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The Governor Who Has Figured Out How to Fix Bridges and Pensions

Bloomberg Business

Mending a state pension system on the verge of collapse is a worthy closing act for any politician. Now it’s clear Gina Raimondo was only warming up.

Four years ago she was treasurer of Rhode Island -- the smallest state headed for the highest unemployment -- when she took on the pension’s unfunded $6.8 billion liability and set it on a path toward solvency.

It was a moment of gritty political will that made the Rhodes scholar plenty of enemies, including public unions whose retirement benefits were scaled back. Seven months into her first term as governor, Raimondo, a 44-year-old Democrat, is applying the same vigor to building a robust economy with jobs that pay $60,000 or more. Among her key strategies: She’s enlisting the help of company chief executive officers, forgiving student-loan debt and fixing the state’s crumbling transportation infrastructure.

One part of the $1 billion repair plan imposes a toll on large commercial trucks -- which has riled the truckers, once again forcing Raimondo to face down angry opposition.

“We have the ability to go after the biggest, most difficult problems and solve them, and that’s extremely important,” she said in an interview with Bloomberg News in her Providence office. “If I’m a CEO, I want to be in a place where the government works.”

CVS Health Corp., the largest provider of prescription drugs in the U.S., toymaker Hasbro Inc. and aerospace manufacturer Textron Inc. are stars in a growing constellation, driving numbers that show Raimondo’s first term is off to an encouraging start.

Outperforming Stocks

Total return on stocks of companies domiciled in Rhode Island has been 22.6 percent so far this year, outperforming any other state. The price-to-earnings ratio for the eight businesses in the Russell 3000 is about 24 times, lower than the rest of the members at about 27, and the forecast is even better, according to Bloomberg data.

The data mean Rhode Island companies are at once over-performing and undervalued, a powerful combination not lost on Raimondo, whose life before politics was high finance and includes co-founding the state’s first venture-capital firm, Point Judith Capital. When told about the numbers, Raimondo said she will send them to the Rhode Island CEOs she’s enlisted as ambassadors to recruit more business.

Raimondo declares herself happy with her state’s performance in the first half of 2015 but hardly satisfied, which should surprise no one who knows her background. She was valedictorian in high school, graduated with honors from Harvard, earned a master’s degree and a doctorate at Oxford as a Rhodes scholar and finished with a law degree from Yale.

Falling Unemployment

Unemployment has fallen more quickly than the U.S. rate since she took office, representing the creation of about 5,400 jobs, according to Bloomberg data. But it’s still higher, at 5.9 percent compared with 5.3 percent.

Raimondo says Rhode Island had a lot of catching up to do after having the highest or second highest jobless rate in the nation throughout one nine-month stretch of the economic recovery. What rankles her most is that 90-plus percent of the new jobs pay less than $60,000 a year.

“Those aren’t family-supporting,” she said.

Pushing for better opportunities reflects her own story, growing up the daughter of a first-generation Italian-American who earned a degree in chemistry and metallurgy. He had a good job at a local watch factory but lost it when the operation moved overseas.

Thriving Center

Her efforts also tie into the state’s industrial history. A thriving textile center from America’s earliest days, Rhode Island surged at the end of the 19th century, becoming a leader in jewelry and silverware. Flush with confidence, lawmakers commissioned the statehouse where Raimondo works. The neoclassical monument of white Georgia marble symbolizes an era of abundance the governor hopes to recapture.

“We’ve just been really hurt by deindustrialization and we haven’t kept up,” Raimondo said.

She hopes her sweeping overhaul of Rhode Island’s transportation infrastructure will help reverse that. Dubbed RhodeWorks, the proposed 10-year plan would spend $1 billion, or 30 percent more than the $3.8 billion already budgeted for repairs and upgrades. It would create 11,000 job-years -- one job for one year.

“If you’re a laborer in Rhode Island, you’ve been persistently unemployed for years,” she said.

Truck Toll

One piece of RhodeWorks calls for rebuilding more than 150 structurally deficient bridges -- ranked by several studies as the worst in the nation -- and making repairs on another 500 with $500 million of revenue bonds not including fees and other charges. The bonds would be financed with a toll on large commercial trucks traversing major roads, including Rhode Island’s 43 miles (69 kilometers) of Interstate 95.

Like the public unions in her overhaul of the pension system, the truckers say they feel cheated.

“She’s alienated and deliberately cut the industry out of the conversation,” Christopher Maxwell, Rhode Island Trucking Association president, said in an interview. “She chose to blindside us.”

Other states along Interstate 95, the eastern seaboard’s main route, impose tolls, but none charges only trucks, said Maxwell, whose group represents about 600 businesses. “Every other place, it’s a shared burden.”

Raimondo rejected the notion the truckers were left out, saying industry representatives have spent hours in her office in deliberation. And why only trucks? “They cause the most damage,” she said.

‘Little Patches’

“Too many politicians for too long have passed the buck” on crucial initiatives, including the overhaul of roads and bridges. “We put little patches here and there,” she said. “It’s like throwing money in the toilet.”

At the end of its annual session last month, the state Senate passed RhodeWorks with revisions. The House, which adjourned without taking action, could consider the plan in a special September session. Raimondo makes no predictions about what will happen but says she’s ready to do what it takes to get it approved.

As Rhode Island’s first female governor after 74 men, and one of only six current female U.S. governors, she says her style is imbued with a pragmatism that may come more easily to women in power.

“It takes a certain willingness to go back to the table, swallow your pride and be relentlessly outcome-oriented,” she said. “I think women are probably better at that.”

Stirring Speculation

Whether sticking to her guns in tough negotiations, schmoozing at her informal dinners with business leaders or out meeting constituents, Raimondo’s performance has stirred speculation about higher office.

“She’s very much on the national radar,” said Wendy Schiller, a political science professor at Brown University in Providence.

Raimondo won’t talk about her ambitions beyond Rhode Island. She strongly supports Hillary Clinton for president but stops short of saying she’d take a job in the administration.

Ideas ultimately shape her agenda, she says, ones that can bring jobs, jobs, jobs to lift all boats in the Ocean State. This year, she pushed through a revamp of Medicaid that will lower and stabilize costs to businesses that were the second most expensive in the nation. Her budget, ratified by the General Assembly, also forgives the loan debt of some college students who stay and work after graduating from Rhode Island schools.

She is always ready to listen to anyone, she says, and then she makes up her own mind. A recent example is the trucker controversy. She listened until she had heard enough.

“Just the pay the tolls,” she said, “and fix the damned roads.”