Raimondo releases proposed $10.2B state budget

photo by Steve Klamkin WPRO News

by Jennifer McDermott, The Associated Press

PROVIDENCE, R.I. (AP) — Rhode Island’s governor released a nearly $10.2 billion state budget plan Thursday that she says closes the deficit, invests more in education and proposes to legalize recreational marijuana despite opposition from legislative leaders.

The Legislature will review the proposals and present its plan before the 2021 fiscal year begins in July.

Democratic Gov. Gina Raimondo’s spending plan is $224 million, or 2.25%, higher than the enacted budget for fiscal year 2020.

It would close an estimated $200 million deficit and invest $14.1 million to continue and expand Raimondo’s signature workforce training program. It would make the state’s free tuition program at the Community College of Rhode Island permanent. Raimondo proposed increasing the minimum wage by $1, to $11.50 per hour.

To reduce Medicaid costs, Raimondo wants to expand a state program that helps Medicaid-eligible workers afford the insurance offered by their employers. The state pays the premium, co-pays and other fees, rather than paying for these workers to be on Medicaid. The budget requires larger businesses to report health insurance benefit information, so the state can increase enrollment in the assistance program.

The administration is also looking to save money by preventing abuse of sick time policies for state workers and reducing reliance on overtime.

Raimondo wants to give her successor the power to strike individual items from the budget rather than having to veto the entire document. The line-item veto provision would take effect in January 2023, after Raimondo’s term ends.

Speaker of the House Nicholas Mattiello said in a statement: “Yet again, the Governor has presented us a budget lacking many details. I am very concerned about her proposal to generate revenue from the sale of recreational marijuana when she was advised this would not be an acceptable policy to the General Assembly. Over $20 million has been estimated, which is risky and short-sighted at best.

“Additionally, I am very concerned with the number of pervasive debt proposals which require a full vetting by the House Finance Committee.  We are disappointed at many of her suggestions, including the raising of taxes and fees, which had been previously rejected by the General Assembly.

“It’s no secret that I’m interested in maintaining the current law regarding the car tax phase-out. This is the second year in a row that the Governor has tried to tinker with the car tax. We must keep our promise we made to our constituents and taxpayers. Lastly, other local aid reductions are very troubling and will have grave consequences for some of our cities and towns.”

Here are some highlights of the Governor’s Budget:

THE DEFICIT

Raimondo proposes closing the deficit largely through new revenues and net expenditure reductions. The big-ticket item under new revenues is $21.8 million from recreational marijuana sales. The reductions include savings of more than $10 million by adding five years to the time it takes to phase out the car tax, so it’s eliminated in fiscal 2029. Continuing to phase out the car tax is a top priority for Democratic House Speaker Nicholas Mattiello, who wants to maintain the current schedule.

Fewer people are in need of public assistance due to the improving economy, which helps to further resolve the deficit, according to the administration. The administration also reduced aid to distressed communities by $6.2 million, citing the economy.

Raimondo proposed transferring nearly $32 million from quasi-public agencies.

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EDUCATION

Raimondo wants to add $31 million for K-12 education and $4.5 million to pay for an additional 750 public pre-kindergarten slots, for a total of 2,170 slots. She wants to increase the funding for students learning English and for mental health professionals in schools. Total education expenditures are up about $45 million.

Raimondo did not propose expanding the state’s free tuition program to more schools like she did last year. Instead, she proposed spending $7.2 million to continue offering the scholarship at CCRI and recommended making it permanent there. Students graduating from high school this year are currently the last eligible students.

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MARIJUANA

The budget would establish a recreational marijuana program controlled by the state, with the first stores opening in March 2021. The state would determine the locations of retail facilities, control inventory through subcontracting, establish retail pricing and limit the potency of available products — a framework the administration believes would be the strictest regulatory structure nationwide.

Democratic Senate President Dominick Ruggerio opposes legalization because he feels there are too many unresolved issues. Mattiello wanted the proposal to be considered separately from the budget, not factored into revenue considerations. He said Thursday that relying on over $20 million is “risky and short-sighted at best.”

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BALLOT INITIATIVES

The proposal includes three ballot initiatives, totaling about $269 million in spending. A $117 million higher education bond would invest in fine arts and ocean technology at the University of Rhode Island, renovate the science building at Rhode Island College and enhance student support services at CCRI.

A $87.5 million housing and infrastructure bond would fund affordable housing, help develop new business parks and make pier improvements to support the offshore wind industry. A $64 million beach and clean water bond would renovate facilities at state parks, beaches and campgrounds, and provide matching funds for clean water projects.

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HOUSING

In addition to money in the housing bond, Raimondo wants to create a permanent funding stream for affordable housing. She recommended increasing the real estate conveyance tax on sales worth more than $500,000, to add $3.6 million in 2021 and nearly $8 million annually after.

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TAXES AND FEES

The budget does not institute new broad-based taxes, but it does propose expanding the sales tax to various services to collect $14.1 million. Those services include custom computer and software design, lobbying and interior design.

The 7% state sales tax would be restored on wine and spirits, similar to how beer is taxed, but alcohol excise taxes would be reduced. That means sticker prices would be lower, but consumers will pay more on average when the sales tax is applied to wine and spirits. The tax was previously eliminated to increase sales, but the administration says that didn’t work and restoring it will generate $9.1 million. The budget also includes a 35-cent tax increase on cigarettes and codifies a ban on flavored vaping products.

Raimondo recommended increasing the state portion of the hotel tax rate from 5% to 6% and the hospital licensing fee from 5% to 6%.

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