Q&A: Here’s why Rhode Island still doesn’t have a new state budget

A WPRI.com cheat sheet explaining the month-old impasse at the General Assembly

PROVIDENCE, R.I. (WPRI) – Rhode Island has now been without a new state budget for an entire month, ever since a stunning blowup between the House and the Senate on June 30.

With Senate Democrats set to meet Monday afternoon about a possible solution to the stalemate, leaders on both sides say this may be the week when the impasse ends. In the meantime, WPRI.com reporter Ted Nesi has a cheat sheet on what you need to know about how we got here and what may happen next.

Why is the state budget such a big deal?

The state budget is the most important document Rhode Island lawmakers write each year – if America runs on Dunkin’, state government runs on the budget. It currently contains about $9 billion in annual spending, providing money for everything from schools and hospitals to beaches and bridges. (About one-third of the money is provided by the federal government in Washington.) The budget also contains lots of major policy initiatives – the bill currently being wrangled over would raise the minimum wage and offer free tuition at CCRI.

Why do they pass the budget in the middle of the year?

Governments operate on a “fiscal year” (sometimes called a “budget year”) rather than the calendar year. For state government and most municipalities, the fiscal year starts July 1 and ends June 30 – so that’s the time period each budget covers. (And just to make things more confusing, the federal government uses a different fiscal year, from Oct. 1 to Sept. 30.)

So why doesn’t Rhode Island have a new budget this year?

The budget process usually goes the same way each year. The governor proposes a budget around January, laying out her priorities and her plan to balance it. (Rhode Island, like most states, requires the budget to be balanced each year.) The House of Representatives takes the lead on reviewing the budget, with the House Finance Committee holding hearings over subsequent months on the governor’s ideas.

Then, in May, the state’s official number-crunchers announce exactly how much tax revenue they expect the state will bring in during the next fiscal year – giving lawmakers the number they have to use when they write the budget. After that comes weeks of closed-door negotiations between the House speaker, the Senate president and the governor over what will go into the budget and what will be left out. Once they agree, the House Finance Committee approves the budget and sends it to the full House for a vote. After the House votes, it’s sent over to the Senate for approval, and from there to the governor to be signed into law.

Historically, the three sides – House, Senate and governor – have ironed out their differences over the budget behind closed doors, so the actual legislative debates and votes on the tax-and-spending plan are close to a formality, beyond some relatively small changes. Not this year.

On June 30 – eight days after the House approved the budget, and the last day of the legislative session – House Speaker Nicholas Mattiello got word Senate President Dominick Ruggerio was considering passing an amendment to the budget and sending it back to the House for another vote. Amending legislation and sending it to the other chamber sounds like a basic “Schoolhouse Rock” move; to Mattiello, though, it was like a declaration of war – the House is historically the prime mover on the budget, and it jealously guards its primacy over the Senate on money matters.

Mattiello announced he was sending the House home immediately so that he wouldn’t be there to wrestle with the Senate over the budget. Miffed at being told they couldn’t amend the budget, the senators decided to do so anyway, then finished their other business and went home, too.

Since the two chambers had passed different budget bills, there was nothing for the governor to sign – the two chambers have to agree on the language of a bill for it to be sent to the governor. And thus the standoff began.

Wait – if Rhode Island doesn’t have a state budget right now, why isn’t the government shut down?

Good question, especially since we’ve gotten used to government shutdowns in Washington when Congress can’t approve a budget.

The difference is that Rhode Island has a state law, passed in 1935 during the Great Depression, that says when a new budget hasn’t been passed, the state will keep operating under last year’s budget. So government offices keep operating, beaches stay open, local aid checks go out, and so forth – but it all has to happen at last year’s spending levels, which is about $300 million less than the amount called for in the new budget that hasn’t passed.

What was the actual policy the Senate wanted to change in the budget that made Mattiello send the House home?

It’s all about the car tax.

Speaker Mattiello is a Democrat, but he represents a fairly conservative district in Cranston, and last fall he was in danger of losing his re-election race. About a month before the election, Mattiello announced that if voters there re-elected him, his top priority for the new legislative session would be eliminating the municipal car tax. Mattiello won, and eventually came out with a plan to eliminate the tax over six years, with the state making the cities and towns whole for all the revenue they’ll lose. Cost to the state: about $221 million a year by 2022.

While most lawmakers agree the car tax is unpopular, particularly in communities like Providence and Cranston where it’s especially high, a number of senators expressed concern from the start about whether the state could afford to reimburse all that money. They note the state is already facing deficits and Congress wants to lower federal health funding, and argue fulfilling Mattiello’s car tax promise will make those challenges harder to address. They also note Rhode Island tried to eliminate the car tax already in 1998, only to reverse course about a decade later, angering voters.

Mattiello was insistent, however, and a full elimination of the car tax was included in the budget passed by the House. But the Senate wasn’t on board, and on June 30 the senators amended the budget to add a so-called “trigger” to the plan. The amendment says that in any year when the state is forced to dip into its rainy-day fund to balance the budget, the car tax phaseout will be paused. Senators like to note that they didn’t change “one cent of spending” in the budget itself, calling the amendment a “taxpayer protection” for future downturns. But Mattiello was livid not only that senators amended the budget but also that they did so by tweaking his pet plan, and he sent the House home, saying the Senate should take out the amendment and pass the original budget if senators wanted to end the stalemate.

Is the car tax really the whole reason for the standoff?

No. While senators have publicly kept the focus on their “trigger” amendment, privately they acknowledge there has been rising frustration with the House – and Speaker Mattiello – for a while on their side of Smith Hill.

Senate President Ruggerio just took over that job from Teresa Paiva Weed in March, and he may have wanted to send a message that the upper chamber wasn’t afraid of a fight under his leadership. The two chambers were also at loggerheads over some major legislation, notably paid sick days, a top priority for one of the most powerful Senate Democrats, Majority Whip Maryellen Goodwin. And once the June 30 meltdown happened, the egos of Mattiello and Ruggerio were involved, too.

(All that said, there’s nothing too unusual about the underlying frustrations – the House and Senate have probably been tangling over who’s really in charge for as long as Rhode Island has had a House and Senate.)

What happens if the new state budget doesn’t pass?

In the first month without a new budget, there haven’t been too many noticeable effects. Perhaps the biggest one has been car tax bills – mayors and other municipal leaders have been struggling to figure out whether to charge the old car tax amounts or the new lower ones called for in Mattiello’s phaseout plan. Providence already sent out bills that include the Mattiello reduction, while Warwick and Cranston are sending out bills with no cuts. Communities that sent full bills say they’ll provide credits down the road if and when the budget passes.

Tuesday is a key date – Aug. 1 is when the state is scheduled to cut local aid checks to cities and towns, and municipal budgets were written based on the higher aid for schools and other programs in the pending budget, not last year’s lower levels. (Mayor Jorge Elorza has warned that if a budget never passes he’d have to lay off about 170 teachers.) Apart from that, some tax and fee increases aren’t taking effect, which could reduce state revenue – though the delay will also save the affected taxpayers some money.

Are legislative leaders close to resolving the budget impasse?

It’s looking that way. Speaker Mattiello and Senate President Ruggerio have been negotiating for about two weeks to find a path out of the standoff that lets both sides save face, and late last week they apparently reached an agreement in principle. Ruggerio is set to lay out the details to Senate Democrats at a closed caucus late Monday, and if there’s enough support, he could call them back to vote on the budget later in the week. That could allow Governor Raimondo to sign the budget into law by as soon as next weekend.

What’s the compromise going to look like?

The details haven’t been released yet, but the expectation is that the Senate will return and pass the original House-approved budget, in exchange for the House agreeing that a few years down the road there will be a reexamination of whether the car tax phaseout is affordable. Also, the House and Senate will return in the fall to take up bills that were left in limbo when Mattiello sent his chamber home on June 30. There could be more to the agreement – including private understandings that won’t be announced – but that’s the thinking right now.

Update: A compromise on the budget was announced Monday night.

Has it ever taken this long to finish a budget before?

It’s very rare but not unprecedented – yet.

According to State Librarian Megan Hamlin-Black, the latest date a budget has passed in the last 50 years was Aug. 7, 1995 – the only time it ever took until August. (Republican Gov. Lincoln Almond and Democratic legislative leaders were at odds that year over pensions and local aid.) Aug. 7 is next Monday this year, so the current impasse will have to last beyond this week to break that record.

Looking further back, local historian Steven Frias – who ran against Mattiello last fall – has suggested this could be Rhode Island’s biggest budget breakdown since 1934, during the Depression, when Democrat T.F. Green was governor and his party controlled the House but not the Senate. “In January 1935, the Democrats staged a coup and took over the Senate,” Frias reports. “After the Senate changed from Republican to Democratic control in January 1935, the impasse on the budget ended and a budget for FY 1935 was finally adopted.” The state law that is letting Rhode Island currently operate under last year’s spending levels was adopted in the wake of that dispute, in fact.

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