RI’s Revenues Collapse: Raimondo Blames Trump, Mattiello Blames Raimondo: UPDATED
Thursday, May 11, 2017
Governor Gina Raimondo, who has been trumpeting an economic recovery, got the worst possible news on Wednesday - May revenue estimating numbers were off by $99.6 million.
Raimondo was quick to blame President Donald Trump.
In a statement released late Wednesday, Raimondo said, “Across the nation, President Trump’s policies have created a lot of uncertainty for businesses and state fiscal officers. At least two-thirds of states, including our neighbors in Massachusetts and Connecticut, have seen revenues fall short of projections as individuals and businesses look to Washington for a signal of what’s to come. The General Assembly has some tough choices ahead of them, and Governor Raimondo’s ready to roll up her sleeves and work with them to pass a balanced budget that protects the progress we’ve made in recent years to strengthen our economy and invest in job training and workforce development.”
It is unclear how the Trump policies were having such an immediate impact on the Rhode Island budget, when none of his proposed legislation has passed - and the stock market is up more than 2,384 points in his first 100 days.
“I can understand that certain economic projections have been revised to reflect lower growth, but it is frustrating to me that a lot of the budget problems are due to not achieving budget savings or revenue initiatives the Administration proposed last year. State government must be managed better so that it works more cost effectively for the taxpayers. My budget priorities have not changed. We will continue our diligence and make sure we cover this gap. We will look at everything.”
The revenue numbers are certain to put a chilling effect on big ticket items like a new Stadium for the PawSox, the Governor’s College funding program, and potentially the timeline for Mattiello’s car tax repeal.
The numbers are a disappointment and top finance experts are worried about the trends. "It is spin to blame President Trump for Rhode Island's fiscal mess. For example, the stock market is doing well and national monthly job reports are strong. What did Trump have to do with UHIP and state policies that drive spending? The state revenue numbers are not consistent with the economic comeback the Governor talk about," said Gary Sasse, the former head of RI Public Expenditure Council and now leads the Hassenfeld Institute for Public Service at Bryant University.
The Governor's explanation for the cause of the poor performance of the revenue numbers, sparked a strong reaction from the University of Rhode Island's top economist. Len Lardaro told GoLocal, "
Revenues are falling because we are looking to Washington? What a joke. Growth is slowing. Does she think it is sunspots, perhaps?"
Related Slideshow: Winners and Losers in Raimondo’s FY18 Budget Proposal
Criminal Justice Reform
Per recommendations from the Justice Reinvestment Working Group, the Governor is proposing nearly $1 million in investments such as the public defender mental health program ($185,000), improved mental health services at the ACI ($410,000), recovery housing ($200,000) and domestic violence intervention, in her FY18 budget.
English Language Learners
Under the heading of “promoting 3rd grade reading,” Raimondo proposed adding $2.5 million to make English Language Learning (ELL) K-12 funding permanent. The Governor’s office points out that RI is one of four states that doesn’t have permanent funding.
The suggestion was one made by the Funding Formula Working Group in January 2016, who said that “in the event that Rhode Island chooses to make an additional investment in ELLs, the funding should be calculated to be responsive to the number of ELLs in the system and based on reliable data, and include reasonable restrictions to ensure that the money is used to benefit ELLs — and promote the appropriate exiting of ELL students from services.”
Car Owners - and Drivers
Governor Raimondo wants to reduce assessed motor vehicle values by 30% - a change that would reduce total car tax bills by about $58 million in calendar year 2018. Speaker of the House Nicholas Mattiello, however, has indicated that he might want to go further in its repeal.
In her budget proposal, Raimondo also put forth adding 8 staffers to the the Department of Motor Vehicles to "address wait times."
The “Air Services Development Fund” would get an influx of $500,000 to “provide incentives to airlines interested in launching new routes or increasing service to T.F. Green Airport.” The Commerce Corporation set the criteria at the end of 2016 for how to grant money through the new (at the time $1.5 million fund).
Also getting a shot in the arm is the I-195 development fund, which would receive $10.1 million from debt-service savings to “resupply” the Fund to “catalyze development & attract anchor employers.”
Minimum Wage Increase
An increase in the state minimum wage is part of Raimondo’s proposal, which would see it go from $9.60 an hour to $10.50 an hour. Raimondo was unsuccessful in her effort in 2016 to bring it up to $10.10 — it was June 2015 that she signed legislation into law that last raised Rhode Island’s minimum wage, from $9 to 9.60.
The state's minimum hourly wage has gone up from $6.75 in January 2004 to $7.75 in 2013, $8 in 2014, and $9 on Jan. 1, 2015. Business groups such as the National Federation of Independent Business however have historically been against such measures, citing a hamper on job creation.
Like the minimum wage, Raimondo is looking for an increase - in this instance, the cigarette tax, and revenue to state coffers. Raimondo was unsuccessful in her effort to go from a tax of $3.75 to $4 last year. Now she is looking for an increase to $4.25 per pack, which the administration says would equate to $8.7 million in general revenue — and go in part towards outdoor recreation and smoking cessation programs.
The National Federation of Independent Business and other trade groups have historically been against such an increase, saying it will hurt small businesses - i.e. convenience stores. And clearly, if you’re a smoker, you’re likely to place this squarely in the loser category instead.
As often happens in the state budget, winner one year, loser the next. As GoLocal reported in 2016, “the Rhode Island Hospital Association immediately lauded the budget following its introduction, and addressed that while it is facing some reductions, that it "applauds" this years budget after landing on the "loser" list last year.”
This year, it falls back on the loser list, with a Medicaid rate freeze to hospitals, nursing homes, providers, and payers — at FY 2017 levels, with a 1% rate cut come January 1, 2018.
The taxman cometh — maybe. Raimondo proposed an “Internet Sales Tax Initiative” — which would purportedly equate to $34.7 million in revenues.
"Online sales and the fact that online sellers do not collect sales tax has created a structural problem for Rhode Island's budget — our sales taxes have been flat," said Director of Administration Michael DiBiase, of the tax that Amazon collects in 33 states, but not Rhode Island. "We think mostly due to online sales, we’re able to capture the growth. The revenue number is $35 million dollars — it improves our structural deficit problem. It’s an important fiscal development."
Long Term Care Funding
The Governor’s proposal recommends “redesigning the nature” of the State’s Integrated Care Initiative, by transferring long-term stay nursing home members from Neighborhood Health to Medicaid Fee-for-Service and repurposing a portion of the anticipated savings (from reduced administrative payments to Neighborhood Health) for “enhanced services in the community.” “The investments in home- and community-based care will help achieve the goal of rebalancing the long-term care system," states the Administration.
Cutting that program is tagged at saving $12.2 million; cuts and “restructuring” at Health and Human Services is slated to save $46.3 million.
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