PROVIDENCE, R.I. (WPRI) — Rhode Island legislative leaders have decided to convene an obscure four-member disaster board in order to authorize Gov. Gina Raimondo to borrow up to $300 million to help the state get through a cash crunch caused by coronavirus, WPRI 12 has learned.
The Disaster Emergency Funding Board will convene on Thursday at 11:30 a.m. in the State Room, according to an email Senate President Dominick Ruggerio sent fellow senators on Tuesday. Raimondo and her advisers are expected to testify in favor of their proposal.
The meeting will air on Capitol TV and online, but the public will not be allowed to attend in person due to the COVID-19 pandemic. Public comment will be accepted by email.
The board, created under a 1973 statute, is made up of Ruggerio, House Speaker Nicholas Mattiello, Senate Finance Committee Chairman William Conley and House Finance Committee Chairman Marvin Abney, all Democrats. It is allowed to authorize borrowing for up to two years as well as other financial transfers.
“This is an extraordinary time that this board was created to address,” spokespersons for the House and Senate said in a joint statement. “The General Assembly is committed to addressing an unprecedented health care crisis and its consequences and is committed to informing and protecting the public.”
In a letter Monday to the four members of the disaster board, Raimondo requested authority to borrow up to $300 million from either the federal government or a private entity. The letter did not specify what financial entity will be used.
She is also asking them to let her “make funds available by transferring funds as needed for cash flow purposes into the General Fund from general obligation capital proceeds, state university and college funds and any quasi-public agencies with available cash balances.”
Raimondo and General Treasurer Seth Magaziner have both warned in recent days that major steps would need to be taken to ensure the state could keep enough cash on hand in the coming weeks. Magaziner has been huddling with advisers in recent days to examine options.
“The state’s not going to run out of money,” Gov. Gina Raimondo said Monday. “It’s going to be very, very difficult, but it isn’t something Rhode Islanders should be worried about.” Still, she added, “Clearly our revenues have fallen off a cliff.”
General Treasurer Seth Magaziner said Tuesday that without action, the state could run out of cash “in as little as a couple of weeks.” He said the emerging financial plan is designed to get the state through until July, the new deadline for income tax payments to be made.
While the board is being asked to approve up to $300 million, “we won’t necessarily use all of it,” Magaziner told WPRI 12. “It will depend on what cash flow needs arise.”
He said his office was in negotiations with multiple financial institutions about obtaining a line of credit that could be drawn down, similar to a credit card. Without offering numbers, he said he was “pleased” by the interest rates being discussed.
In addition to the borrowing, Magaziner said the state may temporarily move money out of a roughly $100 million account containing proceeds from voter-approved bonds, including the $250 million school buildings bond. He said other states make similar temporarily moves over the course of their fiscal years to manage cash flow, though Rhode Island generally has not.
“Let me be clear, all of this money will be transferred back to its original purpose, and we will not have any delay in those projects as a result of these actions,” he said.
Obtaining more cash is only the most pressing of the financial challenges facing Rhode Island leaders, however. They are also confronting a radically altered budget picture for the current 2019-20 fiscal year, which ends June 30, and the 2020-21 fiscal year that would follow. Expenses are set to rise quickly, while revenue is collapsing as much of the economy shuts down.
In a letter to House lawmakers Monday, Mattiello admitted the situation is “changing rapidly,” but said, “Lost revenues and increased expenses will have to be solved.” He noted that sales and income taxes, which account for about two-thirds of state revenue, were plummeting while a major cash cow — Twin River’s two casinos — was closed for at least two weeks.
However, questions quickly emerged about the constitutionality of the board, which it appears has never met before this.
House Republican Leader Blake Filippi complained that lawmakers had failed to pass a bill that would have allowed for remote meetings of the General Assembly, setting up the current situation. And he suggested the board ought to be enlarged to include GOP representation.
Separately, R.I. Republican Party Chair Sue Cienki said the GOP is considering taking legal action to prevent the board from borrowing money without voter approval, citing the state constitution. “A public health emergency doesn’t end our constitutional democracy,” she said, suggesting another source such as the roughly $200 million rainy day fund be tapped.
“Under our form of government, it is the voters not a handful of State House politicians who decide Rhode Island needs hundreds of millions in debt,” Cienki said. “There are constitutional ways to get through this crisis.”
She added, “Congress meets and votes on important legislation to get us through this crisis. If necessary, our General Assembly should quickly convene and vote on any legislation needed to get through Rhode Island through this crisis.”
State Sen. Sam Bell, a Providence Democrat, also said he was concerned about the constitutionality of the decision and reiterated his call for lawmakers to begin meeting remotely to deal with the pandemic.
However, Raimondo and Magaziner both insisted the constitution would not be a legal impediment to either the borrowing or the temporary transfers between accounts. The governor described it as “good news” that fast action was being taken.
“There would be an issue if we were transferring those proceeds permanently, but if it is temporary and it is not going to limit the progress of those project that the voters approved, then our legal counsel agrees that is permissible under the state constitution and federal rules as well,” Magaziner said.
Ted Nesi (firstname.lastname@example.org) is WPRI 12’s politics and business editor and a Target 12 investigative reporter. He is a weekly panelist on Newsmakers and hosts Executive Suite. Follow him on Twitter and Facebook