State of the State Preview
Tuesday, January 31, 2012
A combination of tax hikes and spending cuts will likely be part of Governor Chafee’s fiscal year 2013 budget recommendations when he delivers his second State of the State address to the General Assembly this evening.
The state will need to address a projected $120 million deficit and Chafee has already suggested he plans to call for tax hikes; the only question now is whether he’ll introduce a plan similar to the one killed in last year’s budget, which would have lowered and broadened the sales tax to compete with Connecticut and Massachusetts.
Aside from increased revenues, there is also some question over which areas the Governor will seek to invest in and which ones will face cuts. Last year, Chafee was praised for increasing funding to state colleges for the first time in several years, but the final budget was criticized by many of his progressive supporters who felt severe cuts to several social programs were unfair.
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More Taxes
It’s not a question of if, it’s a question of what and how much when it comes to the Governor’s plan to raise taxes. Chafee has to deal with the fact that it’s an election year and the General Assembly will likely not be too keen on increasing taxes at all, which means his proposal may not be as drastic as it was last year.
Chafee will likely call for taxes that he can justify to middle-class Rhode Islanders, which could mean a tax on luxury items as opposed to the complete overhaul of the sales tax he proposed in 2011.
Cities and Towns
Chafee has gone to bat for municipal leaders when it comes to local pension reform; now it will be worth noting whether he also attempts to increase funding for cities and towns as well. Leaders have blamed cuts in state aid as one of the key reasons some municipalities are teetering on the verge of bankruptcy, so it is unlikely Chafee, a former Mayor, would suddenly decide to take that route.
However, just as with raising taxes, it may be a hard sell to the General Assembly to significantly increase funding to the cities and towns. It is unlikely the PILOT program will be addressed in the initial proposal.
Education
Despite initially butting heads, the Governor and Education Commissioner Deborah Gist had a relatively cozy relationship during Chafee’s first year in office. The reason is that while they have philosophical differences on how to reform schools, Chafee has made education a top priority.
Will that pay off for Gist in the 2013 budget?
One key area to watch is what will happen with the school funding formula. While it was initially praised, several communities have since complained about the rollout. Governor Chafee is expected to call for the full funding of the second year of the formula, but it will be interesting to see if any changes are made.
Higher education is another question mark. Chafee increased funding to state schools last year and is unlikely to attempt to reverse the course this year.
Health and Human Services
It is the largest part of the budget and the one that often faces the biggest threat when it comes to cuts. Advocates were outraged last year by decisions made in 2012 budget, so it will be interesting to see how Chafee addresses those concerns this year.
Similar to the tax hikes, cuts are a foregone conclusion. The question is which area will be affected the most.
Transportation/Environment/Public Safety
Governor Chafee is expected to address inefficiencies with the gas tax, which critics have charged is an increasingly unpredictable revenue stream. Several lawmakers have called for increased funding to the state’s transportation programs, but that may prove to be a difficult fit in Chafee’s budget.
The Department of Environmental Management has faced cuts nearly every year over the last decade and there is no reason to believe this year will be any different. It is unclear whether that will mean staffing reductions or cuts to existing programs.
Public safety is another area Chafee will likely attempt to achieve cost-savings; however there is a limited amount to what he can do. Cuts to overtime may be one option.
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