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Tuesday, January 30, 2024

How real is McKee's promise to raise Rhode Islanders' incomes by $20,000

McKee set a bold goal to raise per capita income but didn't give details

By Nancy Lavin, Rhode Island Current

Photo by Steve Ahlquist
It’s hard to think of anyone in Rhode Island who wouldn’t welcome a $20,000 raise.

Which is exactly why Gov. Dan McKee’s bold goal to increase the average, per-person income by at least $20,000 by the end of the decade grabbed the attention of news outlets, lawmakers and policy analysts. 

Rhode Island’s per-capita income ranks second-lowest among New England states, besting only Maine and just below Vermont, according to quarterly estimates from the U.S. Bureau of Economic Analysis. A $20,000 increase would put Rhode Island nearly on-par with Massachusetts and Connecticut.

But since unveiling his headline-making declaration in the annual State of the State on Jan. 16, McKee’s office has offered zero explanation about what his vision entails, or how it will be achieved.

Instead, the administration promised a plan by early May. The absence of even basic details like whether the increase will account for inflation — or what the earnings estimate being used as a baseline is  — has left some policy analysts skeptical that McKee’s lofty vision will make a difference in residents’ wallets and savings accounts.

“The governor stating an aspirational goal to grow wealth to the state is a positive,” said Gary Sasse, the budget watcher who formerly led the Rhode Island Public Expenditure Council and later served as director of the Department of Administration. “People cannot criticize that. But what people can take exception with is the execution.”

What is the baseline earnings being used in McKee’s initial assessment? The U.S. Census Bureau in its 2022 estimates, for example, pegged Rhode Island’s average per-person income at $43,324, while the U.S. Bureau of Economic Analysis estimated that the average resident earned $66,301 as of the third quarter of 2023. 

Another key question: does the $20,000 increase account for inflation? As Sasse pointed out, the long-term revenue forecast adopted by state budget crunchers in November projects a roughly 4% annual growth in wage and salaries through fiscal 2030, meaning that thanks to inflationary pressures, most people will end up with close to $20,000 more in pay by the end of the decade anyway.

100 days

The governor’s office has only this answer when asked these specific questions: Wait and see.

“As the Governor said in his address, and just as we did for our education goal last year, we will roll out additional details within the next 100 days,” Olivia DaRocha said in an email on Jan. 22.

That answer leaves Sasse unsatisfied.

“This wasn’t something that came into the governor’s head when he was finalizing his draft of the speech,” Sasse said. “It must have been something they were thinking about for a while. We have paid professional people in economic development, state economists, and the entire Rhode Island Commerce. Certainly they must have had some thoughts or given the governor advice. To not spell out more of the details and goals and objectives is unfortunate.”

McKee’s forthcoming plan will also include expertise from outside consultants like Edi Tibaldi, an economist and professor at Bryant University. Tebaldi referred questions about the specifics of the plan back to McKee’s office, explaining that his role was to provide data and answer questions by the administration.

“This is not a trivial issue; it’s not something that can be done in a few days,” Tebaldi said.

Awaiting details, Mike DiBiase, RIPEC president and CEO, was hesitant to throw cold water on the idea.

“It’s a good goal, and it’s the right goal,” DiBiase said. “If we can increase incomes, a lot of our social problems become less daunting — housing, health care, food insecurity.”

It’s also a way to make Rhode Island more competitive with neighboring states.

DiBiase, like Sasse, acknowledged that inflationary pressures will push earnings up over the next six years anyway. DiBiase said he “has to assume” that simply riding the inflationary surge was not the governor’s intention.

But to boost incomes by 30% above inflation in six years will take a “dramatic commitment” to investment in education and workforce training – not unheard of, but not an easy feat, DiBiase acknowledged.

And based on the governor’s proposed $13.7 billion spending plan for the upcoming fiscal year, critics say there’s little proof that he’s laying the groundwork for that long-term, visionary turnaround.

Meaningless if housing, child care costs increase

“The reason we are having a hard time taking it seriously is… it’s hard for us to look at this prioritization and the budget and see how he’s going to pull that off,” said Zack Mezera, Rhode Island organizer for the Working Families Party.

Mezera stressed the need to ensure that earnings boosts would help low-income and working families, not just high-earners and out-of-state workers that the state hopes to lure.

Mezera pointed to McKee’s proposed funding for the Rhode Island Public Transit Authority – including a $10 million reallocation of federal stimulus money, far short of the $100 million that transit advocates have asked for – as evidence that the governor’s proposed spending plan failed to adequately address the needs and expenses of working and low-income families.

Even if McKee manages to pull off a $20,000 pay raise for all, it must be accompanied by corresponding cuts in expenses like housing and child care, Mezera said.

“Without a plan to reduce the cost of child care or reduce cost of housing or prescription drugs, it feels hard to buy the idea that even a $20,000 per capita increase in wages would actually materially improve people’s lives,” Mezera said. 

“We need to stop the bucket from leaking right out immediately, so people can actually use that extra money for savings, for gifts for their kids for Christmas, for stuff that’s not just day-to-day basic needs.”

Alan Krinsky, director of fiscal policy and research for the Economic Progress Institute, expressed cautious optimism at the governor’s forthcoming plan.

“These things are measurable, but whether they are achievable is another question,” Krinsky said. “My assumption is they have some ideas in mind, but I have not detected that as being clearly in the budget.”

Sasse refrained from speculating on the kind of budget proposals needed to make a $20,000 income boost happen. He first needed to understand what that goal meant, and how it was being measured.

“The devil is really in the details here,” Sasse said. 



Rhode Island Current is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Rhode Island Current maintains editorial independence. Contact Editor Janine L. Weisman for questions: Follow Rhode Island Current on Facebook and Twitter.