Grading Chafee’s Budget—State Leaders, Experts Weigh In
Wednesday, March 09, 2011
Governor Lincoln Chafee last night proposed sweeping changes that will reach directly into the pockets, and lives, of Rhode Islanders—affecting everything from how much they pay in home heating bills to the cost of a haircut.
His proposed budget also calls for major shifts in state funding policies towards transportation, higher education, and state aid to cities and towns.
While Chafee earned praise for his positions on education, transportation, and state aid, his plan to lower and expand the sales tax drew more criticism. In all, his budget contained a total of $176 million in tax increases, according to a tally based on supplementary state budget documents. It is certainly not the first time in recent memory that a governor has proposed a major tax increase. In 1991, Governor Bruce Sundlun proposed a 20-percent increase in the state income tax, which at the time was the biggest tax increase in state history.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTRead more about the impact Chafee’s budget will have on….
■ Taxes and economic development
■ State services
■ Education
■Transportation
■ Pensions
■ Local state aid
GoLocalProv asked state lawmakers, and labor, economics, and political leaders to weigh in on the budget last night. While many found a lot to like in the budget—few liked the idea of the sales tax expansion.
Speaker Fox: Raising Taxes Should Be Last Resort “I don’t favor raising taxes and taxes have to be in the context of our last resort, not our first resort, so there’s a lot of work to be done,” said House Speaker Gordon Fox. But otherwise, he gave the proposal a positive review. “I think he was trying to take a balanced approach to it,” Fox said. “I like the fact he’s talking about investments in public institutions of higher education—very important to our social as well as our economic well-being.” Another point of agreement—Chafee’s plan to reform funding of transportation projects. Fox also said the House would have to take a close look at the proposed cuts to health and human services and other departments.
Senate President Liked Education, Transportation Plans Senate President Teresa Paiva Weed found a lot to like in the Governor’s budget—his leadership on education funding, increasing funding for higher education, and diversifying the sources of transportation funding. She also echoed Chafee’s call for federal legislation allowing states to tax Internet sales, which could yield millions in new revenue. “The number he gave of $70 million is certainly significant in terms of revenue,” she said. As for her thoughts on some of the stickier issues like the sales tax? “At this point, we need to examine the details of the budget,” Paiva Weed said. “The hearing process will be critical.”
House Major Leader ‘Very Concerned’ About New Taxes Majority Leader Nicholas Mattiello told GoLocalProv was most concerned about the proposal for new taxes.
“There’s a lot of tax increases that I always have concern with, so as a general comment I have concerns with all of the increases and will look at how they impact our citizens,” he said. “There will be an impact on our citizens, so I’m very concerned about that.” But he said he would reserve his final judgment until the budget passes through the Finance Committee. “But, as a general rule I certainly wish they were not in there.”
Minority Leader: ‘Nonsense’ on Taxes It was a concern shared by his counterpart across the aisle, House Minority Leader Bob Watson, who criticized the idea of lowering and expanding the sales tax as really just an increase by another name. “This whole lowering and broadening nonsense is still revenue enhancement, which is a tax increase,” Watson said. “We’re taxing home heating oil and whose jaw isn’t on the floor when they’re opening their home heating oil bill?”
Watson questioned how effective the state would be in enforcing the new one percent sales tax on services, saying small businesses like barber shops just aren’t used to paying it. “The government’s going to be like a bunch of teachers chasing kids for their homework,” he said.
Union Leader: Hard to Swallow Pension Change But union members also were unhappy with the proposed budget, according to Ken DeLorenzo, executive director of Council 94 of the American Federal of State, County, and Municipal Workers. “The members of Council 94 are going to have a tough time swallowing the 3 percent increase in their pension contribution,” he told GoLocalProv. DeLorenzo said workers were getting mixed messages from state officials—Chafee, he said, wants them to increase their contributions while General Treasurer Gina Raimondo, he added, has signaled that there may be future cuts to their benefits.
State Taxpayer Group: ‘Too many taxes, too little on pensions’ The Rhode Island Statewide Coalition also blasted the new taxes. “To say this budget is way off the mark of what we needed to see is a gross understatement,” remarks RISC Executive Director Harriet Lloyd. “There’s too much of an emphasis on new taxes and far too little of an attempt to address any real pension changes.”
She took aim expanding the sales tax, questioning how it would impact the state’s weak economy. “We still have among the nation’s highest rates of people losing their homes in foreclosure, businesses dwindling or closing altogether, people going a year or longer without jobs, communities struggling to stay out of bankruptcy, and the Governor wants to force a whole array of new taxes on everyday transactions? How does that help jumpstart this economy?”
Lloyd acknowledged that Chafee is calling on teachers to pay more towards their pensions, but she said it was merely a “baby step” in the right direction.
Poverty Institute: ‘A balanced approach to balancing the budget’ Kate Brewster, the executive director of the Poverty Institute mostly had praise for Chafee’s budget. “We are pleased that our Governor has taken a balanced approach to balancing the budget that includes revenue raising proposals rather than relying on a cuts-only strategy,” Brewster told GoLocalProv. “His proposals to close corporate loopholes through combined reporting and bring our sales tax into the 21st century are responsible tax policies.” She also backed his ideas for investing in education and transportation. One area of concern: making sure the $60 million in cuts to health and human services don’t deny services to the neediest state residents.
A ‘mixed bag’ for progressives Kate Brock, the executive director of Ocean State Action, said overall the budget is a “mixed bag” for progressives. “I think it’s incredibly important that we modernize our corporate tax structure,” Brock said. “Obviously I’m concerned about to health and human services—I’m concerned about that the people that’s going to impact. And I’m certainly concerned about increased contributions to pensions.”
Avedisian: Governor Listened to Us Warwick Mayor Scott Avedisian praised Chafee’s plan for a special fund—known as the Municipal Accountability, Stability, and Transparency program, or MAST. The fund sets aside $20 million in extra state aid for communities that keep their fiscal houses in order.
Avedisian said the program rewards, instead of penalizes, communities that do the right thing. “For years we’ve said if we’re doing the right thing, don’t penalize us and I think the Governor really listened to that message,” he said.
Fung: ‘Disappointed’ However, Cranston Mayor Allan Fung was cool to the idea.
“As a mayor, I’m in a little disappointed in the MAST fund … It comes with a lot of hooks on it, hooks that municipalities can’t afford. We really need to take an approach that also cuts benefits with those pensions and those retiree health care obligations that are strangling cities and towns. The way he set that up, it does not provide incentives to cities and towns to do what they need to do to really address the largest problem that we all face.”
And even though Chafee is lowering the sales tax, Fung said it won’t be competitive enough to draw Massachusetts shoppers to Rhode Island. Fung said he also was “extremely disappointed” that the budget cuts state pilot money Cranston receives for the state prisons located in the city.
Taveras Praises Speech Providence Mayor Angel Taveras praised Chafee for his emphasis on education and state aid. “The commitment on education is huge—the funding formula—and also the commitment to the communities in need as well … I’m excited about that,” Taveras said. “The state is facing a huge problem itself so I recognize that and the Governor’s trying to solve that.”
Economist: ‘We Need to Treat This Like a Crisis’ In a nutshell, URI economist Leonard Lardaro said Chafee’s proposed budget just does not go far enough towards addressing the state’s problems with deficits and unfunded pension liabilities. “I just think we need to be doing a lot more,” Lardaro told GoLocalProv. “I think we need to treat this as a full-blown crisis and not just eat around the edges.”
Lardaro said the expansion of the sales tax is likely to hurt small businesses—in a state that he said is already not very friendly to small businesses—and he doubted that Chafee would be able to save as much as $60 million by making state human services programs more efficient.
Senator Tassoni: A Change in Tone Senator John Tassoni, D-Smithfield, said the Governor deserves credit for setting a new tone in the Statehouse. “He didn’t have a vicious tone to his delivery, like the previous administration, you know, an anti-union tone,” Tassoni said. He added that he was concerned about the 3 percent increase in contributions but encouraged by the plan to lower the sales tax.
Political Scientist ‘Strong Speech’ Overall, Brown University political scientist Wendy Schiller says it was a “strong speech” that was “well delivered.” “Governor Chafee gave an address that reflected his philosophy of fiscal restraint with a focus on government spending that directly helps increase education and productivity,” Schiller added. “His proposal to add spending for public higher education and try to help return more money for elementary and secondary education to cities and towns also reflects his belief that a better educated workforce will help Rhode Island's economic growth.”
She said his pension proposal is comes across as reasonable, despite union resistance: “His proposal to increase the pension contribution by state employees will not be well received by state employees but 3 percent seems reasonable given the relative comparison to private sector employee contributions to 401k plans,” Schiller said.
Political Consultant: Everyone’s Getting a Hit “He’s talking tough talk. He’s addressing a lot of the problems and everyone seems to be getting the hit in this—the taxpayers with the sales tax and the one percent … the unions with the 3 percent now going to raise their pension contributions—the social services, a $60 million cut,” said political consultant Joe Fleming.
He said all the cuts are aimed at permanently ending the state’s structural budget deficit.
“The question is now, can he sell it to the General Assembly? The General Assembly sure is not in the mood to increase taxes, but at the same time they have to look at all the options that they’re facing and make the decision what’s best for the state of Rhode Island,” Fleming said. While the General Assembly may be reluctant to approve the new taxes, he said lawmakers would be hard-pressed to come up with another way of closing the deficit.
