Grafton "Cap" Willey serves as one of the facilitators at a breakout session yesterday morning, as topics and ideas were posted around the room. The gathering offered small business owners a chance to interrogate the state’s top leaders about tax policy and business regulations.

The Providence Journal / Kathy Borchers

Policymakers hoping new businesses will dig the state out of its fiscal chasm got little help last year. The number of new companies opening in the state fell by 9 percent, only the second annual drop in the last decade.

In 2002, the number of new business registrations jumped 15 percent, and increased another 10 percent the following year.

Arguing against tax hikes, Governor Carcieri, a onetime chief executive officer, has long held up business development as a better way to finance state government. But last year, the stream of new companies setting up shop in Rhode Island began to dry up, dropping to 7,138 from 7,837 in 2007.

The disappointing tally includes new corporations and nonprofit groups, as well as out-of-state and foreign companies entering Rhode Island. New business registrations have only dipped once before since the state began keeping records in 1996, falling 0.9 percent in 2005.

“This stood out,” Secretary of State A. Ralph Mollis said in an interview yesterday. “We need to turn that around.”

Carcieri played down the decline, saying the national economic downtown has slowed consumer activity. “It’s just the business downturn,” he said in a brief interview. “People aren’t spending.”

This is not an easy time to open a business. Loans are scarce to prepare a site, buy inventory and advertise. The prospects for drawing customers, meanwhile, are poor. Holiday retail sales nationwide dropped 2.2 percent, the biggest decline in almost 40 years.

But Mollis said the economic crisis is not the only factor discouraging entrepreneurs.

State economic development officials often complain about the exodus of talented graduates from local universities. In fact, the state’s overall population is declining, an inexplicable trend given the number of students from out-of-state and overseas who come here to study, Mollis said.

“It’s obvious we’ve had a very difficult year for anyone to open a business in Rhode Island,” Mollis said. “But the employment opportunities are not what they should be to keep people in the state.”

In all, there are 65,000 businesses, including nonprofit corporations, registered with the secretary of state’s office to operate in Rhode Island. The sales, income and property taxes they pay provide desperately needed revenue for the state government, struggling to resolve a $357.4-million current-year budget deficit.

New businesses are also needed to put to work thousands of unemployed Rhode Islanders. As of November, there were 53,100 unemployed residents here, for an unemployment rate of 9.3 percent that is one of the worst in the country.

A consistent influx of new businesses is also critical to replace those that close their doors every year, a number expected to increase significantly during this recession.

Despite the slowdown, a group of intrepid entrepreneurs started new companies last year. In April, for example, Elizabeth Perry began selling homemade dog treats out of her home. Sales by her company, Gracie’s Gourmet Goodies, named for her golden retriever Gracie Lou Freebush, have been climbing steadily, Perry said.

Maria Patricia Duque opened Touched by Green, a gift shop on South Main Street in Providence, in September. With potential competitors frightened away, she said, her shop is positioned to have a strong advantage once the economy recovers.

“I think it’s the best time to open a business,” Duque said yesterday during a lunch break at the Rhode Island Economic Summit, an annual gathering of small business owners.

These days, few are so gung-ho. Summit organizers fielded 233 requests to participate, a chance to interrogate the state’s top leaders about tax policy and business regulations. Last year, only 150 attended, according to Mark Hayward, district director for the U.S. Small Business Administration, one of the organizers.

Eric Weiner, president of All Occasion Transportation in Providence, was among the small business owners at the Culinary Archives & Museum at Johnson & Wales University. He weaved past giant potato peelers, ancient cast iron stoves and copper caldrons in glass cases to hear if state leaders plan to alter the taxes he pays on his 42-vehicle fleet or the meal and hotel taxes that he says keep companies from hosting meetings in Providence and Newport.

In an online survey of participants, 44 percent of the 87 respondents cited the state’s tax burden as the “greatest challenge” small business owners confront.

For All Occasion Transportation, budget cutbacks among the company’s largely corporate clientele pushed down revenue from limousine rentals by 16 percent last November and 19 percent in December. “We are focused,” Weiner said, “on the day-to-day survival of our business.”

bgedan@projo.com