The Rhode Island Fiscal Year 2016 budget proposal will soon come out of House Finance - and here are some key areas to keep in focus.
Rhode Island Governor Gina Raimondo's first budget proposal had drawn praise from supporters for its focus on the economy and education -- but drew sharp criticism from Republicans and taxpayer groups as to the government's role in job creation as well as creating new tax policy.
Now, it's the House's turn to craft a budget package to vet, approve, and place before the General Assembly.
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.
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.
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.
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.
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.
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!"
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.”
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.
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.
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."
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."
