Ten Things To Watch in the RI House Budget

Tuesday, June 02, 2015

Kate Nagle, GoLocal Contributor

 

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The RI House Finance Committee will be taking up the FY16 budget - what are the big issues?

The Rhode Island House of Representatives House Finance Committee is slated to take up the state Fiscal Year 2016 budget next week -- and new developments that have transpired since Governor Gina Raimondo introduced her budget proposal could make for a markedly different tax-and-spend plan.  

The state revenue estimating conference in May showed $173 million in surplus funds not taken into account in Raimondo's budget proposal, and a new game changers including a truck tolling proposal for a $700 million infrastructure bond and the state's pending pension settlement are just some of the factors that will be taken into account on the House finance proposal. 

Slides:  See the Ten Biggest Budget Issues BELOW

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"The increase in state revenue will ease the pressure to make some of the difficult choices that were presented by the Governor in her original proposal," said Speaker of the House Nicholas Mattiello. "As some examples, we will be able to broaden the exemption for the state tax on Social Security to thousands of more retirees. We can now accelerate the phasing out of the sales tax on energy costs for businesses.  We may not have to cut quite so deeply in Medicaid payments to nursing homes and hospitals. We will be able to eliminate the proposed tax on second homes and continue to fund the transportation and textbook loan programs for non-public schools."

Surplus Possibilities?

While mitigating Medicaid cuts are high on General Assembly leaders' list of priorities, advocacy groups have been making the case for their members' interests.  

"AARP is concerned that the proposed budget calls for the state’s revenue surplus to be diverted to the general treasury, rather than transferred to the State Pension Fund," said John Martin, Associated State Director for AARP Rhode Island, who noted their position on the topic could be found online. "We support population-based funding for senior centers as well as the restoration of funding for Meals on Wheels and Elder Respite Care."

The Rhode Island Coalition for the Homeless noted their priorities, in their effort to end homelessness in the state. 

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"We would like to see the Housing Resources Commission budget restored “on budget” so the dedicated funding stream created through the real estate conveyance tax can do more to end homelessness per the State’s Strategic Plan to End Homelessness, Opening Doors RI," said Executive Director Jim Ryczek. 

Some, however, are advocating addressing one of the state's biggest needs. 

"Keep an eye out for how the General Assembly proposes to use the new found “surplus" for this year and the next budget year," said Pam Gencarella with OSTPA. "We think that any so called surplus should be applied to funding roads and bridges, the very basic and essential government service we expect, but have just about given up on.  The Governor would be way ahead of the game if she could reduce that big number she has projected by $150 million.  Maybe she wouldn’t need to establish a new tolling system, but rather she could develop a plan, that starts with this surplus and adds to it the liberated Medicaid dollars resulting from her proposed reforms, to fund the repairs out of the general fund."

Mattiello said he expects to weigh the merits of any tolling plan .

"I will listen to the concerns of the Rhode Island trucking industry at a public hearing on Tuesday before the House Finance Committee and see what can be done to assist them," said Mattiello. "Virtually every state on the East Coast has a toll in place for large commercial trucks, so Rhode Island companies are currently paying these fees when leaving our state.  There is no question that we must address the problems with our crumbling highways and bridges which rank us last among all 50 states.  The heavy commercial trucks are causing the majority of the damage and it is only fair that they assist us in fixing them. My number one goal as Speaker is to improve our economy and job climate, and companies looking to locate in any state strongly consider the condition of our roads and bridges before deciding to do business."   

Overarching Concerns

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Trucking tolls are front and center of RI infrastructure funding -- and budgetary -- debates.

"The Center's top 2015 budget priority is to reduce its overall size and scope," said RI Center for Freedom and Prosperity's Mike Stenhouse. "Specifically, whether or not special interest items are advanced will tell us a lot about the House budget. We are keeping an eye on new harmful mandates like the minimum wage, firefighter's arbitration and other pro labor provisions, renewable energy mandates, and trucker tolls; plus wasteful spending on projects like RhodeMap RI, Healthsource RI, and historic building tax credits."

RI Taxpayers noted that as the General Assembly takes up the FY16 budget, the state is still at the bottom of national business ranking.s

"The Tax Foundation just ranked the state forty fifth on their "2015 State Business Tax Climate Index".  Yet, disturbingly, many of the proposals that have come out of Smith Hill recently - RhodeMap RI, the Taylor Swift tax, the pension lawsuit settlement, a new stadium for the Pawtucket Red Sox, continued payment of the 38 Studios moral obligation bonds without an investigation, and, most alarmingly, a toll proposal - would head the state in exactly the wrong direction," said Monique Chartier with RI Taxpayers. 

"We strongly encourage the General Assembly to keep the best interest of the state uppermost in mind as they tackle the budget and wind up the session.  Tolls must absolutely be taken off the table - forever.  Instead, find the money for road and bridge improvement in the budget," continued Chartier. "Cut spending by examining every expenditure and eliminate the optional, nice-to-have items.  Take steps to mitigate the state's above-average firefighting costs outlined in Ken Block's report.  Rather than continuing to look away from waste and fraud in state programs, tackle it - an easy, politically-pain-free way of freeing up budget dollars."

 

Related Slideshow: What to Watch in the FY16 RI House Budget

The Fiscal Year 2016 budget will be coming out of the Rhode Island House of Representatives Finance Committee, and here are some of the key elements to look for in the tax-and-spend proposal.

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$173 Million Surplus

With the revelation that by the the state’s Revenue and Caseload Estimating Conference in May that Rhode Island has sizable a budget surplus this current fiscal year -- and next -- for a total of about $173 million in surplus funds not not taken into account in Governor Raimondo's budget proposal, the question quickly became what to do with it. Raimondo has indicated that it will not go towards the pension fund.  Rep. Shekarchi had already introduced legislation that 50% of any surplus go to beleaguered cities and towns.  Speaker Mattiello and Senate President Paiva Weed have their own agendas.  Who will see the largesse of this newly found windfall -- and how much debate will ensue -- will soon be seen.  

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Truck Tolls

The proposition by Governor Raimondo and state leaders to have truck tolls help underwrite a $700 million infrastructure revenue bond was met with support by those in labor and trades -- but not by the RI Trucking Association.  Speaker Mattiello acknowledged that the proposal would be reviewed by House Finance - and the truckers have announced they would be making their case against it on Tuesday. “The manner in which the administration has put forth such a significant policy change has been a disservice to both the trucking industry and the small business community. To date, what we have witnessed is a consistent lack of transparency and an abundant amount of misinformation put forth that we intend to dispel,” said Christopher Maxwell, President of the Rhode Island Trucking Association.

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Medicaid

Governor Raimondo's "Working Group to Reinvent Medicaid" released its report at the end of April identifying $91 million dollars in savings for the state -- with nursing homes and hospitals schedule to be among the hardest hit. Pursuant to the bullish forecast for state revenues, however, Assembly leaders made it clear that mitigating some of that suggested payment slashing should be considered. "The Senate leaders place a priority on utilizing a portion of the increased revenue forecast at the May Revenue Estimating Conference to “ease the pain” of the Medicaid transition," said the Senate Press Office.

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HealthSource RI

Rhode Island's Obamacare vehicle continues to have the support of the Governor, but with HealthSource RI slated to cost the state nearly $15 million next year as part of a projected $23.6 million budget -- and Speaker of the House Nicholas Mattiello had indicated that if that number isn't reduced, he won't rule out "turning it over to the Feds."  Meanwhile the fate of the whole program hangs in the balance of the Supreme Court, who is determining the legality of subsidies.  

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Pension Agreement

If approved by the court and the General Assembly, the proposed pension settlement announced on April 2 would end litigation from six challenges arising from changes made to the pension system in 2009, 2010 and 2011 -- and would have a fiscal impact to the state.  The agreement was lauded by Governor Raimondo who had said the proposed settlement "is an important step toward providing certainty for our public employees and our cities and towns, and I believe it is in the best interest of all Rhode Islanders. The proposal keeps our state on a path toward financial stability. While the state has a strong case, the uncertainty of a trial threatened to reverse that progress."  However, the sentiment was far from echoed by all Rhode Islanders. "Far from being an awesome achievement, as the Special Master describes it, this settlement is a bad deal for taxpayers," said R.I. Taxpayers' spokesperson Monique Chartier.  "Remember that this is a second, enhanced settlement.  So we are now two steps removed from the original pension reform at a cost of an additional $232 million for state taxpayers alone!"

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Commerce RI

The former Rhode Island Economic Development Corporation is slated to get a big boost in funding under Raimondo's budget proposal to nearly $83 million dollars, which includes $25 million for incentives for 195 development, and House Speaker Nicholas Mattiello appears committed to supporting robust funding. "We want to make sure the new Commerce Department has the tools needed to attract and grow businesses in our state with the proper incentives and controls to monitor their effectiveness," said Mattiello.  Taxpayer groups, however, have said they will be keeping a close eye on its budget.  "We will also be watching for the amount of money dedicated to Commerce RI," said Pam Gencarella with taxpayer advocacy group OSTPA. "Just because the Economic Development Corporation has been renamed, it doesn’t mean taxpayers are willing to put tens of millions of dollars into a a government organization that they barely know or trust.”

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Corporate, Property Taxes

In light of the budget surplus showing an additional $143 million in revenues for Fiscal Years 2015 and 2016 and approximately $30 million less in caseload expenditures, for a total of about $173 million in surplus funds not taken into account in the Governor’s budget proposal, Senate President Teresa Paiva Weed, in addition to eyeing the abatement of proposed Medicaid cuts, noted two areas she would be lobbying for -- that the $500 minimum corporate tax (and proposals to exempt new companies for the first three years, or for those with limited earnings) should be considered; and local property tax relief, to restore funding to the state Payment in Lieu of Taxes (PILOT) program to help avoid local property tax increases.

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Energy Tax

One of the Speakers top priorities? Exempting businesses from paying sales tax on energy costs. "I want this budget to continue to serve as a catalyst for existing businesses to grow and prosper, in addition to attracting new business looking to locate here," said Mattiello. "That momentum began last year when we lowered the corporate tax rate to the lowest in the Northeast and raised the exemption on the estate tax.  This year, a top priority is to exempt businesses from paying sales tax on energy costs."  Admittedly more business friendly, but at a cost to the state -- for now. 

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Earned Income Tax Credit

The Economic Progress Institute is pushing hard for their working family agenda by advocating for a specific use of the surplus funds.  Their goal? For "hard-working families to keep more of their paycheck by expanding the state’s Earned Income Tax Credit from 10 to 15 percent next year is our top priority," said Kate Brewster with the Institute. "As budget priorities have been recently discussed, it is clear that a significant portion of the revenue surplus is slated to be used to give upper-income seniors and businesses more tax breaks this year.  Working households trying to raise a family on low-wages deserve their fair share of any tax cuts given out this year."

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Late Night Tweaks

Once the budget comes out of House Finance, it then goes to the full House, at which point late nights -- and last minute changes -- have been part and parcel of the process.  “Even the Governor said that it’s no secret how the budget process works - in the shadows, during the late night hours.  We think the biggest items to keep an eye on are the amendments that are proposed on the House floor the night of the budget vote," said OSTPA's Pam Gencarella. "Many representatives are forced to vote on an item that they have had very little time to digest and understand. This year, we are concerned about the Pawtucket Red Sox deal and whether that will be in the budget or perhaps be proposed as an amendment on the floor.  While representatives may vote down an individual amendment, if the amendment passes, it is included in the final budget and therefore if they vote for the budget, they vote for the amendment."

 

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