Monthly Archives : July 2019

Dear Rhode Island business and community leaders:

This is an exciting week in our state. As the week begins, we’re writing you in order to reflect upon Rhode Island’s economic progress to date and to thank you for your contributions to our collective work.

This Week in Rhode Island

First, Governor Raimondo and we on the Commerce team hope you’ll join us in celebrating the opening of the new Wexford Innovation Center — a new hub for entrepreneurship and business growth — on Wednesday (details are below). This is a lot more than just the debut of a building. It’s the culmination of important work aimed at rebuilding Rhode Island’s economy. And it’s the start of a new era that focuses even more on innovation (and that requires even more continuing work in order to succeed).

Also this week, as the first and only state with an operational offshore wind farm, we will be hosting the Rhode Island Offshore Wind Conference in Newport. This convening comes on the heels of the Raimondo Administration’s announcement last month that GEV, one of the largest wind turbine maintenance companies in the world, is creating its US Headquarters — and with it over 120 jobs — here in Rhode Island. So, for all those reasons (and many more), this week seems like a good time to take stock of how far we’ve come together — as well as to consider the journey that is still ahead of us.

Recapping Rhode Island’s Economic Progress to Date

From 2014 to 2018, our unemployment rate dropped more than any other state’s. Our annual average unemployment rate last year was the lowest it’s been since 1988. Our rate is now 3.6%, right at the national average.
In addition, the U6 unemployment rate —which includes discouraged workers who are excluded from common measures of unemployment — fell below the national average in 2018, another sign of economic strength.
In April 2019, Rhode Island experienced the greatest month-to-month job growth in 20 years.
We have exceeded the national average for wage growth from 2014 to 2018.
More than 30 companies have decided to land or expand in Rhode Island under Governor Raimondo’s commerce programs over the past few years.

Promoting the Success of Small Business

Small businesses — the backbone of Rhode Island’s economy — have been helping to drive our economic recovery. Record numbers of businesses have started each year since 2015, and total business filings hit an all-time high last year (9,219).
Programs contributing to this growth include Rhode Island’s first state-financed small business loan program, started by the Raimondo Administration in partnership with the General Assembly. We have made more than 100 loans, more than half to minority-owned and woman-owned businesses.
Another new program, SupplyRI, is connecting 1,700 smaller suppliers to institutions and corporations within the state so the smaller vendors can attain a sustainable customer base right here in RI (and so larger purchasers have a reliable, local supplier network to draw upon).
A small business hotline was created to provide one stop shop resource for business owners for questions about navigating government, seeking capital, or general business resource questions. The hotline can be reached by dialing (401) 521-HELP.

Tax Stability and Reducing Tax

Significant state tax reductions have been enacted since Governor Raimondo took office. Rhode Islanders are benefiting from cuts in the corporate minimum, energy sales, unemployment insurance, and car taxes. In 2020, Rhode Islanders are projected to save well over $175 million due to lowered taxes (that’s a single year figure). These tax savings are the result of the partnership between the Governor and General Assembly leaders including the Speaker and Senate President.

Innovation and Entrepreneurship

The new Wexford Complex will house a replication or the world-renowned Cambridge Innovation Center, with its track record of fostering new and early-stage ventures, as well as new offices for Johnson & Johnson and Brown University’s School of Professional Studies.
Another important incubator, Innovate Newport, opened a few months ago (like Wexford, with support from the state). We encourage you to check it out when you have the chance.

National Rankings

Thankfully, some of the national rankings have been reflecting our progress. Just two months ago, US News & World Report ranked Rhode Island #20 for its economy, up from 29 last year (May, 2019). Also in May, Wallet Hub ranked Rhode Island the 10th best state for jobs (up from 21).

You may have heard that CNBC lowered Rhode Island in its ranking to 50th last week. That was definitely disappointing. It is worth noting that, in the midst of the overall decline, Rhode Island’s CNBC rank improved in three important categories this year: Technology & Innovation, Access to Capital, and Cost of Living. However, due to year-to-year changes by CNBC in how the categories were weighted, two of the categories in which RI made progress were weighted less significantly than in previous years. As a result, Rhode Island’s successes on these fronts were diminished. It’s also the case that, despite the launch of the Raimondo Administration’s major Rhode Works infrastructure program, CNBC continues to place RI last for infrastructure. Clearly this ranking system is, in some key areas, lagging behind our progress. Another observation that puts our ranking in context: this year’s CNBC listing dropped Massachusetts by 6 spots (while RI fell by 5).
That said, we are evaluating all of the rankings systems’ observations and insights to understand what they tell us about where we’re doing well and where we can do better. We certainly need to increase and improve our efforts in some areas and, working together, we will.

Planning for the Future

We are in the process of launching work on the next phase of our state’s economic development plan. This effort will build upon previous ones. It will draw lessons from a variety of sources including national assessments of Rhode Island’s economy as well as local stakeholders’ observations. It will be guided substantially by the Economic Development Planning Council that the General Assembly has established via legislation. We welcome your input to this important process, which is an opportunity to take our collective work to the next level.

In closing, Rhode Island has made a great deal of progress over the past few years. But we cannot simply rest on our laurels. Working together, we need to take seriously – and take on – the challenges that remain in our economy. With renewed determination, our efforts must involve collaborating across institutional boundaries in order to: strengthen our education and training systems, reduce barriers to business starts and business success, and further invest in our economic future.

The Commerce team and I want to thank our public and private sector partners – including the General Assembly, fellow state agencies, chambers of commerce, and more – for their continuing commitment to Rhode Island’s economic success.

With warmest regards and best wishes for the remainder of the summer,

Stefan

1. Opportunities in Manufacturing: Growing Sales of Existing Products
2. The Maker Movement – Feeding Today’s Manufacturing Industry
3. Dealing with the Changing Landscape in the Manufacturing Workforce – Part 1
4. Dealing with the Changing Landscape in the Manufacturing Workforce – Part 2

Service Organizational Control (SOC) – In the modern world, it has become common practice for organizations to outsource certain functions for business processes to third parties, rather than performing all processes “in house.”  When an organization decides to outsource a core business process to a third party, the risk of the service organization often times becomes the risk of the user entity.  Therefore, now more than ever, it is important to understand the different forms of Service Organizational Control reports and the types of risk that are addressed by each one.  If you want to learn more here are a few links to several free white papers that discuss SOC reporting in more detail:

SOC 1 vs. SOC Type 1

The significance of a (SOC)KET “Illuminating the Controls at your service Organization

The Ingredients in a SOC Report and the Nutritional Value of your Service Organization

How to find you matching “SOC” in a basket of wrinkled guidance

PMPA:

With 80 companies responding, the PMPA Business Trends Index
for May 2019 came in at 140, making it our 6th highest month ever recorded.
While sales outlook dropped to a negative reading for the first time since
October 2016, our Sentiment indicator for Profitability rose, while Lead time
remained level.  Forward looking
sentiment for Employment declined from 97% positive to just 87% positive.

Network Security – Our Shops are the
Target!

According to MITECH, a new survey shows 77 percent of organizations
in transport and automotive markets have been hit with IoT-focused cyberattacks
during the past twelve months. Of those that experienced a cyberattack, 91
percent had an impact on the organization, including operational downtime and
compromised customer data and/or brand or reputational damage. Perhaps most
alarming, many organizations are not properly prepared for future threats, with
only 6 percent indicating that they have what they need to combat cyberattacks.

NFIB Posts Its Best Reading Since
Last October

The National Federation of Independent Business reported
that the Small Business Optimism Index rose to the best reading since October,
up from 103.5 in April to 105.0 in May. It was the fourth consecutive monthly
increase in sentiment, and despite softening from August’s all-time high
(108.8), small businesses remain upbeat overall.

Manufacturing Optimism (Take #2)

Last week, the MetLife & U.S. Chamber of Commerce Small
Business Index Q2 report showed strong optimism among small business owners
across the nation.

According to the Q2 report:

• 59% of small businesses viewed the U.S. economy as “in good health,” up six points from last quarter.
• 27% of small business owners plan to increase investment in their company over the next year.
• 69% of manufacturers feel positive about the national economy, up 16 points from last quarter.

“This quarter’s report is further evidence that small
businesses are flourishing.

Manufacturing Optimism Dips:

Manufacturers
were feeling cautious in the second quarter, according to the NAM’s quarterly
Manufacturers’ Outlook Survey. It’s no wonder—the survey was in the field
during the uncertainty about tariffs on Mexico and the Section 232 auto
tariffs.

The Key
Number: 79.8 percent of manufacturers rated their outlook as positive, a drop
from 89.5 percent in the first quarter of 2019. As you may recall, 2018 was the
best year on record for the NAM’s quarterly surveys.

Here are some other findings of interest:

• 68.8 percent of respondents rated the inability to find high-quality workers as their top concern.
• 56 percent reported uncertainty due to the USMCA, the elusive U.S.-China trade deal, the threat of Section 232 auto tariffs and the tariffs on Mexico (since resolved).
• Plus, nearly half are concerned about the rising prices of raw materials.

NAM Chief
Economist Chad Moutray said:

“All things equal, I would expect these numbers to improve if we get the U.S.–Mexico–Canada Agreement across the finish line, strengthen our trading relationships by removing the threat of 232 auto tariffs and get a trade deal with China done.”

Manufacturing Metrics

Navigating
the 4th Industrial Revolution

While
manufacturers recognize the potential value of advanced technologies and
digital innovation – particularly robotics, the Industrial Internet of Things
(IIoT), cloud computing, advanced analytics, 3D printing, and virtual and
augmented reality – they are still deliberating how and where to invest and
balancing the hype with their own level of preparedness. Meanwhile, they’re
also well aware of the significant changes 4IR will bring to a new
manufacturing workforce.

Manufacturing Metrics

6/27/19

The Senate passed the 2019 National Defense Authorization Act. The bill includes Senator Whitehouse’s bipartisan USE IT Act to support carbon utilization and direct air capture research, and his bill with Senators Jack Reed (D-RI) and Dan Sullivan (R-AK), the SEA FUEL Act, to improve the U.S. military’s energy security and reduce carbon emissions called the SEA FUEL Act.

6/26/19

Senator Whitehouse, Senator Dan Sullivan (R-AK), and Senator Bob Menendez (D-NJ) unveiled the Save Our Seas 2.0 Act to combat marine debris. A one-page summary about the legislation is attached to this email.

6/25/19

Senator Whitehouse reintroduced legislation that would extend tax credits for the renewable energy industry.

The Legislative session ended with some positive and negative results.  I would like to commend Speaker Mattiello, House Finance Chair Marvin Abney and the leadership team for formulating a good budget for the business community.  This was a tough budget to negotiate through.  I believe that the Speaker’s leadership was a major factor in producing a pro-business budget.

Major items that were discarded were the Medicaid tax bill, service tax bill, the lobbyist tax bill and marijuana legislation was not approved.  RIMA made our position against passage of these items and we are pleased that these additional tax revenues were removed.

We asked for full funding of Real Jobs.  On this issue, we fell short of achieving our goal.  In addition, the Commerce economic program was downsized.  These types of decisions have many factors involved.  The data supporting these decisions is extensive.   I do know that due diligence of these issues was done.  I hope that these decisions will not impact our training capability nor our ability to grow our economy.

The ReBuild Rhode Island Program legislation passed that now allows for S-corporations and LLC to participate.  RIMA testified in support of this change. 

The FY 2020 Budget allows tax relief for pass through entities by allowing a pass-through entity to pay the state income tax at the entity level the same as a C-Corporation and deduct it from the federal income tax passed through to the owners.  This legislation was presented by House Majority Leader Joe Shekarchi.

The first time in many years, the business community will not face a minimum wage increase as the Senate bill died in House Labor Committee.

RIMA working with Rep. Deb Ruggiero put together legislation on Sustainability.  This legislation passed both the House and Senate.  We will be explaining this legislation to our manufacturers in the near future.  Manufacturers who wish to participate at no-charge and can show how they are doing sustainability within their company and will receive a document noting such by the State of Rhode Island.  Those of us whose customers monitor our efforts for recycling, carbon reduction, energy reduction and many other items will now be able to show your customer a state document noting your company’s efforts.