The State of Rhode Island is part of the six state New England region of the Country, which includes Massachusetts, Connecticut, Maine, New Hampshire, and Vermont. Over the past three decades, the New England region has undergone significant changes, the most significant of which has been the region's employment and labor force, which has shifted from manufacturing into services. With this transition, both income and productivity have increased more rapidly than other region in the Country.

  The catalyst behind New England's prosperity during the 1990s had been its high technology infrastructure, the region capturing a large share of the nation's federal research and development ("R&D") funding, including a relatively high percentage of the Country's venture capital funds. Central to this capacity is the region's high concentration of colleges and universities, which contribute significantly to a well-educated and highly skilled work force.

  While the region has a relatively high concentration of durable goods employment compared to the nation and industries such as instrumentation, electronics, and industrial machinery, services has been the largest and fastest growing sector in the New England economy. Major service employers include health care; business services; engineering and management; and education. Computer and data processing (including software) and suppliers of personal services accounted for the largest number of jobs in business services.

  Further, the region's concentration of jobs in the finance, insurance, and real estate sector has grown to levels comparable to the nation. The New England region shifted from below average to above average employment share in the early 1980s driven in large part by rapid employment growth by securities and commodities brokers, holding companies, investment officers, insurance agencies, and brokerage houses. Given the fact that the fastest growing segments of the New England economy have high proportions of professional, technical, and managerial occupations, demand for highly skilled and well-educated workers had been rising.

  However, 2002 witnessed falling personal income tax receipts as attributed to a shrinking stock market, a decline in general revenue, and rising unemployment. While revenues have recovered slightly in most New England states during the first four months of fiscal year 2003 (July - October, 2002), they are still below expectations. Exacerbating the impact of falling revenues, state spending in New England has continued to grow on average at a rate of 9% per years.

  Excerting spending pressures on the New England states are higher medical costs, increased prescription drug costs, high public assistance caseloads, and rising security costs given the aftermath of 9-11. As a result, the states have drawn heavily on their "rainy day" funds, which had accumulated significant sums during the time period of 1991 through 2001. For fiscal year 2003, all six states expect to see revenue shortfalls again that will force the state governments to cut back on services with the knowledge that tax increases are undesirable.