RI could miss up to $2.5M in monthly revenue if budget impasse drags on

PROVIDENCE, R.I. (WPRI) – Rhode Island lawmakers’ impasse over the new state budget could reduce state revenue by an average of up to $2.5 million a month if it drags on for a significant amount of time, officials estimate.

The reason: four measures to increase taxes and fees are contained in the budget bill that remains in limbo, and those cannot be put in place until the bill is law. The size of the revenue loss will grow if the impasse drags on into August.

Spokesmen for House Speaker Nicholas Mattiello and Senate President Dominick Ruggerio confirmed Tuesday that the two Democratic legislative leaders still have not spoken, even as the budget standoff reaches its 11th day. Both men say they want the other chamber to return and take up his preferred version of the budget.

“At this point they haven’t even gotten in a room together to sort it out, which of course is the first step to anything,” Democratic Gov. Gina Raimondo told reporters Tuesday. “I’m hopeful eventually cooler will heads will prevail.”

“It’s time to put Rhode Island above politics, get back to work, come back to this building and pass a budget,” she added.

Thomas Mullaney, the state budget officer, and Jonathan Wormer, who heads the R.I. Office of Management and Budget, warned in a memo last Friday that a significant decrease in revenue because of the standoff could force lawmakers to reduce spending in the final budget bill compared with the original version in order to bring it back into balance.

Cities and towns continue to wrestle with the uncertainty, with a car tax cut, roughly $45 million in new education funding and millions more in payment-in-lieu-of-taxes (PILOT) reimbursements hanging in the balance. Providence Mayor Jorge Elorza warned the capital city would need to resort to “massive layoffs” if state aid is reduced significantly.

Warwick Mayor Scott Avedisian said his city is now planning to mail out car-tax bills to residents on Friday, and they will not reflect the reduced amounts called for in the pending state budget.

By far the biggest of the four delayed revenue-raising initiatives is a new rule requiring e-retailers and other so-called “remote sellers” to collect the state’s 7% sales tax. The rule was supposed to take effect 15 days after the budget passed. (The biggest e-retailer, Amazon.com, has already begun complying with the requirement voluntarily.)

Brenna McCabe, a spokeswoman for the Department of Administration, said budget officials estimate delaying the remote-sellers rule could reduce revenue by roughly $1.8 million a month. She cautioned, however, that “sales taxes are not collected evenly over the fiscal year” and therefore it was not a precise estimate.

The next-biggest initiative is a proposal to increase the cigarette tax by 50 cents on Aug. 1. Delaying that would reduce revenue by an average of about $575,000 a month, McCabe said.

The other two initiatives were both supposed to take effect immediately on July 1: collecting sales tax on document fees related to car purchases, and increasing various fines and penalties levied by the Department of Labor and Training. Delaying those could reduce revenue by an average of $165,000 and $55,000 a month, respectively, McCabe said.

Separately, the Office of Revenue Analysis has reported that state revenue came in slightly below forecast in May, with a double-digit miss on income taxes offset by higher amounts elsewhere. That forecast had already been lowered, causing concern that collections could continue to be weak in the coming months – which could cause another headache for lawmakers if and when they eventually attempt to pass a balanced budget.

According to the National Conference of State Legislatures, as of Tuesday Rhode Island is one of only three states where lawmakers still have not sent a budget bill to the governor, along with Connecticut and Wisconsin.

Budget status as of July 10. (credit: NCSL)

Ted Nesi (tnesi@wpri.com) covers politics and the economy for WPRI.com. He writes Nesi’s Notes on Saturdays and hosts Executive Suite. Follow him on Twitter and Facebook

Kim Kalunian contributed to this report.