Ted Nesi’s Saturday Morning Post: March 14

News

Happy Saturday! Here’s another edition of my weekend column for WPRI.com – as always, send your takes, tips and trial balloons to tnesi@wpri.com, and follow @tednesi on Twitter.

1. Say this for Governor Raimondo: she’s consistent. Whatever you think of the $8.6-billion budget proposal she unveiled Thursday night, it includes plenty of the big-ticket items she proposed during her campaign: a suite of new economic-development programs, a big push on the I-195 land, an effort to rein in Medicaid, more money to promote tourism, a school building authority, an infrastructure bank, a new lease on life for HealthSource RI, and few tax changes. “She’s clearly outlined her priorities – which are our priorities – and that’s to help working families and help people get back to work,” Senate Finance Committee Chairman Dan DaPonte told me after the speech, describing the overall document as “ambitious.” The budget represents an effort – calculated or not – to push back at the idea that Raimondo is a DINO (Democrat in Name Only), with proposals to expand the Earned Income Tax Credit, raise the minimum wage to $10.10, and tax second homes worth more than $1 million. National Review’s Patrick Brennan countered on Twitter that it’s possible to imagine Republican Massachusetts Gov. Charlie Baker backing the same policies – fair enough, but a more mainstream Republican like Scott Walker probably wouldn’t. Either way, those proposals will likely play a role in Raimondo’s efforts to build stronger support among Democrats in the coming years and avoid the fate of a Rahm Emanuel come 2018.

2. Budgets are sprawling documents, but the centerpiece of Governor Raimondo’s blueprint appears to be the set of new economic-development programs she proposes entrusting to Commerce Secretary Stefan Pryor, who’s quickly emerged as one of the most powerful people in her young administration. “It is a bold jobs budget, and I want to see the budget passed with the economic-development plan largely in tact,” Raimondo said Friday while taping this week’s Newsmakers. “It’s a comprehensive jobs plan – developing skills, making college affordable, investing in education, incentive packages to attract and retain businesses – we need that.” Not everyone agrees with her approach: Mike Stenhouse’s Center for Freedom and Prosperity, for instance, argues it relies too much on government initiatives. But plenty of others support her: the Greater Providence Chamber of Commerce’s Laurie White called it “the most imaginative, sophisticated thinking we’ve seen in 30 years when it comes to business development.” The budget’s backers face a different, difficult question: Is it enough? While Raimondo is suggesting her proposals will be catalytic, some of the dollar amounts attached look a bit meager when you consider that Massachusetts, for example, is pouring $1 billion into life sciences alone. Raimondo could face a backlash if it turns out she’s over-promising.

3. Reading this Globe piece, it’s no wonder the governor is jealous of the Boston economy.

4. As one of my colleagues pointed out Thursday, Governor Raimondo borrowed a line from Governor Carcieri in her speech when she said a construction boom has made Massachusetts’ new state bird the crane. It’s worth recalling that Carcieri used that line regularly during his re-election campaign in 2006, as he argued the then-robust economy made the case for four more years. Raimondo’s no fool, and one of the side benefits of all the real estate subsidies she wants to add would be plenty of cranes in the sky in time for her own re-election bid, not to mention lots of construction jobs to go with them. (Witness the enthusiastic reception the budget got from the Building and Construction Trades Council.) Her personnel choices make the focus clear: Secretary Pyror did big real estate projects in Newark and Lower Manhattan; his two deputes have a real estate background; and her nominee to lead the 195 Commission, Joe Azrackpioneered REITs. Raimondo’s office says the new package “encourages construction of job-producing projects, with a special emphasis on investment near transit hubs and in historic structures.” Developers are sure to drool over her proposed Rebuild Rhode Island tax credits, which would allow Pryor – at his discretion – to provide a transferable credit worth up to 30% of a project’s cost. Superman building, anyone?

5. Governor Raimondo has taken a page out of the U.K. Liberal Democrats’ playbook with her suggestion of what would effectively be a new mansion tax. The actual proposal is to levy a tax of $2.50 per $1,000 of value on all second homes and vacant residential land worth $1 million or more; once triggered, the tax would be charged on the house’s entire value. Steve Neuman, Raimondo’s chief of staff, said about 2,800 houses in the state would face the tax. Amusingly enough, no small share of those homes are probably owned by some of the wealthy donors who bankrolled the new governor’s campaign. Raimondo acknowledged on Newsmakers she let some of them know it was coming. “There’s a few people who are not too happy about it, but by and large the people I’ve talked to see it for what it is: it’s part of an overall plan designed to get people back to work,” she said. “It’s a relatively modest assessment, and they want to do their part.” As Josh Barro has noted, economists generally say property taxes and consumption taxes are more efficient than those on income and capital, which is likely part of why Raimondo’s team chose this option.

6. One of the biggest fights ahead is clearly going to be over Raimondo’s proposed Medicaid cuts – roughly $91 million in state funds, which means about $180 million when federal matching funds are considered. Virginia Burke, an influential lobbyist for the state’s for-profit nursing homes, was quick out of the gate with a warning Thursday night that her members “are financially stressed and are not in a position to take further stress.” Burke has good reason to be vocal, as attention is increasingly focused on Rhode Island’s high nursing home usage and high Medicaid costs for seniorsBill Flynn of the Senior Agenda Coalition has long argued the state could do more to increase home-based care. Asked about the issue on Newsmakers, Raimondo said: “It’s a spectrum. Many nursing homes are efficiently run, and many could be run much better. I also think that nursing homes have to bear responsibility for care. What am I talking about? If people in a nursing home aren’t turned over regularly enough, and they have sores on their back, we shouldn’t have to pay for that. If people in nursing homes continue to fall and wind up in the emergency room, that adds costs, and it’s poor care.”

7. One of the murkier parts of the budget is Raimondo’s proposal to refinance and restructure Rhode Island’s debt, yielding $84 million in upfront cash during the next two fiscal years; she says she looked at the idea when she was treasurer but Governor Chafee wasn’t interested. It’s a complicated bit of financial engineering, and Treasurer Seth Magaziner admitted Thursday night the details haven’t been worked out yet. “The low interest rate environment that we’re in offers us a very unique opportunity,” Magaziner told me. “This is something that other states have done, and it’s something that, if we strike while the iron is hot, we can raise some funds that will allow for good economic stimulus without costing our state any more over the long term. We still have a lot of details we need to work through.” He said it will “probably be a few months” before the specifics of the transaction are worked out, but said the $84 million is based on a ballpark projection. One reason Magaziner is excited: the debt restructuring will yield $2 million to seed a state infrastructure bank, which he campaigned on creating. “This is exciting,” he said. “We think we can do $30 to $40 million worth of projects over the next three years with only a $2 million, one-time budget line.” Private capital and leftover stimulus finds will do the rest, he said.

8. What happens if the May revenue estimates come back with more money for lawmakers to spend? The state is already running $44 million ahead of forecasts, and Speaker Mattiello said Thursday night that “hopefully we can make better, easier decisions come June.” Governor Raimondo suggested in her budget speech she’d like to see additional revenue used to expand the Earned Income Tax Credit for low-earners. Mattiello, however, wants to exempt Social Security benefits from income taxes for individuals who make more than the $60,000 (for couples) threshold Raimondo set out in her budget. Watch to see how that shakes out.

9. Our weekly Saturday Morning Post dispatch from WPRI.com’s Dan McGowan: “Governor Raimondo’s budget proposal brought both good and bad news to Providence. Raimondo’s plan to fully fund the state’s school funding formula while also setting aside money for school construction is clearly a victory on the education side – aside from state money, the city has level-funded the district for five straight years – but her decision to cut $5 million from the state’s payment in lieu of taxes (PILOT) program signals she wasn’t ready to help the city reduce its looming shortfall of $10 million to $23 million. (Raimondo’s top aides maintain that cities and towns were well aware that the extra $5 million they received in last year’s budget was a one-time addition.) On the other hand, Raimondo’s proposal to create a $25-million I-195 Development Fund to subsidize key projects on the former highway land – money that can’t be used on the proposed PawSox stadium – could lead to significant tax revenue for the city down the line. ‘From what I heard today, it’s good for Providence because it’s about jobs, it’s about schools, it’s about quality of life,’ Mayor Elorza said following the speech. It’s no surprise Elorza praised Raimondo’s proposal – but it’s also no mistake that the legislative agenda he released Friday asks members of the Providence delegation to push for a boost in municipal aid. Remember, he’s already ruled out raising taxes in his first budget.”

10. Finally, if you really want to dig into the budget, here’s the entire 549-page bill.

11. Tim White has more here from Raimondo’s Newsmakers sit-down, on the PawSox and PARCC. About the stadium idea, she said: “I’m not open to yet again being taken advantage of by another baseball deal.”

12. For all the talk from state leaders about Rhode Island’s economic decline, the state’s job market is showing some signs of vigor. The unemployment rate fell to 6.5% in January, and nonfarm payroll employment reached 481,700. That’s the highest job count since June 2008, though it’s still well below the pre-recession peak of 495,700. To put that in some context, the official forecast at last November’s state revenue conference was for unemployment to average 6.7% during all of 2015 – so the jobless rate in the first month of the year was already below what analysts thought it would average for the whole year. Two caveats: first, the labor force is still shrinking (driven in part by demographics); second, two-thirds of the new jobs are low-wage ones.

13. “American Millennials are among the world’s least skilled.” Ouch.

14. Back in 1994, Rhode Island lawmakers capped the amount a city or town can reimburse a motorist for pothole damage at $300. After 21 years and this brutal winter, it seems like a good time to reassess whether that’s enough.

15. Congressman Cicilline’s push for U.S. House members to undergo mandatory ethics training has seemed quixotic for a while. But Illinois U.S. Rep. Aaron Schock’s response when Politico asked if his headline-grabbing spending broke the rules – “I certainly hope not” – may give it new momentum, particularly since he has a Republican cosponsor, Virginia’s Scott Rigell. Stay tuned.

16. Jay Leno on Buddy Cianci: “He used to show up with jars of homemade spaghetti sauce all the time. It was like, ‘Oh this guy’s the mayor?'”

17. Barney Frank is out with a memoir – here’s a great review from The New York Times’ Jonathan Martin.

18. Set your DVRs: This week on Newsmakers – Gov. Gina Raimondo. Watch Sunday at 10 a.m. on Fox Providence. This week on Executive SuiteRobert Atkinson, president of the Information Technology and Innovation Foundation, and Laurie White, president of the Greater Providence Chamber of Commerce. Watch Saturday at 10:30 p.m. or Sunday at 6 p.m. on myRITV (or Sunday at 6 a.m. on Fox). See you back here next Saturday morning.Ted Nesi ( tnesi@wpri.com ) covers politics and the economy for WPRI.com and writes the Nesi’s Notes blog. Follow him on Twitter: @tednesi

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