Rhode Island and Michigan continued to be the leaders in unemployment in the nation in October. Rhode Island's unemployment rate was 9.3 percent, up a half a percentage point from September, losing another 2,400 jobs. In addition to this bad news, Rhode Island has the distinction of having one of the highest budget deficits as a percentage of a state budget in the United States. How and when is Rhode Island going to get out of this dismal economic spiral?

The recent economic forecast by the New England Economic Partnership reports that Rhode Island will lose 12,000 jobs in 2009 and 3,000 jobs in 2010. Total employment is expected to decline from 493,000 in 2007 to 469,300 in 2009. For 2009, the forecast indicates significant job losses in manufacturing, trade, transportation and utilities, leisure and hospitality, professional and business services, financial services and construction.

Unemployment is forecasted to be 9.5 percent in 2009 and 10.2 percent in 2010. The unemployment rate will not be below 8 percent until 2012. The forecast shows a growth of 7,800 jobs in 2011 and 16,000 jobs in 2012.

Why can't we create jobs? It is easy to blame the national economic situation. However, Rhode Island began losing jobs in 2007. Our job creation process is not working. By lowering taxes, giving financial incentives and highlighting special niche employment sectors, more jobs should be created but this is not happening. One answer may be that jobs come because consumers and businesses purchase products and services from other businesses.

The Buy Local R.I. program originated by Lieutenant Governor Roberts is the right step at the right moment because it will help small businesses grow by encouraging consumers and businesses to shop locally. We need to find better ways in other sectors of our economy to increase jobs in employment sectors paying higher wages such as high-technology.

There are at least four other reasons why job creation is not happening in addition to reasons such as high taxes and an unfriendly business environment.. First, the responsibility for creating jobs has been delegated to state government which itself has significant economic problems. Second, corporate leaders are focused on their companies rather than the state economy. Third, residents oppose changes in their communities that could create jobs such as land development or a port. And fourth, businesses are reluctant to come to a state that is constantly dealing with budget deficits and no real solutions in place.

Let's start the process by solving the deficit facing Rhode Island. For each of the next two years the state needs a $400 million a year cost-cutting program. There is already a reluctance to consider more consolidation of services, reducing the number of school districts and moving towards a county type of government rather than the city/village type of government currently in place. Critics want hard evidence these changes will work.

Without these changes, how will the state get rid of the deficit? Cost cutting will lead to more personnel layoffs, first at the state level and then locally because cities and towns will not get the funding they need from state government or local taxes, and then to fewer services. Increasing taxes will turn away businesses and encourage more Rhode Islanders to leave the state. The solution to the deficit problem has to restart itself again at a basic level: everything is up for review and no idea is a dumb idea.

With a state of a little over 1 million people, we are reluctant to learn from the experience of cities with populations over ½ million such as Atlanta, Austin, Texas, Boston, Charlotte, North Carolina and Jacksonville, Florida. Each city has one school superintendent, one purchasing department, one police department and one human resources department. Each city is larger than any one of our counties and seems to be functioning well. Changing government structure is a long-term solution. A short term solution is adopting a zero-based budgeting system.

Zero-based budgeting is different than traditional budgeting because it starts from a zero-base namely, all department spending is assumed to be zero, and that the entire budget must be approved not just the increases. This leads to cutting wasteful and unnecessary line items saving the taxpayer money.

In traditional budgeting, only increases have to be justified over the previous year's budget and what has already been spent. Zero-base budgeting cannot solve the flaw in government accounting rules that just tracks the sources and uses of funds and not the cost/benefits of how the funds are used.

In zero-based budgeting, every activity is reviewed. You study the value of the activity under review and determine what would happen if the activity was not provided at all or if the activity was performed in a less costly manner. Public safety activities are never eliminated but analyzed in terms of better delivery systems. It is also a way to see where the activity would fit in if all activities had to be prioritized. It is a way to determine which activities are over-budgeted.

This type of budgeting is a good way to allocate limited resources to where they will do the most good. To be effective, the budgeting must be done right. There needs to be a commitment by top government officials since entitlements will be reduced, unnecessary spending eliminated and performance audits implemented. The willingness of state and local government employees to work with this budgeting system is also needed. Once implemented, existing costs should be reduced by 10 to 15 percent in year one, 5 to 10 percent in year two and enough to offset inflation in the third year.

Are there inefficiencies in state government? Zero-based budgeting is a way to identify and eliminate costs that could be tied to inefficiency and that do not justify the activities expenditure. To accomplish this task, it takes a dedicated group of managers to analyze the benefits of an activity, function or department, from the minimal level of staffing and budget to the present level of staffing and budget. Each government agency would submit a prioritized budget at alternative funding levels and what they could accomplish with each. The zero-based budgeting system focuses on a comprehensive analysis of objectives and needs and combines planning and budgeting into a single process. The process gives taxpayers a detailed justification of how each dollar is spent and how their government assets are managed.