THE BUDGET passed by the Rhode Island General Assembly and signed into law by Governor Carcieri is good for the state’s economy. Our 2008 Economic Growth Plan made clear that the state has to get control over its spending without raising broad-based taxes. The fiscal 2009 budget does exactly that. Do not underestimate how important this is to improving our business climate and stimulating job creation.

Rhode Island’s economy has taken a hard hit. Our unemployment rate is too high and may go higher before we hit the bottom of this downturn. This is unacceptable and to turn it around we must fix the underlying problems that make our economy less competitive.

Why has Rhode Island been hit harder by the current downturn than our neighboring states? Rhode Island is more dependent on low-wage service jobs especially vulnerable to economic downturns. Our economy has also been more dependent on cyclical construction and related financial jobs that have been heavily affected by the subprime-mortgage crisis. Today, only 40 percent of Rhode Island’s jobs are in knowledge-based sectors that are better able to withstand economic downturns and to create new high-wage job opportunities. Contrast that with Massachusetts, which has not been hit as hard by the downturn because 58 percent of its jobs are in technology-driven sectors that grow even in a tough economy. Knowledge-economy jobs are more likely to survive economic downturns and they also pay higher wages.

Rhode Island can create a stronger and more resilient economy. We must stay focused on implementing our 2008 Economic Growth Plan, which lays out a clear vision for building a stronger economy and outlines the specific actions we are taking to create jobs. Our plan seeks to increase the number of jobs that pay above the national average wage of $42,000 from 40 to 60 percent over the next 10 years. Accomplishing this goal will result in 79,000 new high-wage jobs, $2.5 billion in additional state income, and $83 million in state income-tax revenue.

We have a strong foundation to build upon in high-wage, knowledge-based industries, such as financial services, health and life sciences, information technology and digital media, defense and marine technology, consumer products and design, and precision manufacturing and industrial products.

We must continue to invest in programs that accelerate Rhode Island’s transition to a knowledge economy. Despite a $422 million budget deficit, the governor and General Assembly funded core innovation-economy programs, such as the Slater Fund and the Rhode Island Science and Technology Advisory Council. Building our innovation capacity is central to creating an economy that provides good, high-wage jobs for all Rhode Islanders.

Our investment is paying off. This June, the Milken Institute reported that for the first time Rhode Island ranked in the top 10 of its State Technology and Science Index. Moving into the top 10 of this index confirms that Rhode Island is becoming a national hub for science, technology and innovation.

Our economy is in transition and we are aggressively implementing the actions called for in our 2008 Economic Growth Plan. We have launched a regional attraction campaign to promote new company relocation and expansion in target sectors. We formed a partnership with the Department of Transportation and the city of Providence to get maximum economic development value from property made available through the I-195 relocation. We have modernized the state’s expedited permitting program, championed legislation to strengthen the Community College of Rhode Island’s workforce development capacity, and partnered with Brown University and the University of Rhode Island to create a statewide research alliance that will increase research and development activity and stimulate new company creation. We also launched a new program that reduces the regulatory burden faced by the state’s small businesses.

We have a long way to go, but I believe we can create a more prosperous future for our state. The fiscal discipline demonstrated in the fiscal 2009 budget is an important step forward, and our economy will be stronger because of it.

Saul Kaplan is executive director of the Rhode Island Economic Development Corporation.