12 things to know about Raimondo’s $10B RI budget plan

Politics - Government

PROVIDENCE, R.I. (WPRI) — Democratic Gov. Gina Raimondo unveiled her $10.2 billion state budget plan for 2020-21 on Thursday, kicking off the annual debate on how Rhode Island state government should be funded and operated.

The final budget deal is usually signed into law in June, just before the start of the new fiscal year on July 1 — but legislative leaders are already expressing concern about parts of the budget, notably its reliance on over $20 million from legalizing recreational marijuana.

Here’s a cheat sheet with 12 key things to know about the brand-new plan.

1. Rhode Island’s state budget will pass $10 billion for the first time.

Raimondo’s new proposal is a symbolic milestone: the bottom line total for Rhode Island’s state budget is 11 figures for the first time, clocking in at $10.2 billion. The governor and her aides downplay the significance of the dollar amount, pointing out among other things that $3.3 billion of the total is actually federal money sent by Washington.

Still, there’s no disputing that spending has ramped up during the governor’s two terms. To take one example, the annual budget for RIDOT has soared from $453 million in 2017-18 to $660 million in the new plan. (Some of that is federal money.)

As the chart below shows, if lawmakers approve all her proposals (they won’t), expenditures from the General Fund would be up nearly 20% since Lincoln Chafee’s final budget. That’s about $720 million.

2. New taxes and fees are part of the plan to close a $200 million deficit.

In what has become a perennial problem, the governor began the budget process facing a roughly $200 million shortfall if she wanted to continue providing all programs authorized under current law (let alone add new ones) based on expected revenue.

Raimondo is not proposing to raise rates on broad-based taxes such as the sales tax or the income tax, but she is suggesting smaller tweaks that will get more out of taxpayers.

One that’s sure to get attention: reimposing the sales tax on wine and spirits, undoing a policy change made in 2014 that her aides say has turned out to be much more expensive than originally expected. However, the budget also proposes lowering the excise tax on wine and spirits, which should lower the sticker price on your bottle of merlot. But adding the sales tax back onto that bottle and others is expected to bring in about $14 million.

Other tax increase proposals include raising the cigarette tax to $4.60 a pack, imposing the sales tax on additional items such as computer programming services, and bumping the hotel tax from 5% to 6%. She also wants to get $32 million out of the state’s hospitals by putting their licensing fee back up to 6%, and $17 million through the much-maligned practice of “scoops” from quasi-public agencies’ reserve accounts. (The biggest scoops: $5 million each from the landfill and the R.I. Infrastructure Bank.)

3. Marijuana legalization is back – this time modeled on New Hampshire.

Another potential new source of revenue: legalizing recreational marijuana, under a revamped framework modeled on New Hampshire’s state-owned liquor stores. The governor says pot could net $21 million for the state in a year, far more than her 2019 legalization plan – though top lawmakers have already basically ruled out the move this year.

Target 12’s Steph Machado has all the details on the marijuana proposal here.

4. Education and job training are key spending initiatives.

The proposed budget adds $224 million in additional spending over the current one. So where does the extra money go? There are a million answers to that question in a $10 billion budget, but Raimondo’s aides specifically highlight a few areas where she is seeking to add additional funding, notably in education and job training.

After failing to get legislative support last year for a requested bump in funding for the Real Jobs RI training program, Raimondo is making a full court press on the topic this year, playing it up big in her State of the State speech. The proposed budget includes $14 million for Real Jobs RI.

On the education front, Raimondo is asking lawmakers to make her Rhode Island Promise scholarship program permanent, offering free tuition at CCRI to all graduating high school seniors; the program is currently slated to end after this year, so it would not be available to students who are currently juniors in high school. She also wants to add nearly $35 million to base school aid, with a portion dedicated to more pre-K classrooms, and is seeking further funding for English language learners.

Here’s a look at how the entire budget breaks down by spending category.

5. Problem agencies like DCYF and the Veterans Home are getting attention.

Bowing to reality, Raimondo is proposing to increase funding at two of the state’s most troubled agencies: the Department of Children, Youth and Families and the Rhode Island Veterans Home.

DCYF funding has been an increasing bone of contention in recent years, not only due to tragedies involving children in state care but also because of the administration’s mixed messages about whether it has adequate resources. After years of low-balling the next year’s DCYF budget in January and then seeking more money halfway through the budget year, Raimondo is proposing to up base DCYF funding from $230 million in the current budget to $264 million in the new one.

As Target 12 has reported, the new Veterans Home has been plagued by poor management and financial shortfalls, resulting in policy changes that have upset the veterans who live there. Tim White and Eli Sherman have the details here on the budget’s proposed changes for the facility.

6. Housing has jumped higher on the Raimondo administration’s agenda.

Here’s how the budget’s economic outlook section puts it: Rhode Island “has seen rapidly appreciating home prices, which has not translated into faster new-home construction activity to meet growing demand. There is some evidence that the pace of home price growth is tempering, but an uptick in new-home starts is necessary to satiate the demand for more affordable, entry-level construction.”

Target 12’s Eli Sherman has all the details here on how the budget proposes tackling housing.

7. There’s no Medicaid employer penalty, but there is a new approach to the issue.

Last year’s budget proposed levying a new penalty on large for-profit employers if their workers sign up to get health insurance through the state’s Medicaid program. But businesses balked, and legislative leaders removed the proposal from the final budget.

Administration officials say there is still a problem that needs to be solved, citing a March 2019 report that showed a long list of major employers with at least 50 workers on Medicaid, including CVS, Walmart and Home Depot. So this year they are proposing a different approach.

Since 2001 the state has had a program called RIte Share, which allows the state to cover the premium and co-pays for low-income workers who sign for their employer health plan at work. State officials argue it’s a win-win: the state gets the employer to contribute to the worker’s health care costs, while the employee gets commercial insurance that is accepted by more providers than traditional Medicaid is.

The new budget proposal would seek to expand RIte Share by requiring all for-profit employers with at least 50 workers to file a form with the state annually summarizing their health insurance benefits. The state would then make sure the plan is generous enough to qualify, and if it is, get the employee to sign up for the work plan paid for by RIte Share.

Employers who don’t file the health plan information would face a penalty of up to $5,000 per employee.

8. Phasing out the car tax would take 11 years rather than six.

This one won’t sit well with House Speaker Nicholas Mattiello: the phaseout of the car tax, his best-known policy priority, would be stretched out from six years to 11.

The governor’s aides note that shifting the entire $200 million-plus that taxpayers would otherwise pay in their car tax bills onto the state budget is an expensive undertaking in a time of deficits, and say stretching it out makes sense. They suggest chipping away at the goal more modestly, adding only $10.5 million to the phaseout in the new budget.

Mattiello has repeatedly indicated the current six-year car tax phaseout plan is a nonnegotiable for him, and he reiterated that Thursday. “This is the second year in a row that the governor has tried to tinker with the car tax,” he said in a statement. “We must keep our promise we made to our constituents and taxpayers.”

9. Raimondo wants voters to approve $269 million in new borrowing.

It’s an election year, and as usual Rhode Island voters are likely to be asked to approve a number of bond referendums on their November ballots.

Raimondo is proposing three bonds. The first is $117.3 million for higher education facilities, to fund capital projects at all three state colleges as well as a new Center for Ocean Innovation. The second is $87.5 million for affordable housing and infrastructure such as industrial sites, Quonset Pier and additional pre-K classrooms. The third is $64 million for state beaches and parks, clean water and environmental projects.

Lawmakers may have their own ideas for how the state should use its borrowing capacity – or may think this price is too steep when another $250 million school construction bond could be coming in just a few years. Mattiello said he is “very concerned with the number of pervasive debt proposals.”

10. The state is still projecting future deficits, but they’re not as large as before.

Despite a decade-long economic expansion, Rhode Island still doesn’t have its budget in the black going forward. But the governor’s aides estimate her plan would reduce the size of the shortfalls in the years to come.

One key reason for that is her proposal to delay the car tax phaseout, which would save tens of millions of dollars annually in the next few years. Another is her proposal to legalize marijuana, which is supposed to bring in almost $40 million by 2022 and keep growing from there.

Here’s a look at the projected deficits (last January’s forecast in blue, today’s forecast in orange).

11. This is only the starting gun on the annual budget debate.

So what happens now? The governor’s budget bill gets formally filed in the legislature this afternoon. The House Finance Committee expects to kick off months of hearings on the plan in early February, taking testimony from the administration and the public, and Senate Finance will start doing the same shortly thereafter. Then in May, revised estimates of tax revenue and social-services spending will come in, kick-starting the final round of negotiations between the governor, the House speaker and the Senate president. A final budget should be done by sometime in June.

12. It’s a $10 billion budget – there’s a lot more in there.

A constitutional amendment to create a line-item veto is in there (and it wouldn’t go into effect until after Raimondo leaves office). Hospital rates would be frozen and nursing homes’ increase would be lowered. The minimum wage would rise to $11.50 in 2021, and the Earned Income Tax Credit would rise to 20% over five years. Another $22.5 million would be poured into the Rebuild RI tax credit program. Funding for distressed communities would be cut by half. A crackdown would be launched on overtime and abuse of sick pay by state employees. A new $35 million R.I. State Police barracks would be built in the southern part of the state. The 38 Studios bondholders would get their final payment, for $12.5 million.

Want more details? All the budget documents are here.

Ted Nesi (tnesi@wpri.com) 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

Eli Sherman, Steph Machado and Tim White contributed to this report.

Copyright 2020 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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