In downturn, Rhode Island worse-off than most
PAWTUCKET, Rhode Island (Reuters) - The city of Pawtucket in Rhode Island offers a vivid glimpse into the depth of America's worsening recession -- and a warning of the dangers of rising unemployment.
About 50 miles south of Boston, Pawtucket was a pioneer in America's industrial revolution. Now more than 11 percent of its workforce is jobless, the worst anywhere in a state that rivals economically battered Michigan for the highest unemployment rate in the country.
Main Street is pockmarked by empty storefronts. In just 100 yards (meters), six shops have "for lease" signs in their windows and a 32,000-square-foot (2,973-square-meter) retail and office complex stands empty.
"I don't have much business left," said Sait Sado, 56, who repairs and alters clothing at Sado's Tailor Shop. "I've worked this area for 26 years. I've never seen it like this."
One business that's busy on Main Street is a pawn shop.
"Business has been very good," said David Katz, a clerk at Pawtucket Pawn Brokers. "You can see for yourself," he said, pointing to shelves packed with televisions, stereos and music equipment. "We have been picking up for the past six or seven months. We're also getting a lot of gold and jewelry."
When President-elect Barack Obama puts his economic rescue plan together this month, he is expected to channel significant aid to state and local governments. Rhode Island illustrates the scale of the problem as many states consider dramatic cuts to local services to balance budgets.
Strained by a loss of tax revenue as unemployment worsens and real-estate values plummet, the state of 1 million people faces its biggest budget shortfall in 17 years, spending $1 million a day more than it collects and forecasting a $357-million budget deficit for the fiscal year to June 30.
That is projected to swell to $486 million in the 12 months from July 1, with lawmakers predicting the red ink will grow by about $80 million a year to reach a $770 million deficit in 2012 unless new revenue sources are found.
Schools are bracing for cuts. Lawmakers have not ruled out tax increases and are warning cities and towns to tighten their belts. They are considering a big public works program, a consolidation of state services and possibly the nation's only tax on residents for each mile they drive.
Under that tax proposal, residents would have to report their mileage and pay a fee when registering their vehicles every two years.
"You really have two choices in this state. You can try to cut more expenses which means that you are going to be laying off more people, or you are going to have to look at taxes," said Edward Mazze, a professor of business administration at the University of Rhode Island.
"Anything else that we do now is eventually going to affect the local cities and towns, and the provision of every type of state service. And that in itself becomes a deterrent to attracting industry," he added.
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