Like many other debates this election season, the debate between the four Rhode Island gubernatorial candidates that took place at Brown last Thursday was at times enlightening, at times entertaining and occasionally a little disconcerting. But amid the fray, one idea stood out as particularly fresh and exciting. Moderate Party Candidate Ken Block has proposed using 1 percent of the state's pension fund — approximately $70 million — to invest in Rhode Island businesses.
Under Block's plan, the state would hire a prominent venture capital firm to manage the money and would require that firm to match the state's investment at a minimum ratio of one-to-one. The plan would target the high-tech, medical and clean energy sectors in Rhode Island, attracting new businesses to the state and supporting the growth of those already here.
By drawing on money from the pension fund, the proposal avoids adding to the state's budget deficit. But because the plan calls for only 1 percent of the state's pension fund to be used, it wouldn't significantly jeopardize retirees' financial security.
In an interview with the editorial page board, Block emphasized that investment decisions would not be made by elected officials, but rather by expert venture capitalists whose own money was also at stake. There's always a risk that politicians will try to meddle, but that's no reason not to move forward. Indeed, we're hopeful that the plan can be implemented in a way that balances the need for oversight with the need for insulation from political influence.
Other states have already begun to implement similar initiatives. According to a report issued in April 2009 by the New York state comptroller's office, New York has made nearly $1 billion in state pension money available to private equity firms for in-state investments, and the 17 firms managing the money are all "performing well."
Last November, North Carolina's state treasurer announced she would be requesting proposals from private equity firms to invest up to $250 million from the state's pension fund, the Triangle Business Journal reported. To be eligible to bid, firms must demonstrate prior experience with similar regional programs or have worked with at least 25 companies with "significant operations" in North Carolina, the article noted. If Block's plan does move forward, similar requirements should be adopted here.
With a nearly 12 percent unemployment rate that ranks among the highest in the nation, Rhode Island can't afford to fall behind other states. It also can't afford to continue trying stale ideas.
In the weeks leading up to the election, we don't expect that the other candidates will be showing much enthusiasm for Block's plan. Still, we hope that whoever is elected will give this idea serious consideration in the months ahead.
Editorials are written by The Herald's editorial page board. Send comments to editorials (at) browndailyherald.com.
