RI lawmakers’ budget cuts taxes, keeps business incentives

Tax-and-spending plan has lower beach fees, breaks for retirees, education changes

PROVIDENCE, R.I. (WPRI) – Rhode Island lawmakers late Tuesday unveiled an $8.9-billion proposed state budget for the 2016-17 fiscal year that cuts taxes on pensioners and employers while maintaining funding for Gov. Gina Raimondo’s economic-development efforts.

“This is a pro-jobs, pro-economy, pro-growth, pro-citizen budget,” House Speaker Nicholas Mattiello told reporters, adding later: “I’m particularly proud of this budget. It’s a good budget.”

The budget unveiled Tuesday is a revised version of the tax-and-spending plan put forward in February by Raimondo, which sought to ramp up spending on education, worker training and business incentives while holding the line on broad-based taxes and social services.

Lawmakers’ revised budget makes no changes to Rhode Island’s overall sales or income tax rates, but it does include new tax and fee cuts: most pensioners will get a break on their first $15,000 in retirement income; employers will get a roughly $30-million reduction in their unemployment-insurance taxes; the corporate minimum tax will fall from $450 to $400; and beach fees will be lowered to their 2011 level.

Mattiello said the reduction in beach fees – an immediate hit on social media – was his own idea. “That’s just our way of giving back to the citizens of the state of Rhode Island so that they can enjoy more reasonably one of the state’s best assets,” he said.

Also receiving a break: trucking companies, which will see their registration fees cut by roughly $4 million. The move follows promises from state leaders earlier in the year that they would find a way to give truckers a boost to make up for the enactment of a new toll program to fund bridge repairs.

On the other side of the ledger, Mattiello emphasized that legislative leaders avoided some of the revenue-raising proposals put forward by the governor. It does not include her proposal to increase the cigarette tax by 25 cents. And the fee for new tags on medical marijuana plants will be only $25, much lower than Raimondo suggested. But lawmakers added a new tax she had not proposed, on Uber and other ride-sharing services.

The House Finance Committee approved the budget at about 1:30 a.m. on a 14-2 vote, after a hearing that lasted less than two hours and was delayed by the wait for freshly printed copies of the budget to be brought into the hearing room. Two Republicans, Reps. Anthony Giarrusso and Patricia Morgan, voted no.

“Nothing good happens after midnight,” Giarrusso said after the vote.

A spokesman said the full House will debate the budget bill on Wednesday, with the Senate to follow. If both chambers pass it, as expected, the spending plan will go to Governor Raimondo for her signature. The one-year budget will cover the new 12-month fiscal year, which starts July 1.

Hours before the budget’s debut, the biggest question-marks were around Raimondo’s various proposals on education, including a change in the school funding formula that would impact charter schools and a proposal for new “empowerment schools.”

The budget that emerged makes a complicated series of changes to the funding formula, but Mattiello said the empowerment schools section isn’t actually done as currently drafted and will be subject to further negotiations over the coming days. “It’s still not in what I believe its final form will be,” he said.

Raimondo’s aides were pleased with the results on a key gubernatorial priority: ongoing funding for Commerce RI programs Raimondo argues will promote economic development. Lawmakers focused in particular on the Rebuild Rhode Island real-estate tax-credit program, capping its size at $150 million but also giving new options for developers who want to build on the old 195 land. They also created a new fund to subsidize additional airline routes to and from T.F. Green Airport.

“My feeling is she is laying a good foundation and that they’re working very hard on attracting companies – they’ve got some irons in the fire, so we want to be as helpful as possible and give them the tools that they need to be more successful in attracting companies,” Mattiello said.

One Commerce program that took a hit: tourism. Some of the money allocated last year for the new $5-million statewide tourism campaign will be redirected to regional bureaus for one year in the wake of the “Cooler & Warmer” debacle. A news release said the change will let the regional bureaus “promote the state’s tourism resources while the Commerce Corporation reorganizes” the statewide campaign.

While Raimondo’s proposed revenue from medical marijuana was scaled back dramatically, her suggestions for stepped-up regulation of the program made it into the final document. “We believe that regulation is important, and we’ve adopted the governor’s plan to regulate through a tag system,” Mattiello said.

Two proposed bond referendums – $40 million for school construction and $20 million for ProvPort – were not in the budget released Tuesday night. But labor leaders suggested they will continue pressing for inclusion of the ProvPort money in particular, which has the support of Senate Majority Leader Dominick Ruggerio.

Democratic legislative leaders opted against Raimondo’s proposal to raise the state minimum wage to $10.10 an hour. But the earned-income tax credit will be increased once again, this time to 15% of the value of the federal one, up from 12.5% now.

This is first budget for the House Finance Committee under the leadership of new chairman Marvin Abney, D-Newport, who took over as the panel’s leader last month after the abrupt resignation of Rep. Ray Gallison. “It’s been a pleasure so far to work on a budget that I think is reflecting what people in Rhode Island have been asking for a long time,” Abney said.

Speaking of Gallison, legislative leaders followed through on a promise made Monday to scale back community-service grants, a program lawmakers have used to direct money to specific groups and that has funded a controversial nonprofit run by Gallison; the beneficiaries of the grants were never spelled out in the budget.

The budget reduces funding for the program from $11.6 million to about $6 million, converting about two dozen current grants into direct line items listed in the budget and putting the rest of the money into new funding pools to provide competitive grants for various types of organizations, such as senior centers.

There was no immediate word on how the final budget agreement would impact Rhode Island’s structural deficit – the state’s perennial gap between revenue and expenses – down the line. Raimondo’s aides estimated her original proposal would have lowered the 2017-18 deficit from $212 million to $193 million, and the 2020-21 deficit from $377 million to $272 million.

Ted Nesi (tnesi@wpri.com) covers politics and the economy for WPRI.com. He writes The Saturday Morning Post and hosts Executive Suite. Follow him on Twitter, Facebook and Instagram

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