when the residents of a city or town disagree with their elected officials, they shouldn’t be looking to the state to pass new laws. Lombardi feared that the General Assembly might be flooded with every local issue that is “controversial” if they passed this bill. Of course, it’s fairly easy to find dozens of examples where the state has stepped in to override local laws and ordinances. The very creation of the Energy Facilities Siting Board, the body that will ultimately decide whether or not the power plant will be built, is an example of the state overriding local concerns and laws, for instance.

Lastly, Lombardi noted that one of his colleagues “was gracious enough to provide us with a Rhode Island Supreme Court case entitled Warwick Mall Trust v State of Rhode Island.” Sources told me that the court case was provided to Lombardi and the other senators by Senate Majority Leader Dominick Ruggerio, a strong supporter of labor who sat in on the original Senate Judiciary Committee meeting that heard testimony on this bill.

Lombardi said that the decision in this case could be applied to Fogarty’s bill, and claimed that the bill, as written, would be unconstitutional.

In the end, of course, the Senate Judiciary Committee voted Fogarty’s bill down. It was such an unusual occurrence that Chairman Michael McCaffrey couldn’t quite get his head around how it was supposed to work. As the chairman struggled to find the right way to phrase a no vote, two Capitol Police Officers entered the room, to make sure the crowd did not react aggressively to the decision everyone seemed to know was coming. The vote was 7 -2 against. Only Nesselbush and Erin Lynch Prada voted in favor of the bill.

The disappointment of the Burrillville residents could be felt physically. There were tears. Nick Katkevich, of the FANG Collective, shouted “Shame!” as he was leaving the room. The Capitol Police responded by telling Katkevich to leave, but he was already gone. Out in the hallway, there were more hugs and tears among the Burrillville residents.

They say they will continue the fight.

Looking over every single Senate Judiciary Committee vote this session, you will find that every bill brought up for a vote passed. In fact, every bill before this committee, but two, passed with no votes against them. The two exceptions were S2333 on May 5 and S2505 on March 3, and both times it was Senator Harold Metts casting the lone vote against. Until this day, six of the senators present had not cast a no vote in committee this year.

The truth is that no one is ever really supposed to vote no. These committee votes are pro forma. It’s theater. Every vote serves a purpose and no bill is voted on in committee without a predetermined outcome known well in advance.

And the vote on Paul Fogarty’s bill was no different.

In a letter to Majority Leader Dominick Ruggerio and other members of the Senate on Tuesday, leaders of the Young Democrats of Rhode Island and Students for Sensible Drug Policy thanked the senators for backing S 2420 because it would “improve Rhode Island’s ability to protect students, retain graduates, attract young professionals and create opportunities for a new generation of entrepreneurs.” The full letter is available below.

S 2420 would make possession of limited amounts of marijuana legal for adults 21 years of age and older, and it would establish a tightly controlled system of licensed marijuana cultivation sites, testing facilities, and retail stores.

“It’s a sensible proposal that is long overdue, and we are proud to stand with you in support of it,” the letter reads. “The time has come for Rhode Island to move forward and leave the antiquated policy of marijuana prohibition behind.”

A poll conducted in April of 2015 found that nearly three out of four voters aged 18 to 34 support regulating and taxing marijuana similarly to alcohol. The full results of the poll can be found here.

Full letter from Rhode Island youth leaders to ranking members of the Rhode Island Senate:

Dear Honorable Members of the Rhode Island Senate,

We are writing on behalf of our organizations and their many members across Rhode Island to express our gratitude for your support of S 2420, the Marijuana, Regulation, Control, and Taxation Act.

The Young Democrats of Rhode Island and Students for Sensible Drug Policy represent a diverse group of young, civically engaged Rhode Islanders who share a commitment to promoting the health, safety, and general welfare of our communities. We strongly support S 2420 because it would dramatically enhance Rhode Island’s ability to protect teens, retain graduates, attract young professionals, and create opportunities for a new generation of entrepreneurs.

Our state’s current policy of marijuana prohibition has caused far more problems than it has solved. It has failed to prevent teens from accessing marijuana. It has disproportionately impacted lower-income communities and communities of color. And rather than eliminating the supply of marijuana, prohibition has forced it into an underground market in which consumers aren’t asked for ID, they don’t know what they’re getting, and they’re often exposed to other, more harmful substances.

S 2420 would replace our state’s underground marijuana economy with a regulated market for adults. Marijuana would be sold by licensed businesses that test their products, label them, and only sell them to adults who provide proof of age. These companies would also create good jobs for Rhode Islanders and generate tens of millions of dollars in new tax revenue to fund vital state programs and services.

It is a sensible proposal that is long overdue, and we are proud to stand with you in support of it. The time has come for Rhode Island to move forward and leave the antiquated policy of marijuana prohibition behind.

Sincerely,

Michael Beauregard
Young Democrats of Rhode Island

Shmuel Barkan
Brown University Students for Sensible Drug Policy

Patrick Shea
University of Rhode Island Students for Sensible Drug Policy

The report, “State Job Creation Strategies Often Off Base” takes advantage of new data accumulated over the last fifteen years “about which kinds of firms create jobs” and the data shows that the “vast majority of jobs are created by businesses that start up or are already present in a state — not by the relocation or branching into a state by out-of-state firms.”

The immediate takeaway from this report for Rhode Islanders is that Governor Gina Raimondo’s planned (yet not realized) trip to Davos and the time she spent trying to persuade General Electric (GE) to move to Rhode Island rather than to Massachusetts are wastes of time and money. Raimondo’s offer to GE was in the “same neighborhood” as Massachusett’s $140 million in state and city incentives and grants.  Given the conclusions in this report, Rhode Island dodged a bullet when GE turned Raimondo’s offer down.

I asked the authors of the piece directly about the governor’s plan to travel to the World Economic Summit in Davos and they told me, “That is not where state economic development comes from and that’s really not where policy makers should focus. They should focus on homegrown businesses and try to stimulate startups and helping their businesses that are already in the state to find customers and find the skilled workers they need. Business recruitment accounts for such a tiny share of job creation and that’s really a major point of this paper. It is not where the priority should be placed.”

In other words, we are, as a state, pursuing failed economic and job creation strategies, and we will continue to fail unless we take this new data seriously.

On average, 87 percent of new jobs are created by businesses already in the state. In the chart below, you can see that Rhode Island is no outlier in this department. The remaining 13 percent of jobs come from out of state businesses branching into the state (think of a restaurant chain in Boston adding a store in Providence) or a business actually relocating into the state, as GE recently did when they moved to Massachusetts.

What kind of businesses stimulate job creation? The report stresses that “startups and young, fast-growing firms are the fundamental drivers of job creation when the U.S. economy is performing well.”

The report quotes economist John Haltiwanger and his colleagues as saying, “Overall, the evidence shows that most start-ups fail, and most that do survive do not grow. But among the surviving start-ups are high-growth firms that contribute disproportionately to job growth. These high-growth young firms yield the long-lasting contribution of start-ups to net job creation.”

The firms that take off are called “gazelles.” Think Google, Amazon, Tesla or Under Armour, or, in Rhode Island, think NuLabel. These kind of firms accounted for about 15 percent of all businesses, but were responsible for half of gross job creation from 1992-2011.

Failed Policies

In trying to create a “business friendly climate” that will lure small businesses to the state, our leaders, like leaders in many other states, have pursued strategies that are “bound to fail because they ignore the fundamental realities about job creation revealed by the new data and research discussed above.” A favorite failed strategy is tax cuts for “small businesses.”

These tax cuts are not properly aimed at young businesses, they are aimed at small businesses.  Most small businesses don’t have employees or plan to add employees. And targeting tax cuts to young businesses has little effect because most young businesses spend so much money on new equipment, product testing and marketing that they have little in the way of taxable income in the first place.

Tax cuts don’t help a state’s business climate, but they do hurt a government’s ability to do the important work of funding education and maintaining a top notch infrastructure. The report cites an Endeavor Insight study that showed that only 5 percent of entrepreneurs cited low tax rates as a factor in deciding where to locate their company, whereas 31 percent cited access to talent (education) and a city’s quality of life as a factor.

Offering tax breaks and non-tax incentives to lure out-of-state companies to our state is also a losing game. In Rhode Island we are addicted to TSAs, Tax Stabilization Agreements, which allow companies and developers to avoid paying their fair share of taxes and shifts the businesses’ tax burden onto the rest of the city or state taxpayers. As the report clearly shows, “jobs gained due to firm relocation are such trivial factors in a state’s overall job creation record that they should not be a consideration in formulating state tax policy or economic development policy more broadly.”

A look at statements made at the recent Greater Providence Chamber of Commerce luncheon reveals that our elected leaders haven’t gotten this message yet.

Here’s Senate President Teresa Paiva-Weed talking about the importance of tax cuts:

Here’s Senate Majority Leader Dominick Ruggerio talking about tax stabilization agreements to spur development:

Here’s Senate Minority Leader Dennis Algiers on “broad-based” tax cuts, which we’ve seen are not only not effective, they are counter-productive:

Here’s Speaker of the House Nicholas Mattiello talking about how “incentives” (i.e. tax breaks) “attract new people to our state.”

Continuing to pursue strategies that have been shown to hinder rather than help in job creation would be foolish in light of the data in this new report. Instead, “policy needs to focus on encouraging entrepreneurship generally, helping new businesses to survive, and enabling businesses with the potential to become high-growth firms to fulfill that potential.”