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Chafee’s Budget Calls for Big Borrowing and Sparks Reaction

Thursday, January 16, 2014


The most daring part of Governor Lincoln Chafee’s budget and his budget speech may have been his ending quote. Chafee’s speech and $8.5 billion proposed budget was safe – it was bit of a surprise for a state that ranks last in economic growth, at the bottom of every business rankings and it tied for the highest unemployment in the United States. The biggest surprise was the amount of borrowing proposed by Chafee.

While Chafee’s proposed budget is safe, his final quote did capture the immortal words of Taylor Swift, “RI’s a good place, a really good place.”

For those looking for bold action and dynamic new policies the Governor’s budget was lacking. For those seeking for caretakers approach, the speech and the proposed fiscal policies were a dream come true.

Big Borrowing is a Big Focus

The biggest winners in the budget may be URI and the environment. Chafee proposed $125 million engineering building for the University of Rhode Island and $75 million bond issue targeting environmental issues was a windfall. Total borrowing as outlined in the Chafee budget was $275 million in new borrowing authority. The General Obligation bond approach was a throwback to the era of big bond issues proposed in the 1980s by then Governor Ed DiPrete.

House Majority Leader Nick Mattiello raised questions about the borrowing strategy, “… there are a lot of bonds proposed, we have to carefully scrutinize any spending.  There are going to be cuts - there's a lot of specifics we didn't get.  I look forward to the finance committee vetting it.” 

Moreover, the borrowing strategy seems inconsistent with the previous Chafee policy of creating dedicated funding for infrastructure financing. Chafee's policy was best exemplified in his fight to implement a toll on the Sakonnet Bridge and to use the revenue to support maintenance.

Reaction to Budget

One of the harshest criticisms of the budget strategy came from Lisa Blais of OSTPA.  “Shameful. All Rhode Islanders deserve more from the Governor's office and our legislature. Where was the road map to dig out of our long term structural deficit? We need more from state leadership than we have seen or we are likely to see if Governor Chafee's presentation is an indication of what our legislators will accomplish in 2014.”

Environmentalists rallied around the proposed environmental bond issues. “Save The Bay thanks Governor Chafee for including this $75 million request in his 2014 budget...Save The Bay is especially pleased to see $20 million in funding for the RI Clean Water Finance Agency to invest in wastewater and stormwater infrastructure, and $31.5 million linked to an array programs designed to restore natural buffers along our rivers coasts, expand floodplains, conserve valuable habitat and support public enjoyment of Rhode Island’s natural resources by investing in parks and recreational facilities like Rocky Point,” said Peter Hanney of Save the Bay.

"Audubon is pleased that Governor Chafee has recommended $75 million in bonds to restore moderately contaminated industrial sites (Brownfields) and to provide monies for municipal water and wastewater infrastructure improvements. These measures will improve health for Rhode Islanders and be attractive to businesses. This is the capital budget, and we look forward to similar focus on environmental protection and enhancement in the operational budget," said Eugenia Marks with the Audoban Society of RI.  

Leading legislators however raised questions about the borrowing, including Senator Lou DiPalma (D).  “I liked the focus on education, job training and infrastructure investment.  The challenge I see is the bonds proposed -- I think we're looking at north of $300 million in investments.  I believe they're the right areas, but it's the magnitude that's the concern."

"The work we've been doing on how to fund our roads and bridges -- we have a $1 billion problem over 10 years.  $80 million is a good initiative, but it's not 1/10 of what we need.  From a roads and bridges perspective, the problem has gotten there from our lack of attention,” said Senator Lou DiPalma.

Senate President M. Teresa Paiva-Weed was supportive of the Governor’s themes, but outlined that the Senate would have their own initiatives this year. “The Governor has made of priority of funding education, and I'm pleased to see his fully funding the $38 million funding formula as well as avoiding increases in tuition in higher education."

"If there was one area where we had an opportunity to infuse money, workforce development is one area I'd like to see a greater investment.  Tuesday we'll be releasing a report, "Rhodes Back to Work," where along with my colleagues we'll release those initiatives,” said Paiva-Weed.

Support from Former Rivals and Mayors

Chafee's former rival and almost opponent before he bowed out of the race for Governor in 2014, General Treasurer Gina Raimondo complemented the Governor on his budget, "I thought he did an excellent job. I admire the Governor, he has dedicated his life to public service and always puts the people of Rhode island first. It's a hard time to govern. I like what I heard in terms of what I heard in investing in the future -- eduction, workforce training. We have to see the details, it's the beginning of a long process."

Another voice supportive of the Governor's budget is Pawtucket Mayor Don Grebien (D) who lauded the approach and the funding for cities and towns. The Chafee budget supports a total of $72 million in municipal aid.  "It was an interesting budget...you have to digest it, but it increases school aid, overall state aid to cities and towns, not a bad budget. I give it a B...once we digest it, it might make it to an A," said Grebien.


Related Slideshow: Best and Worst Run States in New England

How well do the New England states stack up against each other in terms of how they're currently run?

According to Wall Street 24/7, looking at a state's debt per capita, budget deficit, unemployment, median household income, and percentage below the poverty line are all indicators of a state's level operational success - or lack thereof.  

Below are how the New England states were ranked compared to each other, based on data from 2012 -- as well as the "best run" and "worst run" states in the country. 

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Rhode Island

National Rank, #47

> Debt per capita: $8,721 (3rd highest)
> Budget deficit: 6.9% (35th largest)
> Unemployment: 10.4% (3rd highest)
> Median household income: $54,554 (18th highest)
> Percent below poverty line: 13.7% (tied-20th lowest)


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National Rank, #41

> Debt per capita: $8,531 (4th highest)
> Budget deficit: 17.1% (12th largest)
> Unemployment: 8.4% (tied-14th highest)
> Median household income: $67,276 (4th highest)
> Percent below poverty line: 10.7% (4th lowest)


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National Rank, #30

> Debt per capita: $4,447 (12th highest)
> Budget deficit: 16.6% (14th largest)
> Unemployment: 7.3% (tied-22nd highest)
> Median household income: $46,709 (16th lowest)
> Percent below poverty line: 14.7% (tied-24th lowest)


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New Hampshire

National Rank, #25

> Debt per capita: $6,414 (8th highest)
> Budget deficit: 20.0% (8th largest)
> Unemployment: 5.5% (8th lowest)
> Median household income: $63,280 (7th highest)
> Percent below poverty line: 10.0% (the lowest)


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National Rank, #18

> Debt per capita: $6,414 (8th highest)
> Budget deficit: 20.0% (8th largest)
> Unemployment: 5.5% (8th lowest)
> Median household income: $63,280 (7th highest)
> Percent below poverty line: 10.0% (the lowest)


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National Rank, #6

> Debt per capita: $6,414 (8th highest)
> Budget deficit: 20.0% (8th largest)
> Unemployment: 5.5% (8th lowest)
> Median household income: $63,280 (7th highest)
> Percent below poverty line: 10.0% (the lowest)


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Worst Run State in US

50. California

> Debt per capita: $3,990 (20th highest)
> Budget deficit: 27.8% (3rd largest)
> Unemployment: 10.5% (2nd highest)
> Median household income: $58,328 (11th highest)
> Pct. below poverty line: 17.0% (18th highest)


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Best Run State in US

1. North Dakota

> Debt per capita: $3,033 (20th lowest)
> Budget deficit: None
> Unemployment: 3.1% (the lowest)
> Median household income: $53,585 (19th highest)
> Pct. below poverty line: 11.2% (6th lowest)



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