The state of Rhode Island is in a deep financial crisis. Resolving its large budget deficits will require real and significant structural changes to the status quo.
The status quo was best summed up in a passing comment by Representative Gorham last night on the Matt Allen show: Gorham talked about how the state budget deal is typically reached in a “clandestine” fashion in the office of a just a few state legislators and then rapidly moved to a vote.
That approach is, in no small way, how RI got into its current mess and maintaining such practices won’t yield successful and lasting change.
As someone who has led corporate turnarounds for nearly 20 years and has read extensively on what it takes to lead successful change initiatives, it is appalling how little progress has been made to effect real change in the face of the current crisis here in RI. It’s not like these structural problems are a new development!
One of my favorite authors on leadership and change is Harvard Business School professor John Kotter. He has been writing for years about the topic of leading change and is a world authority on the subject. More on his books can be found here.
For the last decade, Kotter has been writing extensively on what he calls the “Eight Step Process of Successful Change.” Here is an excerpt from his “Iceberg” book, a book which uses a fable to describe what it takes to realize successful change. Easily accessible to the layperson, I recommend reading it.

Set the Stage
1. Create a sense of urgency: Help others see the need for change and the importance of acting immediately.
2. Pull together the guiding team: Make sure there is a powerful group guiding the change – one with leadership skills, credibility, communications ability, authority, analytical skills, and a sense of urgency.
Decide What to Do
3. Develop the change vision and strategy: Clarify how the future will be different from the past, and how you can make that future a reality.
Make it Happen
4. Communicate for understanding: Make sure as many others as possible understand and accept the vision and strategy.
5. Empower others to act: Remove as many barriers as possible so that those who want to make the vision a reality can do so.
6. Produce short-term wins: Create some visible, unambiguous successes as soon as possible.
7. Don’t let up: Press harder and faster after the first successes. Be relentless with initiating change after change until the vision is a reality.
Make It Stick
8. Create a new culture: Hold on to the new ways of behaving, and make sure they succeed, until they become strong enough to replace old traditions.

As we all reflect on the severe crisis here in RI, one of the most disconcerting conclusions is how RI is currently 0-for-8 in moving in the right direction.
Where is the sense of urgency?
Where is the powerful guiding team?
What is the change vision and strategy?
There will be no successful structural changes in RI until those questions are answered in tangible and affirmative ways. If they are not, the crisis will worsen instead of getting better.
Avoiding the hard choices which go with implementing difficult changes is a part of human nature and, at one level, perfectly understandable. Which is why it is so important for there to be leaders who display the requisite courage to initiate the change dynamic.
The structural status quo in Rhode Island is built on a foundation of economic fiction. And, whether certain people like it or not, economic fictions simply cannot persist – even if many people choose to ignore the problems in the hope they will just go away. Which is exactly what causes bad situations to turn into crises.
Tackling RI’s economic fictions matters for reasons beyond just balancing a budget. The well-being and futures of many families will be affected. As I wrote back in 2004:

…Even so, this debate is about more than current taxation levels and today’s family budgets. It is about freedom and opportunity for all — and family budgets in the future. The greatness of our country is that people can live the American dream through the power of education and hard work.
High taxation and mediocre public education create a disincentive for new-business formation in Rhode Island. That means fewer new jobs, and less of a chance for working people to realize the American dream. It also means people have an economic incentive to leave the state — and the ones who can afford to do so will continue to leave.
Unfortunately, the ones who cannot afford to leave are the people who can least afford the crushing blow of high taxation and mediocre education. The status quo dooms these families to an ongoing decline in their standard of living. That is unjust…
We are at a crossroads in Rhode Island. If we tackle issues now, a turnaround with only some pain is possible. If we delay, we will doom multiple generations of working families and retirees to further tax hell and a reduction in their standard of living. That is wrong.
This public debate is about breaking the chains of bondage and giving all citizens the freedom to live the American dream here in Rhode Island. What greater legacy can we leave for our children than a fair shot at the American dream here in their state?
…Let’s tear down this wall of economic fiction, and let freedom ring out across the state. Let’s make Rhode Island a vibrant land of freedom and opportunity, for all working families.

Either we will do change here in RI or change will do us. The failure to act over the last 4 years means the changes will now be far more painful. And the pain will only deepen more if further inaction accompanies the passage of yet more time.
So, have you done your part to increase the sense of urgency? Have you stepped up to become part of a team dedicated to real change? Have you worked, even at your town level, to identify a vision for change?
One of the most striking observations I regularly find when going into troubled companies is how many people at all levels instinctively know what is wrong. One of the most heart-warming outcomes is how many of those people want to pitch in and be part of a solution. And one of the most satisfying developments is watching those people rise to the occasion, often in ways that would never have been predicted. Never under-estimate the power of the human spirit to be selfless and do great things. Even when it requires going through pain.
But before those wonderful developments can ever occur, we have to start with the basic first steps of a successful change initiative. Unlike the business community where companies die if they base their plans on economic fictions, change in the political world is much more difficult because entrenched special interests have no incentive to be part of constructive solutions. They have no incentive since their demands are funded by third-parties – taxpayers – while the special interests suffer no direct adverse economic consequences from making unrelenting demands.
Any real solutions in the RI public sector will require taking enough power away from those special interests so that the economic price of their demands is reduced. Yet the people to do that – politicians – usually have a focus on their own re-election and thus have no incentive to challenge the very interests who can subsequently cause them to lose an election. The problem is compounded further because the same politicians and bureaucrats have no incentive to help solve the problems because they also suffer no direct adverse consequences from their failure to act.
So any solution to RI’s problems will require some selfless and courageous politicial leaders who care more about change and doing the right thing than winning elections. Part of their challenge will be to build a large enough coalition of citizens committed to change. It is only then that a courageous citizen coalition can exert the requisite pressure on enough fence-sitting politicians, providing the latter with a sufficient re-election incentive to join the change initiatives and the majority votes for change.
Bluntly, I don’t see any of those dynamics even starting to happen in RI right now. Which says things will get far worse before they have any chance to get better.
We are faced with an ongoing political stalemate in place in RI: The window of opportunity for “reasonable” solutions passed some years ago. When RI already has one of the highest taxation rates among the 50 states, raising them even higher is a certain doom loop. It is too late to solve the problem by tinkering on the margin. Yet the special interests have shown zero willingness to back off their entitlement demands so as to make structural changes possible. With each passing month, there will be even less flexibility.
We are on a treacherous path as a state. But sometimes it takes going through sheer hell before the will to make tough decisions arises. Given the incredibly powerful and entrenched special interests and the political balance of power, maybe the only viable solution for RI is to let it all blow up and then pick up the pieces. Maybe we just have to become a statewide version of Vallejo.
Since the status quo political debate on these problems is an abject failure, here is my provocative proposal for public discussion:

Building the sense of urgency: Begin talking publicly and bluntly about exactly how bad the structural problems are. No sense of urgency will be built until after these problems are crisply defined and transparently obvious for citizens across the state. Simply saying we have a budget deficit of $X million is insufficiently compelling; we need to talk about the ongoing budget deficit and how we have masked it previously, the structural problems which have caused recurring deficits, the unfunded pension liabilities, and the unfunded healthcare liabilities – all of which were incurred despite extremely high taxation levels.

Pull together a team of leaders and active citizens: There has to be a conscious building of a powerful group of people from across the business community, policy community, and political community who are committed to change. It is a group which will only coalesce when we stop being so delicate in our conversations about the crisis. In RI, that means we need some people who are willing to take on previously unseen levels of personal risks. As they say, we need a few good men and women who have both the sense of urgency and the willingness to talk about the stark challenges faced in RI. Who are equally willing to talk bluntly about how the inaction of politicians and bureaucrats as well as the resistance from powerful special interests make it necessary to either do some major restructuring immediately or implement a radical solution of throwing the state into receivership/bankruptcy. Said another way, we need leaders who are willing to use that blunt public conversation to shake the foundation, thereby either stimulating real and previously non-existent policy ideas for serious change outside a legal restructuring or making the case on why there is no other alternative.

The change vision for RI: By the middle of the next decade, do what Massachusetts did in recent years by going from taxation levels which earned it the nickname “Taxachusetts” to middle of the pack among the 50 states.

The strategy for achieving the change vision: Set a specific and firm near-term time deadline for implementing the necessary major structural changes to realize the change vision. If the changes don’t occur by the deadline, throw the state into some form of receivership/bankruptcy and then restructure everything by brute force.

What do you want the future of RI to look like? How are you willing to help bring about change?