The Power of Words. The exodus is over, but left its mark on R.I.

6/22/97
The exodus is over, but left its mark on R.I.
By WILLIAM J. DONOVAN
Journal-Bulletin Staff Writer

       During the first half of the 1990s, working age Rhode Islanders, especially those in their 20s, heeded the mid-1800s advice of Horace Greeley -- they went west.
       They also went south and north, and some probably went east.
       But not a lot of them stayed in Rhode Island.
       In the midst of the worst economic recession since the 1930s, Rhode Island experienced a greater flight of its people in the 1990s than any other state.
       Roughly 46,000 people had hit the road by the end of 1995, according to the Rhode Island Economic Policy Council, or about 5 percent of the state's population. Though much of that loss was offset by foreign immigration and by births, the state still suffered a net population loss of about 1.5 percent.
       But the exodus is apparently over. According to the U.S. Census Bureau, in 1996, Rhode Island's population grew by about 1,600, raising the total to 991,405. For the rest of the decade, the Census Bureau predicts small annual increases - though the state still won't return to the one million mark, which it fell below in 1991, until the next century.
       Economists say the end of the emigration is due to an improved economy and the fact that the layoffs of thousands of workers, primarily in the defense industry, are nearing an end.
       But the five-year decline has changed the composition of Rhode Island:
       *There are fewer people within the working ages of 15 to 59 in the state; there are more minorities, immigrants and older residents.
       *There are fewer people paying taxes as in 1989; there is a greater percentage of the populace using the services that tax revenues afford.        *And there is a greater reliance than in 1989 on federal outlays, as a portion of the state's total income, money that can be and has been affected by decisions from Congress.
       A stagnant population "affects an economy in a number of ways, and none of them are very good," says Paul Getman, New England forecaster for Regional Financial Associates, an economic research firm in Westchester, Pa.
       In the first five years of the 1990s, payroll employment in Rhode Island fell by more than 13,000 jobs, thanks to cuts in the defense industry, manufacturing, construction and numerous other fields.
       Seeing limited opportunity, many Rhode Islanders moved to other parts of the country - such as the South or the Rocky Mountain region - where companies were hiring. As Rhode Island lost more than 1 percent of its population from 1990 to 1995, the population of the Rocky Mountain region increased by 16 percent.
       According to the state Economic Policy Council, from 1990 through 1995, Rhode Island lost about 8 percent of its population aged 20 to 24. Further, there was a decline of nearly 9 percent in the number of people ages 55 to 59.
       As the working-age population has gone down, the percentages of older residents and of immigrants have risen. By 1994, about 15.6 percent of the state's population was older than 65, ranking Rhode Island third highest in the country after Florida and Pennsylvania.
       The loss of working-age people is significant because of the vitality they bring to an economy, says Robert Atkinson, executive director of the state Economic Policy Council. People in their 20s in particular, he says, start new businesses, create jobs and help communities grow.
       Losing income-earners, at a time when the percentage of older residents grew, also placed a fiscal strain on state and local governments, says Atkinson.
       "The dependent population - under 18 and over 65 - generally consumes more in state and local resources, in terms of education and other services, and contributes relatively little to the tax base," says Atkinson. "A bigger share of our population consumes resources and doesn't pay it back in taxes."
       The worst seems to be over. State government expects to finish its fiscal year, on June 30, with a slight budget surplus. State budget director Stephen McAlister credits the improved economy.
       "More people are working, making money in the (stock) market, getting overtime, and those things at this point override a decline in the population," says McAlister.
       Atkinson agrees, but notes how different things would have been had 46,000 residents not moved away.
       "If the demographics had not changed as they did, we would see an even stronger fiscal reality for state and local government," he says.
       The change in population has also altered the sources of income in the state. About 21 percent of total income in Rhode Island now comes from transfer payments, primarily outlays from government to individuals. These include Social Security, Medicare, welfare, food stamps, and unemployment and workers compensation insurance. In 1990, only about 17 percent of income came from those sources.
       "We're dependent upon the Feds for our income, and that's a risk," says Atkinson.
       Policy changes in Washington can have a greater impact on Rhode Island than on other states.
       For example, last year Congress and President Clinton agreed upon a welfare plan that included cuts in the federal food stamp program and Supplemental Security Income.
       Intitially, state officials believed that Rhode Island would suffer a direct loss of about $22 million in federal income. State officials used a multiplier factor of three to determine the true dollar impact, meaning the state was threatened with a loss of about $60 million from its economy.
       Fortunately, the food stamp cuts were postponed until April of this year, which delayed the loss of benefits. Then SSI was extended until at least the end of 1997.
       And, in the end, the Almond administration included about $3.5 million in the state budget for fiscal 1998, to make up for the loss of food stamp benefits.
       That risk of transfer payment reliance is not about to let up, however. "The concern is similar to what is happening to our demographics in terms of age," says Atkinson.
       "With the growth of the minority and immigrant population, at least initially, a higher share may be in the dependent population who have limited work skills and education. They may be more dependent on social service payments. So it makes it harder for the state as a whole if that segment of the population is growing."
       Getman, of Regional Financial Associates, says another result of the state's shrinking population has been a depressing effect on the Rhode Island real estate market.
       "You have an infrastructure built up for real estate for a certain population, and you don't have enough people coming into the state or staying in the state to get people to move up from starter homes to executive homes and so forth," says Getman. "One of the reasons house prices have been so weak in Rhode Island has to do with the fact that population growth has been, until recently, negative."
       According to federal statistics, prices for new and existing homes fell from 1990 through 1994, then rose slightly in 1995 and 1996.
       Improving upon those numbers may be difficult, even if the state's economy continues to slowly improve through the rest of the decade. The Census Bureau says the state's population will grow by only about 0.8 percent through the year 2000.
       But Getman says Rhode Island will still have trouble attracting new residents, because Massachusetts and Connecticut will appear more attractive.
       "The economy was hemorrhaging jobs and the hemorrhaging stopped," he says. "But that's a long way from saying we're going to be able to attract new residents into the state.
       "The new economies in the neighboring states are really running much faster than Rhode Island's," Getman adds. "The longer that lasts, the more incentives there are for people to move to neighboring states."
With contributions from Journal-Bulletin staff writer David Herzog.

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