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Chafee’s Budget: $76 Million in New Taxes

Wednesday, February 01, 2012


Calling this the “year of the cities and towns,” Governor Lincoln Chafee proposed a budget that would create $75.9 million in new taxes as well as another $17 million in rate increases, with the majority of funds going to municipalities in the form of education and other aid.

Restaurants, taxis and limos, moving, storage, warehousing and freight services, pet services, car washes, the tobacco industry and bed and breakfasts would all see increased taxes under the Chafee proposal, which critics said Tuesday would disproportionately affect those working in the service industry.

“I have continued to insist on an honest, fiscally responsible budget,” Chafee said in his State of the State address. “This budget proposes a clear way to pay for this substantial and necessary education funding and help for our local communities: it will be supported by a 2-percentage-point increase in the meal and beverage tax. I know that this will be controversial, but the money we raise will go to the most important investments we can make: educating our young people and helping the property taxpayer.”

The taxing plan includes:

• Increasing the meals and beverage tax from 1% to 3%.
• Expanding the lodging tax to include rentals of vacation homes and bed and breakfasts.
• Taxing clothing that costs more than $175.
• Expanding the sales and use tax to include limos and taxi services, moving, storage, warehousing and freight services, pet services and car washes.
• $7.2 million in additional tobacco taxes.

$45 Million in Cuts

Chafee’s proposal also called for nearly $45 million in cuts, including ending dental services for adults on Medicaid, the elimination of state funding for Rhode Island PBS and several departmental mergers or eliminations.

A large portion of the cuts come from health and human services, which makes up the largest portion of the state budget.

“The cost of health and human service programs has climbed far more rapidly in recent years than any other sector of state government,” Chafee said. “Unavoidably and unfortunately, this is where many of our cuts must occur. We need to control our spending and bring our costs in line with our neighbors. We must also ensure that no one is unfairly taking advantage of our state’s programs, and my budget proposal includes new funding for the Office of Health and Human Services to crack down on waste and fraud.”

Secretary of Health and Human Services Steven Costantino, who previously served as chairman of the House Finance Committee, said that while the cuts are painful, they could be much worse.

“If you know some of the other options you could take, there are always worse options,” Costantino said.

Local Help

Chafee’s proposal also outlined the need to help cities and towns, which he said are in “crisis.”

The Governor proposed accelerating the education funding formula, which includes fully fund the second year of its implementation plus an additional $11 million for a total of $39 million in additional dollars going to public schools. That money would come from the increases taxes.

He said municipalities cannot afford any more cuts in state aid after $192 million in cuts in the five years prior to his taking office.

“Cuts in state aid to cities and towns have not only led to higher property taxes and stifled job creation, it has also drawn resources from our schools,” Chafee said. “If we want our children to compete for the jobs of the future, they must have good schools. I am proud to announce tonight that my budget maintains my commitment to education, while also reducing the financial burden on Rhode Island property taxpayers. My budget devotes nearly $40 million in additional education funding to cities and towns.”

Pawtucket Mayor Don Grebien said he was pleased with the initial proposal.

“The Governor is committed to the cities and towns,” Grebien said. “When you look at the state aid that has been cut over the last five years, it’s a step in the right direction. In these tough times, you always want more, but the Governor has done his share. He has teed it up for the General Assembly and let’s hope they take it and they swing away at it and give us the tools we need.”

Job Creation

The Governor was vague about his plans to create jobs in a state with the third-highest unemployment rate in the country, but he did announce that he plans to create the “Governor’s Jobs Cabinet,” which will seek to “retain and expand existing businesses, attract and cultivate employers in high-growth industries, and develop a skilled workforce that meets business demand.

Chafee emphasized a need to provide access to more capital in order to encourage innovation.

“I have heard from many Rhode Islanders who have exciting and promising ideas,” Chafee said. “But they are unable to obtain the needed resources to invest in new technologies, expand their operations, or start a new company. This is an area where we need to work together with experts and develop a plan for Rhode Island to strategically invest our state and private assets in the types of industries that will bring good jobs to our state.”

Complete Budget Breakdown

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Wow--end dental care for seniors but let's shove another $40M to a failed school system w/o demanding reform; the downward spiral continues unabated. Sorry for the negativity, Link.

Comment #1 by Mike Govern on 2012 02 01

I guess the people on medicaid better start flossing,this is crazy. As far as the taxes go,hes crazy there to. I also heard raising fees at the D.M.V.,we should be cutting taxes and fees,not raising them!

We should have heard more about jobs,we have had double digit unemployment for more than 2 years now.

Why doesn't he start with cutting the big salaries for his staff?

Comment #2 by anthony sionni on 2012 02 01

Who ever is in position, whether it be politicians or lawyers, somone needs to start the process of getting this man out of office.

This isn't a joke. The process needs to be underway. It was a farce that he got into office in the first place. 66% of the state didn't vote for him, and he's continuing the downward spiral of this state.

Comment #3 by pearl fanch on 2012 02 01



Comment #4 by Ford Renner on 2012 02 01

sales tax was defeated last year and it will be defeated again. the forces are organized and ready to go.

the casino operators in massachusetts and connecticutt must be laughing at rhode island. they will get all the business that rhode island taxes away.

one more thing ...helio melo, chairman of house finance, works for burger king. i dont think he will be voting for an increase in meals tax.

Comment #5 by john paycheck on 2012 02 01

This goes to prove that our government Just Doesn't Get It. Property values plummet but taxes go up, people stop going out because incomes are falling but go ahead put higher meal taxes,(that will get them to go out), teachers are making out like thieves in the worst state for education in the country so toss them some more money. The French had the right idea in the 1790's.

Comment #6 by Marc Andreani on 2012 02 01

More $ for education means more teachers.

Teachers who we CAN NOT FIRE under almost ANY circumstance.
Teachers who have NO CHOICE on union membership-dues and where those dues go!
Teachers who have no merit based evaluation system.
Teachers who will NOT guarantee a job for my kid after graduation!!!

What a self-serving bunch of bull.

We need jobs from FREE MARKET EMPLOYERS who actually want to move here.
We need jobs from entrepreneurs who can find their way here because it's a great place to grow a business.
Right now they are avoiding RI like it was radioactive! Why? the democRATS have make employers out to be evil over the last 70 years! So, how's that working out for us?

Want change?

Stop voting democRAT.

Comment #7 by Paul Marshall on 2012 02 01

If this budget is anything like the one he filed last year, it will be another joke. Misplaced priorities and more borrowing. In the dire financial shape we are in, he proposes $200 Million in more borrowing for infrastructure projects ? More buildings for RIC, open space, recreation and water quality? Is this guy serious? How about your interstate highways system that is falling apart? The bridges that are being shored up with timbers to keep them open? While the meat clever could be thrown at Health and Human Services being the largest budget item, how about the other agencies, like the $100 Million cash cow DEM - he couldn’t touch that one? This governor fails to see that we need to prioritize state spending. All of these various government agencies that were added over the years need to have their budgets reigned in. In addition, where is the oversight in the over spending by the IMH, Dept. Of Health & Human services and the DOT? Why can’t they live in their budgets? Perhaps some heads need to roll there. This budget of $7.9 Billion is layden with fat. He claims that he cut $45 Million out of it but that is nothing compared to the 12.9% he proposed increase over last year’s spending.
He boasts about the tourism industry in this state but yet he has to hit them with a tax increase in the restaurant industry. He nailed the tourism industry with a tax last year which almost closed Newport. The Senate President has filed a bill to repeal that.

This administration is similar to a boat without a rudder. It has no direction. These people live in a vacuum and do not hear or care about the people that put them there. In all the years that I have observed governors, this one is clearly out of touch with reality.

Comment #8 by Lance Chappell on 2012 02 02

Note to Governor: Raising taxes on the people that create the wealth causes them to leave.
Textile industry, boating, jewelry manufacturing, tooling and machining. Just a few that have vacated the state because of unrealistic regulations, fees and taxes.
Lower the taxes, regulations and fees, make us business friendly and you will get more jobs and thus more funds into the state.
Or those of us that create the wealth will continue to leave.

Comment #9 by Wuggly Ump on 2012 02 02

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