PROVIDENCE, R.I. (WPRI) – Democratic Gov. Gina Raimondo unveiled her $9.3-billion state budget plan for 2017-18 on Thursday, delivering hundreds of pages of documents to the General Assembly as they kick off the annual tax-and-spending debate.
Here’s a cheat sheet with some key things to know about the budget plan.
1. The state budget has soared past $9 billion. Governor Almond’s final budget (2002-03) totaled $5.4 billion. Governor Carcieri’s final budget (2010-11) totaled $7.7 billion. Governor Chafee’s final budget (2014-15) totaled $8.4 billion. Now Governor Raimondo is proposing a budget of $9.3 billion, up 10% since Chafee’s last year and 20% since Carcieri’s. The bulk of the increase has been in general revenue – that is, taxes and fees collected by the state, which are up $837 million since 2010-11; federal money in the budget has risen $333 million over the same period. Unsurprisingly, a lot of that money has gone into the two biggest spending categories in the budget – human services (up $885 million since 2010-11) and education (up $480 million). One caveat: none of these numbers are adjusted for inflation.
2. Broad-based taxes aren’t technically going up, but you’ll still be paying more. Rhode Island’s income and sales tax rates would stay where they’ve been under Raimondo’s budget plan, as would other tax rates. But there’s still expected to be a nearly $35 million increase in how much Rhode Islanders pay in sales tax next year, thanks to a new push to get online retailers to collect the tax. To be fair, everyone was always supposed to pay sales or use tax on their online purchases – in practice, though, almost nobody does. Amazon has already said it will levy the sales tax in Rhode Island starting Feb. 1, which guarantees plenty of revenue in and of itself. State leaders want to get retailers who don’t follow Amazon’s lead to send shoppers some sort of annual notice saying how much they spent so they can pay the tax at the end of the year.
3. Smokers are being targeted for more revenue – again. Raimondo wants to raise the excise tax on a 20-pack of cigarettes by 50 cents on Aug. 1, to $4.25. The cigarette tax has been soaring over recent decades: in 1997 it was just 71 cents, but by 2004 it had risen to $2.46, and from there it climbed to $3.46 in 2009, $3.50 in 2012 and $3.75 in 2015. Officials argue raising the tax is a win-win – if people decide to quit or smoke less because of it, residents get healthier; if they just pay it, revenue goes up. Smokers probably disagree with that thinking, and others argue the rising tax rates just push sales into the black market. Also worth noting: Raimondo has earmarked $500,000 of the new cigarette revenue for anti-smoking efforts.
4. The free college plan is in there, but it isn’t paid for. Ever since Raimondo announced her proposal to offer two years of free tuition at state colleges, residents have been asking where she found the money. The short answer is, she didn’t – the state is projecting budget deficits in future years, and those would be lower without the cost of the college initiative. The exception is this 2017-18 budget plan, which includes a $10 million down payment to start the program, funded by higher-than-expected revenue already on the books. But money will have to be found to cover costs in future years; the program’s price tag is expected to be $30 million a year once it’s fully implemented starting in 2020-21. The governor’s aides say they’re confident the money will be available, noting $30 million is less than 0.5% of the state budget.
5. A cut in the car tax isn’t in there – yet. This will definitely be a bone of contention with House Speaker Nicholas Mattiello, who has repeatedly promised to eliminate the car tax over the next five years starting in this budget. Raimondo has somewhat grudgingly jumped on the cut-the-car-tax bandwagon, putting forward what she describes as a “fiscally responsible” plan to lower the tax by about $58 million and reimburse municipalities for the lost revenue. The catch: Raimondo didn’t put a dime of that money in this 2017-18 budget proposal, so her cut wouldn’t happen until July 2018. Mattiello signaled Thursday he’s still planning to find money to make good on his promise to cut the tax this calendar year. “I would suspect that the budget that the House passes, the House Finance Committee and and the House passes, will have relief for the car tax in it this year,” he said. The challenge for the speaker: not only finding roughly $40 million to start the process in this budget, but coming up with another $40 million in each of the four years after that.
6. Spending on social services is being squeezed once again. Willie Sutton supposedly said he robbed banks “because that’s where the money is.” Along the same lines, the Raimondo administration has repeatedly looked for ways to save money in the state’s multibillion-dollar budget for social services, particularly the Medicaid health program for low-income residents. The governor has trumpeted more than $100 million in Medicaid savings in her first two budgets, and now she’s seeking an additional $39 million in savings ($79 million when you include the federal share). Much of that involves freezing rates paid to hospitals, nursing homes and insurers, though Health and Human Services Secretary Elizabeth Roberts insists it’s all part of a broader effort to change how care is delivered in Rhode Island. Virginia Burke, the nursing homes’ influential lobbyist, has already expressed “extreme dismay” about the budget, calling it “a staggering blow” hot on the heels of the troubled new computer system for benefits.
7. Raimondo says she wants to shift the state’s budget priorities. That effort to hold the line on social services is part of a broader push by the governor to change where the state spends its money. Here’s how her team puts it in the budget documents: “The Raimondo administration aims to rebalance state expenditures by constraining consumption-oriented spending – for example, health care and benefits programs – and increasing investments such as education and workforce training, economic development, and infrastructure.” Or as one of her aides put it Thursday, the administration is “trying to really contain costs and invest in growth areas.” Raimondo has pushed the Medicaid reductions, as well as the 2011 pension cuts, with that overall goal in mind. Of course, there are other ways to manage the budget – progressives might suggest higher taxes so social services and Raimondo’s priorities can both have more money, while Republicans might suggest using savings from social services for tax cuts. But this is a window into why the governor’s budgets look the way they do.
8. There’s no plan in place to deal with federal funding cuts. As you may have heard, there’s a new president taking office on Friday. And President Trump will have Republican majorities in both houses of Congress to work with, the first time the GOP has had full control in Washington since 2006. Between Obamacare repeal and other policy changes they’re mulling, Republicans could implement some major changes at the federal level in the coming months – and more than $3 billion in Raimondo’s budget is paid for with federal money. But state officials are taking a wait-and-see approach rather than build any wiggle room into the budget for possible cuts. “You certainly could not address that in the budget right now without knowing what the federal government is going to do,” Speaker Mattiello said Thursday. “We will see what they do and address it as it comes.”
9. First Gentleman Andy Moffit’s pet project got funding. Raimondo’s husband is the first male gubernatorial spouse in Rhode Island history, and has found a number of ways to put his stamp on the job. One is chairing the Outdoor Recreation Council, which released a report in December suggesting various ways of “improving and promoting Rhode Island’s recreation system.” The governor’s budget proposes $2.5 million to pay for some of the council’s ideas, including grants for local programs, capital and maintenance funding, and park staffing.
10. The Rhode Island State Police colonel could lose some power. Not everything in the budget is about dollars and cents. One change the governor suggests in the budget bill is merging the R.I. Emergency Management Agency with the R.I. Department of Public Safety, and removing the Rhode Island State Police colonel as head of the Department of Public Safety in favor of a new civilian director. The proposal comes just after a changing of the guard at the top of the state police, with Ann Assumpico succeeding Steven O’Donnell as colonel.
11. The state’s future budget shortfalls are still sizable, but shrinking. This is a glass half-empty, glass half-full one. Rhode Island continues to face perennial structural deficits – that is, when forecasters look out to the future, they say spending on the programs that currently exist is going to rise faster than the revenue to pay for them. That’s the bad news. The good news is, those structural deficits now look significantly smaller than they did 12 months ago, with the estimated shortfall in 2020-21 now $193 million rather than $333 million. Why? The governor’s aides cited a few reasons – an improving economy, more revenue from online sales, and Twin River Casino’s stronger-than-expected showing against new competition. (For what it’s worth, that structural deficit would be even smaller if Raimondo wasn’t adding free college and the car tax cut to the state’s future obligations.)
12. Legislators have their own ideas on what should go in the budget. The governor’s proposal is just the starting gun in the annual budget process, which usually lasts until a final plan is signed into law around June. Though governors often get much of what they propose, legislative leaders are free to add or subtract as they please if they can make the numbers work. Will they go for free college? Or a cigarette tax hike? Speaker Mattiello will almost certainly add funding to start the car tax cut he’s promised, and he’s also said he’d like to cut the estate tax and the income tax paid by retirees. Senate President Teresa Paiva Weed has talked about the need to spend more on mental health. Let the horsetrading begin.
BONUS. It’s a $9.3-billion budget – there’s a lot more in there. The minimum wage would rise to $10.60 on Oct. 1. Care workers would receive raises of 5% to 7%. Commerce RI programs would get more, including $10 million to replenish a fund to subsidize I-195 developments. New tax breaks for manufacturers and job training would be created. There’s no 38 Studios bond payment thanks to legal settlement proceeds. Penalties for labor-law violations would rise. More than $13 million in “scoops” would come from quasi-public agency accounts. More money would go toward mental health for prisoners. Want more details? All the budget documents are here.
Ted Nesi (tnesi@wpri.com) covers politics and the economy for WPRI.com. He writes Nesi’s Notes on Saturdays and hosts Executive Suite. Follow him on Twitter, Facebook and Instagram
Caroline Goggin, Dan McGowan and Steph Machado contributed to this report.