What to Watch for in Governor Chafee’s Budget

Friday, January 11, 2013


With Governor Lincoln Chafee set to unveil his fiscal year 2014 budget next week, GoLocalProv previews some of the potential plans for addressing a $69 million deficit beginning July 1.

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Tax Hikes
The state is projecting a $69 million deficit for the 2014 fiscal year, which has some questioning how the Governor plans to bridge the gap. In Chafee’s first year in office, he unveiled a proposal to make sweeping changes to the sales tax (lowering the rate, but broadening the tax), which was promptly killed by the General Assembly. Last year, he took a more conservative approach, proposing over $75 million in new taxes and fees, but also asking for close to $50 million in cuts.

It is unclear whether Chafee will take another shot at the sales tax next week, but there is growing pressure from his progressive supporters to find a way to slightly raise taxes on the wealthiest Rhode Islanders. A lot of attention was paid to a bill introduced by Rep. Maria Cimini last year that would have tied a tax hike on rich to the unemployment rate, but the discussion was tabled.

In his fiscal year 2013 budget, the Governor proposed slashing dental care for Medicaid recipients and cutting funding for Rhode Island PBS and the budget he eventually signed into law restored some of the funding cuts made to agencies that serve development disabled in the previous year.

But with lawmakers always resistant when it comes the revenue increases, the Governor will likely have to propose at least some cuts in order to balance the budget. The question is, where? The number of state employees is significantly lower than it was a decade ago (most of this stems from the Carcieri administration) and cuts in Health and Human Services, education or RIPTA always result in tons of backlash.

Business Boost
The Governor needs a win with a business community that already appears to be lining up behind other potential candidates in 2014. The state is routinely labeled as one of the worst states to do business and with unemployment stuck at 10.4 percent, Chafee needs to put together some sort of plan that will inspire confidence in the state’s business leaders.

One seemingly obvious option for Chafee is to call for the restoration of the historic tax credit program, which was eliminated in 2008. State lawmakers have already indicated they will pursue restoring the tax credits (look for the Bank of America Superman building to be a major beneficiary), so Chafee might as well jump the gun and take credit for it.

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Cities and Towns
2012 was supposed to be the year for the cities and towns, but Governor Chafee’s municipal relief package was tabled and municipalities were forced to begin tackling their pension problems on their own. As a former Mayor, it would be surprising not to see Chafee attempt to pursue some form of his 2012 plan to help communities in his budget proposal, particularly with West Warwick seemingly on the brink of collapse. He may need to produce a more modest plan, but the Governor won’t turn his back on municipalities.

Education Spending
The biggest winner –by far— in Chafee’s fiscal year 2013 budget proposal was the Rhode Island Department of Education (RIDE), thanks to increased funding for the state’s education funding formula. It’s difficult to imagine that RIDE will be the biggest beneficiary of Chafee’s budget again, but Commissioner Deborah Gist has played her cards right and it would be shocking if she comes away disappointed with the Governor’s proposal.

It will be interesting to see what Chafee proposes for the state’s colleges and universities. The state has a reputation for underfunding higher education and with no tuition increases coming next fall, URI, RIC and CCRI are going to need some help. With so much attention being paid nationally to the need to improve community colleges, it will be worth watching whether the Governor focuses on CCRI.

Health and Human Services
The department takes up the largest portion of the state budget, which means it is always susceptible to cuts. Last year, in addition to proposing ending dental care for adults on Medicaid, Chafee suggested eliminating a support group for youth in the Training School and cutting YESS Aftercare Services, which assists young people aging out of DCYF, by 20 percent.

Those enrolled in managed care and fee-for-service Medicaid could see cuts to prescription drug coverage and Rite care may see some changes, while reforms to the state’s temporary cash assistance program may also be proposed.



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