Painful Flood Could End Up Helping Rhode Island's Troubled Economy
Flood waters have ravaged business districts in small towns and engulfed the Warwick Mall, one of the state's largest. Aram Garabedian, one of the mall's co-owners, told local press that he plans to reopen Warwick as soon as possible, provided there's no structural damage.
Amtrak service has been disrupted, and parts of I-95 remain shut down. The number of residents seeking unemployment benefits has risen three-fold since the calamity. Rhode Island Governor Donald Carcieri likened the disaster to a "kick in the teeth" that the beleaguered state would survive. The road ahead, though, won't be easy.
Doing Poorly Before Flood
"We don't have much in the way of engines of economic growth," says University of Rhode Island Professor of Economics Leonard Lardaro. "Rhode Island's tax and cost structure isn't very competitive. We were one of the first states to have deficits."
The state was in poor economic shape before the disaster struck. Unemployment stands at 12.7%, about three points higher than the national average. Rhode Island usually ranks among the top three in jobless rates. The state was expecting a budget deficit of $220 million in the fiscal year ended June 30 and another $427 million shortfall for the following year.
Rhode Island's transportation infrastructure is a mess, and its public schools are in such poor shape that a local superintendent made national headlines when her institution's board approved her plan to fire the entire faculty of the poorly performing high school.
Rhode Island lacks a significant manufacturing base and employs about 18% of its workforce in the retail sector. The state government employs far more people than private companies, such as CVS Caremark (CVS) and Hasbro (HAS), or colleges such as Brown University. Lardaro says Rhode Island entered the recession months ahead of the rest of the country.
One of the few silver linings to the flood is that once federal money starts to flow into Rhode Island, the spending will help jump-start the economy and may help it sustain a stronger recovery than it would have otherwise through its first year. "It might boost the pace of recovery," says Andres Carbacho-Burgos, an economist at Moody's Economy.com.
Though that may offer some solace, Rhode Islanders' concerns are more immediate.
Businesses are eager to find out information about applying for federal assistance and getting unemployment benefits for employees. Homeland Security Secretary Janet Napolitano is touring the flood-ravaged state, along with officials from the Federal Emergency Management Agency, to get a first-hand look at the devastation, according to the Associated Press. President Barack Obama declared the state a natural disaster area earlier this week.
"The timing of the flood could not have been worse," says Laurie White, president of the Greater Providence Chamber of Commerce. She adds that the disaster striking before the Easter holiday was particularly devastating to the state's small retailers, who count on sales from the holiday to bolster their bottom lines.
"I just spoke to some business people who lost their entire life's savings," she says. "They're still in a state of shock."