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Read Chafee’s State of State Speech; Budget Proposal


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Below this graphic are the prepared remarks of Gov. Chafee tonight. You can read his proposed FY 2014 Budget Summary here.

Mr. Speaker, Madam President, members of the General Assembly, Congressman Langevin, fellow General Officers, members of the Judiciary, distinguished guests, and my fellow Rhode Islanders,

I am honored to join with you tonight in our beautiful State House. This building is both a symbol of Rhode Island’s proud and prosperous past and a beacon of hope reminding us that our brightest days are still ahead.

It is a pleasure and a privilege to work in this building and in this great state. Nothing could give me more satisfaction than helping to achieve progress on many fronts in Rhode Island.

Our state has gone through incredibly tough times recently. The national recession has taken its toll on our economy, our businesses, and, most dramatically, our people. Short-sighted decisions in better times left us struggling to provide the most basic services.

But Rhode Island is strong. And tonight we begin a new year with new opportunities to continue Rhode Island’s recovery.

There is a popular saying that bears repeating tonight. It goes: “Don’t tell me what your priorities are. Show me your budget, and I’ll tell you what they are.”

Well, anyone wondering what my priorities are should read the budget I respectfully submit to you tonight. It continues the path that I believe will make Rhode Island a stronger state in both the near- and long-term future.

I submit this budget to the General Assembly on January 16th – on time and the earliest that a Governor has done so in over two decades.

Thanks to good management and good decisions, we have ended the past two fiscal years with surpluses. This was achieved by able and dedicated Cabinet directors. They have worked together with common purpose to provide quality services at a rate that is mindful of the taxpayers. Thank you to these dedicated public servants in all the departments of state government.

Our revenues are exceeding projections. This is another indication that the state is being run well – being managed responsibly – and that more and more each day people and businesses are investing and spending here. We are providing certainty, predictability, and stability. And that’s what businesses demand to have the confidence to create jobs in Rhode Island.

The budget I present to you tonight contains no increase in taxes, fees, or charges of any kind. Not only are there no tax or fee increases, I also propose lowering our corporate tax from 9.0 percent to 7.0 percent over the next three years. This will put Rhode Island’s rate below that of both our neighboring states.

We have avoided tax increases and are lowering the corporate rate through both good fiscal management and a strengthening economy. As we move forward, it is important to keep investing in the building blocks of this progress – that is, investing in education, infrastructure, and workforce development.

Throughout my career in public service, I have been committed to quality public education. There is simply no more important investment we can make than in our schools and the potential of our students. My commitment to education continues with this budget.

In 2010, the General Assembly worked with Commissioner Gist on behalf of our students to pass the state’s school aid formula. In this budget, I have once again provided the resources to fully fund the formula, including all categorical aid programs. This year, that amounts to $30.3 million in additional state education aid.

I have also allocated over $14 million to support repairs at the state’s vocational education facilities.

But the state’s responsibility to our students goes beyond K-12 schools. We must also do all we can to ensure that motivated and hardworking Rhode Islanders can attain a quality college education. And we must ensure that they can do so without taking on mounting levels of debt. The biggest barriers to these goals are ever-increasing tuition rates.

Therefore, in an effort to ensure that there is no tuition increase next year at the Community College of Rhode Island, Rhode Island College, or the University of Rhode Island, I propose an increase of $6 million for higher education.

However, the leadership of these institutions must meet me halfway. If they can achieve $6 million in total savings and efficiencies, coupled with my $6 million in additional funding, we can guarantee the students of these schools no tuition increase next year.

When you pass this budget, we will have invested $115 million in public K-12 and higher education in Rhode Island over the past three years.

It also is important to bear in mind that Rhode Islanders looking for work need to be ready not only for today’s economy, but for the economy of tomorrow. And Rhode Island employers looking to hire or expand need to have confidence that there will be qualified candidates to fill available positions. Therefore, I propose $3 million in new state support for workforce development initiatives.

I also want to applaud the good work of the Governor’s Workforce Board for all the volunteer time and effort they have given toward the betterment of our economy.

Many studies show that you can’t build a good economy without good infrastructure. Rhode Island is the second-most densely populated state and one of the most heavily traveled, all in a coastal salt air environment – and our infrastructure takes a beating. Maintenance of our roads and bridges is critical. Make no mistake: strengthening our infrastructure is an integral part of improving our economic competitiveness.

With this in mind, the budget I submit to you includes a number of strategic infrastructure investments. These have the dual benefit of strengthening our economic climate while putting Rhode Islanders back to work now. I have included a proposal to advance over $11 million in pay-as-you-go funding for already approved projects that can start immediately. This is a smart opportunity to get the trades back to work as soon as possible and improve the condition of our infrastructure.

Being more proactive about routine repairs and maintenance will also help us avoid costly replacement projects in the future. Unfortunately, we have seen a number of these in recent years, including the Sakonnet River Bridge. They have cost the taxpayers significantly and have forced hard decisions to be made. I do not want to have to rebuild another bridge because of lack of proper maintenance. This is not going to happen as long as I am Governor. We must invest in our infrastructure.

I am pleased to note that my Administration has also taken historic steps to reform how we finance our transportation system.

For the first time in memory, this past November voters did not have to approve a bond referendum to support transportation costs. We will no longer borrow to provide our state match for our federal highway dollars. This means that our valuable resources can be put toward important repair and improvement projects – not interest on the debt. Again, this is good fiscal management.

Although we didn’t bond for transportation funds, I am pleased that a number of important bond items were approved by an overwhelming majority of voters this past November. These initiatives will boost our economy by investing in some of Rhode Island’s premier assets, such as our environment, our institutions of higher education, and veterans’ services.

Thank you, Rhode Islanders, for your strong confidence in this Administration’s ability to wisely manage these projects worth over $200 million. Not only will we manage them well, we will get construction workers on the job as soon as possible.

I also want to accelerate the economic activity in Providence’s Knowledge District. To that end, I propose an additional $500,000 to enhance the operations of the 195 Redevelopment Commission. You have heard me talk before about the importance of the medical, research, and education fields – the ‘meds and eds.’ We must continue to focus on these assets to grow our economy and create jobs.

This past year saw another strong tourism season, highlighted by the return of America’s Cup racing to Newport and the Netroots Nation conference in Providence – among others.

To ensure that tourism and hospitality remain a strong sector of our economy and that we continue attracting visitors to Rhode Island, I recommend bolstering the state’s tourism marketing efforts with an additional $600,000.

As a former local official, I have worked in my time as Governor to make property tax relief a key priority of my Administration. I may sound like a broken record at this point, but in the years before I took office, cities and towns bore the brunt of the downturn in state revenues. Those most severely affected were the distressed communities that could least afford it.

I am generally skeptical of the myriad rankings and reports that place Rhode Island at the bottom of the barrel in terms of business climate. Many of them fail to take into account important factors, and many compare apples to oranges.

But here are some facts, from a report that compares apples to apples. The Department of Revenue studied the tax burden on Rhode Island businesses compared to other states.

Rhode Island ranks 26th in the burden of state taxes on businesses. We’re in the middle nationally with our sales and income taxes. In this same study, we rank 41st – near the bottom – in terms of local taxation borne by businesses. That is, the property tax.

While everyone likes to talk about onerous tax rates at the state level, the property tax is the real major barrier to economic growth – particularly on small businesses.

With that in mind, I will continue to work with the cities and towns for property tax relief.

How will we do it? On top of the $41 million in local aid contained in my previous two budgets, this year I recommend an additional $30 million for property tax relief. This is divided between $20 million in additional aid to our cities and towns – with particular attention to distressed communities – and $10 million in RICAP funds for local roads and streetscapes.

To further help our cities and towns, I also propose modifying the historic tax credit program by providing access to abandoned tax credits.

Failure to support these initiatives will only drive Rhode Island further down on the chart that matters most to our economic climate – the burden of local taxes borne by businesses. Our state as a whole cannot be successful without the financial health of our cities and towns. We’re going to continue encouraging local prosperity by supporting our municipalities.

You have heard me talk a lot tonight about Rhode Island’s economy. This is because, with a stronger economy and more Rhode Islanders working, all of our other challenges become more manageable.

But in order to do my job as Governor – for us to do our job as elected officials – we must care for the most vulnerable among us.

Each budget brings with it difficult decisions. That has been the case once again this year, as we worked to close the deficit. But it is my hope, as in years past, that if the May numbers upon which you, the General Assembly, will base your budget, come in stronger than the numbers on which I base mine, you will be able to undo some of these tough choices.

I also anticipate criticism about my decision to lower the corporate tax rate while there is a strain on social services. I would not make this recommendation if I did not truly believe that in the long run it will result in a stronger economy, more Rhode Islanders working, and fewer of our citizens in need of state support.

Our ultimate goal is always to get our people back to work and to give those who rely on social services a hand up, where possible, to financial independence. And again, hopefully May revenue numbers will provide better options.

Throughout my time in public service, whether as Mayor, United States Senator, or Governor, my whole agenda has been based on thinking not only about today, but about the long-term. I am always considering how the decisions we make today will influence Rhode Island years down the road.

We want to have a state where there are jobs and opportunities for our children and their children. They deserve to be able to stay in the state they love – a state with good roads and bridges, high-quality schools, clean water, protected open spaces, and a secure safety net.

Governing a state is not about quick gains that draw headlines. It’s about positioning Rhode Island for lasting success and prosperity.

Everyone likes accountability. And the best way to measure our progress is through tracking certain metrics.

The results indicate that we are moving steadily in the right direction.

Two years ago, when I was sworn in as Governor, Rhode Island was facing a $295 million deficit.

Our unemployment rate was 11.4%.

We had lost 40,000 jobs in the previous four years.

Many cities and towns were on the verge of collapse – most notably Central Falls.

We had sustained years of cuts to higher education and inadequate K-12 funding.

And our state workforce was demoralized.

A gloomy cloud of negativity gathered over our state.

It takes time for the sun to break through, but it is. Two years later, unemployment is heading in the right direction – still unacceptably high, but improving.

We are tackling our deficits.

Central Falls has been called a national model for emerging stronger from Chapter 9.

The Station District in Warwick is ready to realize its potential with the runway expansion and the arrival of JetBlue.

We are investing in our schools and in our students.

Things are getting better, and we must build on this momentum to continue our recovery.

I know that tomorrow the House of Representatives will be holding an economic summit. This follows an ongoing discussion that has occurred over the past year about how best to improve Rhode Island’s economy.

My hope is that you all will be skeptical and wary of deviating from the steady, methodical construction of a Rhode Island economy built for today and for the future. We tried the “get rich quick” approach by giving $75 million to a retired baseball player with zero business experience. We cannot make such panic-driven decisions again.

In addition to offering us an opportunity to look ahead, the State of the State reminds us to reflect and to learn from the year we have just completed.

Perhaps the darkest moment of the past year came just before its end. On December 14, just over one month ago, a troubled young man took the lives of 27 innocent victims – 20 elementary school students, 6 teachers and administrators, and his own mother. This tragedy happened in our neighboring state of Connecticut, in a community similar to so many in Rhode Island. It was the latest in a series of mass shootings that occurred this past year.

We should not need this reminder, but we have been given it. While respecting the rights of hunters and responsible gun owners, we could – and should – do more to prevent senseless acts of violence. That is why, in the current General Assembly session, I will join with the leaders of the House and Senate to craft, introduce, and pass legislation that makes Rhode Island a safer place both for us and our children.

Despite this horrific chapter, 2012 did have its positives. I am grateful that our state did not have the extensive damage and loss of life that Hurricane Sandy brought to other Northeastern states.

I want to thank all those who came together to get Rhode Island through the storm safely. This includes hardworking state and municipal employees, National Grid, the Red Cross and the United Way, and the many volunteers who pitched in to help their fellow Rhode Islanders.

I am also grateful to the Obama Administration for the millions of dollars in federal aid to help us recover, repair, and rebuild.

Looking ahead to our agenda for the year we have just begun, we in this room will have an opportunity to enact historic legislation. In this climate of intense economic competition, as we work to attract the best and brightest, we are currently at an economic disadvantage with our neighbors. For our economic development, for civil rights, and for basic fairness, we must extend the rights and benefits of marriage to all Rhode Islanders.

Let’s come together to pass marriage equality.

Rhode Island has a long legacy of tolerance and diversity. For centuries, new Americans have made this state strong. To uphold this legacy, in the coming weeks I will announce efforts to bring greater diversity to our state workforce.

We will also keep moving forward with the development of the Health Benefits Exchange, which will make healthcare more affordable for individuals and employers. This is an area where I am proud to say that Rhode Island continues to lead the way.

Finally, with so many Rhode Islanders returning home from foreign deployments, we will continue make it a priority to support military service members and their families – both during and after their service.

Mr. Speaker, Madam President, members of the General Assembly – my priorities are reflected in this budget. And your priorities will be demonstrated in the action you take in the coming months. The steps we have taken over the past several years, the changes we have made, are working. Rhode Island is working.

To summarize: in this budget, we are investing in education. We are investing in infrastructure. We are investing in workforce development. We are investing in our cities and towns and property tax relief.

And we’re doing it all without raising taxes or fees of any kind – and while lowering the corporate tax.

My fellow Rhode Islanders, the state of our state is steadily improving. I am eager to join with you to continue moving with purpose and vision toward our shared goal: a brighter future for our great state.

Thank you.

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Privatization of Higher Ed Violates State Constitution


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As reported  here and here, the University of Rhode Island has spent close to $500,000 on repairs of its president’s tuition-funded home, which is among the fringe benefits that come with the president’s job, such as a car, an expense account, and club dues.

Excessive administrative spending is but one of many results of nationwide privatization of public education.  Particularly distressing in this context is the root cause of this development, namely the decline of the fraction of the URI budget that comes from the Rhode Island general revenue, a percentage that has dropped from 60% in the 1950s to less than 10% currently.

Privatization has resulted in an explosive increase in tuition.  As documented in Trends in College Pricing 2012, a College Board publication, inflation-adjusted tuition and fees have increased by more than 350% since the early 1980s. Excessive spending on presidential perks, in particular at URI, typifies a litany of deplorable policy decisions that coddle university and college administrators at the expense of public education.  Recent examples are:

  • URI’s previous president got a 14 percent raise in 2008-09.
  • The previous president cashed in with a retirement incentive of 40 percent of the $183,000 “faculty” salary he earned after his resignation as president ot the university, a salary which happens to roughly 80 percent higher than full professor faculty salaries.
  •  URI’s current president started his tenure at a salary about 25 percent above what his predecessor ever made.
  • A study performed for the American Association of University Professors found that between 2004 and 2010 spending on instruction and academic support at URI declined by 10 percent; while spending on administration increased by 25 percent.

In spite of all of these excesses and skewed priorities, the almost defunct Board of Governors of Higher Education routinely justifies the tuition hikes and administrative bloat it authorizes by claiming concern for quality education.  Of course, the ultimate responsibility for the neglect of public education rests with the Rhode Island legislature.  The legislature and its serial enablers of the Board of Governors for Higher Education, which is tasked with oversight of public higher education, are duty bound to uphold the Rhode Island Constitution and pertinent statutes.  Their collective failure in this respect is monumental. As Sections I and IV of Article 12 of the Rhode Island Constitution state:

  • […] it shall be the duty of the general assembly to promote public schools and public libraries, and to adopt all means which it may deem necessary and proper to secure to the people the advantages and opportunities of education and public library services.
  • The general assembly shall make all necessary provisions by law for carrying this article into effect. It shall not divert said money or fund from the aforesaid uses, nor borrow, appropriate, or use the same, or any part thereof, for any other purpose, under any pretence whatsoever.

 Title XVI [of the Rhode Island General Laws] adds:

  •  […] the purpose of continuing and maintaining the University of Rhode Island […] in order to promote the liberal and practical education of the industrial classes in the pursuit and the professions of life […]

Privatization is sold as if it provides better services at a lower cost to the taxpayer, but the real costs to Rhode Island and its citizens are hidden.  In education, chief among those hidden costs are increased tuition and interest on student loans, which exclusively benefits moneylenders.  The examples listed above are just a small sample of the many symptoms that characterize a society unable to keep in check the predatory impulses of a small minority.

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Welfare Program Stat More Misleading than Wrong


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The State House in late November. (Photo by Bob Plain)

Good for Politifact for calling foul on Rep. Patricia Morgan’s misuse of the old talking point that welfare programs account for more than 40 percent of the state budget.

First of all, her numbers were flat our wrong. As Politifact points out, her definition of welfare programs is quite broad. It includes “such spending as Federal Emergency Management Agency payments for storm cleanups as well as the legislative grants representatives and senators give out to such groups as Little League teams in their districts.”

The actual number, argues the ProJo, is 31 percent. Still, the paper of record decides to award her a half-true.

Fair enough, given that Linda Katz, executive director of the Economic Progress Institute, agrees with the number. But, watch this video to learn what programs are actually behind that number, who is actually fitting the bill and what some of the consequences would be of cuts to these programs.

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Want an Efficient Historic Tax Credit? Raise Taxes


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State House Dome from North Main Street
State House Dome from North Main Street
The State House dome from North Main Street. (Photo by Bob Plain)

As the maneuvering in advance of the next legislative session gets into gear, we keep hearing that the state’s historic structures tax credit is to be revived.

To recap: for several years, Rhode Island had a tax credit available for developers who restored historic buildings.  It was essentially a subsidy for 30% of the cost of the project.  In a variety of ways it was a decent program, with low overhead to administer, and the subsidies went to a variety of worthwhile projects, mostly in the cities that need it.  Some of the projects were a bit too gentrifying, and I regret that the credits didn’t come with strings to insure better wages for the people who work on them, but it was, for several years, the most effective affordable housing program in the state.

The downside, though, was big.  Because the program was available to any qualifying project, it was impossible for the state to budget for it.  The credit was much more popular than budget-writers anticipated, and this made not only a big hole in the budget, but an unpredictable one.  When the program was closed in 2008, there were around $300 million of credits outstanding, waiting to be cashed in for lower tax bills.

It made sense at the time to float a bond to make the redemption of the credits a bit more predictable, so the state borrowed to create a trust fund to make payments to the people who held the credits.

However, there is another down side to our tax credits.  When the state gives a $5 million tax credit to some project, the project only receives around $4 million or less.  The rest is shared between some tax credit broker (Michael Corso has become a famous one for his involvement with 38 Studios) and a business or rich person who wants to lower their tax bill.  That is, less than 80% of the face value of the tax credit goes to the public purpose to which the credits are supposed to be devoted, and the other 20% is for a benefit that goes directly to the richest citizens of our state.  Being a perfect example of government overpaying (by a lot) for a service, one might think this the very definition of “government waste,” but somehow the label never seems to be applied there by the fiscal watchdogs.

Contrast this to federal tax credits, where it is usually more than 95% of the credit that goes to the stated purpose.  Federal taxes are higher than Rhode Island taxes, so credits against those tax bills are worth more than credits against a state tax bill.  So one way to increase the efficiency of state tax credits would just be to raise the state business and personal income taxes on the top end by a lot.  Yes, I know, that’s just my little joke, but with the recent “reforms” of the tax rates, prices for state tax credits are going to be even lower than they were in 2008, when they were 80 cents on the dollar or less.

Here’s the bottom line: credits against state taxes are a great way to waste a ton of money and create unpredictable budget costs.  The projects that the tax credit funds are worthwhile, but if they are to be subsidized they should be funded by grants, with a set annual budget and rules to demand that projects pay at least a living wage to their contractors.  As they were constituted, they did useful work, but also served as a giveaway to wealthy insiders who don’t need your tax dollars to live a life of ease.

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RI’s Gambling Addiction: Vote No on Questions 1, 2


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Every couple of years someone in RI has the same brainstorm: “Let’s balance the budget by increasing state gambling revenue!” There is often some time-critical imperative requiring that we do it immediately if not sooner. This election cycle it’s the threat/certainty of gambling casinos going up across the border in Massachusetts: our addicted gamblers will be drawn away from RI’s gambling dens to wager away their family’s resources, thereby causing RI state to lose revenue. RI’s solution, being voted on in ballot referenda 1 and 2, is to add table games to both Newport Grand and Twin River.

Rhode Island’s greater and greater dependence on gambling income has arisen because of the myth that gambling has no victims, because supposedly increasing revenue via gambling will not raise taxes, and because raising taxes in the open is anathema to the General Assembly. And forget about lowering spending. Supporting gambling seems the easy way out of the annual budget-setting crisis, but it is not only immoral (it amounts to a regressive tax on the poor, uneducated and minorities), it’s also really dumb.

In-depth studies have estimated that the economic costs of gambling exceed the benefits by three-to-one; also see: Gambling Economics: Summary Facts. That is, for every new dollar of revenue three new dollars of costs arise. This does not include the immeasurable emotional tragedies of broken families, bankruptcy, suicide, etc. that can result from problem or pathological gambling.

Investing in Fool’s Gold

Proponents point out that gambling is the third largest source of income to the state, so we can’t possibly get rid of it or have it threatened by competition from Massachusetts. However, it (so far) “only” composes 10% of state revenue.

There has been the implication that the new RI gambling facilities will make up for a possible loss in business due to the new MA casinos. In order to examine this, the state arranged for a gambling impact study (January, 2012) of the forthcoming presence of gambling facilities in Massachusetts on gambling revenue to RI. However, the report shows that adding table games in RI will NOT make up completely for the lost revenue, in fact far from it. WITHOUT table games (the current situation) Gross Gambling Revenue to the state will decrease by $75M after the new Massachusetts casinos are established. WITH table games (if the referenda pass) the GGR will STILL decrease and by about the same amount: $59M. That is, adding table games will likely only save the state $16M annually on a roughly $8B budget (0.2%). Is this really worth the costs? NO.

The gambling income to the state discussed in the gambling impact study consists of only the raw revenue increase to the state, that is, there are only economic positives.  It makes NO mention of either economic or moral negatives, let alone does it try to measure them.  Of course, the human costs are incalculable.

However, a whopping percentage (perhaps 300%, as noted above) of any state’s revenue from gambling goes right out the door again in the economic costs of crime, broken marriages, abused children, etc. Thus the supposed increased revenue from gambling is just fool’s gold. In fact, what we should really do is eliminate all gambling in the state. We would save a bundle.

By supporting gambling and using it as a major source of revenue the state effectively imposes a (another) regressive tax on poor and lower-income residents. These people are the ones most likely to gamble and least able to afford it. They provide the supposed extra state revenue needed to balance the budget every year, not the well-off. Therefore the better-off residents are not paying their fair share of state taxes.

Let’s take a look at another supposed benefit of the added table games, in particular focusing on Twin River. The claim is that the expansion adds many jobs. This is a mirage. The new casino income arises both from the ‘entertainment’ of gambling and from increased patronage of on-premises restaurants and other onsite businesses. But all of this decreases the business to existing restaurants, theaters, and other independent businesses outside of the casino, and possibly far from it, which eliminates existing jobs. (Example:  In Atlantic City in 1978, just before casinos opened, there were 311 local taverns and restaurants.  19 years later there were 66.) Further, the casino jobs are low-quality, truly dead-end and low-status. Do parents brag about “our son, the croupier”?

On the Addicted Gambler

Gambling addiction is real. Problem gamblers make up about 0.5-2% of the population, nationally. (RI’s figures are similar to those of the whole country.) The percentage increases substantially the closer a gambler lives to a casino, particularly within 50 miles of a casino. This is the entire state of Rhode Island!

Like other forms of addiction, gambling addiction affects more people than just the gambler. It is estimated that typically 5-10 other people around him/her are also negatively affected. Therefore roughly 2.5-20% of the population is adversely affected by gambling (this does not even include the increased proportion arising from the closeness of the casinos). In RI that works out to be 25,000 to 200,000 people, perhaps a fifth of the state at the high end.

An addicted gambler is often 10’s of thousands of dollars in debt; he and his family are often financially ruined. Counseling is available to treat gambling addiction, and may be partially state-supported again in the future via the referenda. But providing counseling is like a drunk driver offering an accident victim with paralysis a wheelchair to make it right; it just doesn’t, the damage has been done, and there’s no way to reverse it.

Counseling doesn’t help everyone, and not necessarily permanently, as is the case with treatment of other addictions. In a study done right here in RI Dr. Robert Breen of Rhode Island Hospital found that eight weeks after intensive treatment, while many subjects had been helped, 28% of them had returned to gambling. That’s only eight weeks! Longer-term recidivism rates are unclear, but presumably are worse. So for many gamblers and their families, again, there is no going back. Further, the counseling and other social services for affected families can be a substantial monetary cost to the state.

Summing It Up

The humanitarian cost in shattered lives and families from gambling addiction is unacceptable. The economic impact is negative. There is no gain anywhere, only loss. Only one course of action is justifiable: VOTE ‘NO’ on Referenda Questions 1 and 2.

 

____________________________________

These are my personal opinions. I have no affiliation with pro- or anti-gambling organizations and have no financial interest in Amazon.com.

Many thanks to Laurette for one heck of a lot of help with this!

 

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Legislature Wanted to Force Cities to Cut Taxes


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June in Rhode Island means two things: ripe strawberries and gubernatorial vetos.

The silly way our legislature schedules things — with all important bills held until after the budget passes to ensure every legislator falls into line on that vote — means that hundreds of bills are passed in the last few days of the legislative session. This then means they all await the Governor’s signature after the session ends. And some of them get a veto instead.

My favorite veto so far this year was of a bill that would provide a tax break… at someone else’s expense. Sponsored by Representative John McCauley (D-Providence) in the House, and Senators Michael McCaffrey (D-Warwick) and Erin Lynch (D-Warwick) in the Senate, the bill would exempt from the property tax any new construction before it was issued a certificate of occupancy.

The collapse of the housing bubble has meant a real collapse in construction employment. Unemployment among construction workers is almost certainly much higher than the already way-too-high general rate lurking around 11%. It’s natural to think that the industry could use some help. But is it natural to demand that someone else provide it?

Essentially what this bill’s sponsors hoped would happen is to stimulate the construction industry by giving developers a break on property taxes collected by a city or town. One can applaud the motivation while still thinking that the concept is pretty weak.

First of all, it’s not at all clear that this would have a stimulative effect. How many developers are dissuaded from investing by the potential risk of having to pay taxes on property before it’s occupiable?  Might not the lack of buyers be a bigger disincentive?

Second, how dare these legislators pile on to the cities and towns? This is a bill that would actually take tax revenue away from many municipalities. Do they not read the news?  Are they not aware that we now have three cities in financial trouble, with more on the precipice?  In what way exactly would this help those cities?

To be honest, this is hardly that unusual. After all, it’s almost traditional in the General Assembly to ignore or hide the cost of tax cuts. I can’t think of a single substantial tax cut over the past 20 years that passed the Assembly with offsetting cuts to services. In fact, the tradition is not only to avoid paying for tax cuts, but to vote to phase them in over several years so the real costs are hidden during the budget year they are debated. This was true of the 1997 income tax cut, the 1997 car-tax cut, the 2006 flat-tax cut, and the 2001 capital gains cut, which didn’t even take effect until five years after it passed.

So does this mean unemployed construction workers are out of luck? Probably it does, but not because there is nothing to be done. They are out of luck because the people who can do something choose not to. The General Assembly leadership feels that keeping state revenue down is more important than helping cities and towns. Three years ago municipal budgets across the state were vandalized when the state withheld part of that fiscal year’s state aid payment. Then they did it again the next year, and the next. Between fiscal year 2008 and 2010, the state withheld what amounted to about 10% of Providence’s non-school budget, and millions more for each other municipality.

Admittedly, the state saw its own revenues plunge in 2008, as the income and sales taxes both skidded down in the recession, accelerated by big tax cuts for rich people during each of the years 2007-2011. But the recession and the cuts are over, and revenue in the current fiscal year looks like it will end well ahead of last year’s projections. You might think that would allow us to restore the tax cuts and thereby restore the municipal aid cuts of the previous years, but apparently not. Or you might think we could engage in some small local stimulus, perhaps by accelerating the scheduled repairs of our bridges, maintenance of state buildings, or maybe even re-hiring a few hundred teachers. Nope. Tax cuts are still the only thing on the menu at the state house.

So bravo for Governor Chafee. Bills like this deserve a veto and the legislators behind them deserve to be shamed.

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Pension Lawsuit Primer


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On Friday, the long-anticipated lawsuits against the 2011 Rhode Island Retirement Security Act (the pension changes passed by the Rhode Island General Assembly and signed by Governor Chafee last fall) were filed on behalf of those impacted by the changes. We believe that the State of Rhode Island has a legal and a moral obligation to the active and retired teacher, state and municipal workers. This article will outline the background, thinking and rationale behind the legal arguments that will be pursued.

The basic legal argument included three counts that assert that the state violated the Rhode Island Constitution by contravening contract rights, due process rights, and the takings clause (relating to property rights) of some or all vested employees and retirees.

While it is possible the various lawsuits will be consolidated, for legal procedural reasons there are currently three lawsuits involving the rights of vested active employees, represented by a coalition of unions including the National Education Association Rhode Island, RI AFSCME Council 94, RI Federation of Teachers and Health Professionals, Laborers’ International, National Association of Government Employees, and the International Brotherhood of Police Officers, among others, and several attorneys.
A lawsuit covering retirees was filed separately at the same time, and falls under the umbrella of the RI Public Employees’ Retiree Coalition, a group formed by the retired groups from NEARI, RI AFSCME-Council 94, RIFTHP, RI Retired Teachers Association, RI Association of Retired Principals, RI Laborers’ Retiree Council and other retirees.

The lawsuits requested an immediate temporary restraining order to stop the implementation of last fall’s changes to the state, municipal, and teacher retirement systems, which was denied, but the court did set a speedy trial date later this summer.
While we expect the lawsuit(s) at the Superior Court level to take several months, and with expected appeals even longer, the basic legal arguments can be summarized in a few key legal questions.

The first question is whether the pension benefits are contractual in nature. To date, the courts have suggested that they are, and folks covered by pensions in the state run Municipal Employee Retirement System may even remember negotiating for the specific plan that covers them. Even the benefits that are statutory in nature, such as those for teachers and state employees, should be found to meet the elements of a contractual relationship.

The next question has two parts – did the changes in the law impair the contract that a pension represents, and if so, was the impairment substantial? We believe that these are easy questions for the courts to answer in the affirmative – significant diminishment in COLA’s, benefits, formulas, and age of retirement should easily clear the “substantial impairment of benefits” standard.

The final question is where we expect the lawsuits to be grounded – and to be won by the active and retired members. Even if there is a contract, and even if the contract was substantially impaired, did the impairment serve a greater government purpose? The key subsidiary question to be answered under the “greater government purpose” standard is whether more reasonable options were available.

We believe that there were many more reasonable options available that could have significantly reduced the devastating impact the pension changes had on so many active and retired teachers, state and municipal workers. If the Court finds that there were more reasonable options not entertained and undertaken, then the State will not prevail in defending the pension changes.

The questions on reasonableness cover several areas, some in arcane areas that expert testimony will cover. They may include whether the updated mortality data used to calculate pension liabilities went too far; whether the reduction in the expected rate of return of the pension portfolio assumed too low of a rate of return; why no new revenue from the state was included to offset the potential increased costs incurred when the aforementioned changes were made to the mortality and rate of return assumptions; how the projections related to the new defined contribution portion of the new retirement plan were calculated; the decision of when COLA’s should be restored and at what level; the potential disparate impact of the changes on lower and higher paid workers and retirees; the potential disparate impact on workers with longer and shorter terms of service; the potential disparate impact on Social Security recipients and non-Social Security recipients, etc., etc.

Or, perhaps more simply, how can Rhode Island consider honoring the “moral obligation” related to the bonds issued for the now bankrupt 38 Studios before they honor the legal and moral obligations to retired and active state and municipal workers and teachers?

The intent of the above in not to argue the entire legal case in this article, but to point out that there is much room to conclude that Rhode Island elected leaders left many more reasonable options on the table. And that conclusion means that the changes made to the pension system do not stand up to legal scrutiny. Perhaps that is why the City of Providence, faced with a similar set of facts, chose to negotiate with the parties involved. Perhaps the State of Rhode Island should have negotiated with the unions in the first place. Perhaps they still should.

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Sewage Treatment Gets Legislative Treatment


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State House Dome from North Main Street
State House Dome from North Main Street
The State House dome from North Main Street. (Photo by Bob Plain)

In the waning days of the legislative session, can one be forgiven for suspecting that Assembly members don’t give a, well how about a quart of  sewage solids about the municipal governments they represent?  Sewage stories from Woonsocket and Warwick lead one to suspect otherwise.

Woonsocket first. Woonsocket is currently under a DEM order to drive nutrient pollution down beginning in 2013. Nutrient pollution, in the form of nitrates and ammonia, acts as fertilizer for algae blooms that use up oxygen in the water, killing the fish that aren’t driven away. The estimated cost of these improvements is around $35 million.  The system serves Woonsocket, but also some customers in neighboring towns, on either side of the border with Massachusetts.  The estimate is that this will add a couple of hundred dollars to annual sewer bills.

Woonsocket’s now-infamous House delegation, Jon Brien, Robert Phillips, and Lisa Baldelli-Hunt, tried to get the DEM requirement killed during the last legislative session. Unfortunately, DEM is only enforcing a federal EPA requirement, so it’s more complicated than just yelling, “stop.”

Complicating the issue, upstream from Woonsocket, the sewage authority over the line in Massachusetts is suing the EPA over the same rules. The dodge currently preferred by the city of Woonsocket and their House delegation is that Rhode Island wait for the outcome of that suit. Though it might seem to make sense to wait for the suit to settle, similar suits around the country have failed. Besides, clean water is — to most people — a good thing. Might the delegation have proposed helping Woonsocket pay for the sewage treatment upgrades?

Move now to Warwick. The Assembly repealed a law to mandate that homeowners along the new sewer routes hook their houses up to those sewers.  A typical hookup costs $1500-2000, and annual sewer bills are around $450. The mandate is/was part of the Greenwich Bay Special Area Management Plan, a plan to clean Greenwich Bay, once home to a thriving shellfish fishery, and now mostly closed to digging clams.

Governor Chafee vetoed the bill and the Assembly overrode his veto. Another victory for low sewer bills. Except that the finances of the Warwick Sewer Authority have budgeted in a certain number of hookups per year. This is part of how they borrowed the money to fund the expansion in the first place, and how they make their budget each year. Without those new hookups, the people already connected to the sewer will see their rates rise, both according to the financial statements, and to Janine Burke, the Warwick Sewer Authority director, who I spoke to about it.

Alternatively, the Authority has the legal authorization to charge a fee — a “connect-capable” fee of around $200 per year — to the houses along its route that aren’t hooked up. To date it has chosen not to do so (which puts it out of compliance with the Greenwich Bay plan), but it can revisit the issue. At any rate, overriding that veto in order to keep sewer costs down seems like it may be a losing strategy.

What both of these stories say is that the state is interested in seeing cleaner water. The Assembly gave no orders that DEM repudiate the EPA requirements. No one will go on record wanting dirty water and dead fish. They just don’t want to pay for the cleanup.

To a small extent, you have to give the Woonsocket gang of three a little credit for consistency. They don’t think cleaner water is worth spending any money on, and so reject both the money and the requirements, even if they offer lip service to clean water. Lisa Baldelli-Hunt told the Woonsocket Patch:

“I understand it’s important to decrease the pollutants in the water and I also understand that eventually, this must happen. But we can’t possibly move forward with this project at this time and consider ourselves fiscally responsible leaders.”

So their position is clean water, later. The rest of the Assembly seems ok with the idea of clean water now, so long as someone else pays for it. Neither perspective seems worth endorsing to me.

What about the perspective that clean water now is a good thing worth paying for?  It’s a good thing for Woonsocket, but it’s also a good thing for everyone downstream, which means Lincoln, Cumberland, Pawtucket, Central Falls, Providence, and everyone on Narragansett Bay. Untreated sewage currently flows into the water from the Warwick shore, but East Greenwich benefits from a cleaner Greenwich Bay, too. Given all that, why should the state insist that all sewage problems be solved locally?  Yes, Woonsocket residents pay higher property taxes proportional to their ability than nearly any other city or town in the state.  Sewer customers in Providence and Pawtucket have seen their rates climb dramatically in recent years for the same reasons.  Does the state have nothing to offer besides words? How about money?

Let’s end with a riddle. In 2010, our state’s economy, measured by the gross state product, was about $49.2 billion dollars. Corrected for inflation, this is larger than it has ever been in our little state’s history, despite our monumental unemployment rate. There are those who say that our economic growth is because of the dramatic drop in tax revenue over the past decades. That’s silly because growth has slowed or stalled as taxes have been cut. But slow growth or fast, the economy now is bigger than ever.

So remember, when you hear about how we can no longer afford clean water or good education or comfortable retirements — let alone find enough jobs for everyone — that our state is collectively richer now than it has ever been before. Ever. Feel better now?

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Layoffs Could Cause Crisis for Unemployed Rhode Islanders


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Recently, the DLT has been informed of an unprecedented reduction in workforce. Up to sixty-nine employees are scheduled to lose their jobs on July 28th, 70 percent of these are to come from the Unemployment Insurance sector. The irony of going from working to serve unemployed citizens in their time of need, to being one of those in need of such assistance is not lost on us. This layoff is guaranteed to significantly decrease the department’s ability to provide the necessary level of customer service.

The bottom line is this: Rhode Island’s employment situation is not improving quickly and this mass layoff of frontline workers is going make more acute the pain unemployed Rhode Islanders are already feeling.
At 11% unemployment Rhode Island already has the second highest jobless rate in the country. The Rhode Island Department of Labor & Training provides that assistance with its divisions of Income Support and Workforce Development for the approximately 62,000 Rhode Islanders out of work.

At its current staffing levels, DLT is already it struggling to keep up with the demand for services. I know this because I work as a Senior Employment & Training Interviewer with Unemployment Insurance. I am one of the many representatives that work hard to ensure fair and timely processing of payments within the increasingly complex system of jobless benefits.

The cutback in staff will exponentially delay benefits payments to those facing extreme hardship. It will hold back dollars from flowing into economically starved local economies. Entire specialized sectors of benefits specialists could be eliminated, including but not limited to the already challenged office dedicated to processing military claims. This will lead to extremely long delays in benefits to those men and women in uniform, returning from service. Our veterans have honorably served our country and are owed the highest quality of service the state can provide.

Finally, the State of Rhode Island is a direct reimbursable employer. This means that they are responsible to pay the employees that they lay off dollar for dollar when these employees file for Unemployment Insurance. This burden falls ultimately to the taxpayer. Therefore, Rhode Island’s taxpayers will be on the hook for upwards of one million dollars in benefits paid out to laid off DLT staff to perform no services to Rhode Island citizens. This estimation does not include subsidizing health insurance for the out of work employees and their families. I know, personally, my wife and infant daughter will be forced to seek public assistance to help pay the high costs of staying insured.

Is there a solution? I think so. The state of Rhode Island needs to create a plan to find and allocate funds to maintain appropriate staff levels at the DLT. When a house is on fire one does not take the firefighter’s hose and replace it with a watering can. Rhode Island is our house and it is burning. Rather than reducing the economic stream that can help contain this fire and eventually extinguish the blaze, the state needs to locate the funds and allow them to flow to where the fire burns brightest: the people who need it most.

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Legislature Ignores Public Transit in Budget


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Who cares about buses? Apparently no one on Smith Hill.

The House Budget, to be voted on Thursday, contains not a penny in new revenue for RIPTA. It also contains no ideas, proposals, or signs that anyone in the House Fiscal staff spent more than a dozen minutes thinking about the agency. This is hardly surprising, since the Governor’s budget didn’t have anything to say about it, either. Despite several years of a funding crisis, RIPTA still struggles to get anyone’s attention.

This, of course, is also hardly surprising. No one in a position of authority actually rides the bus. The Governor doesn’t, the Speaker doesn’t, the Senate President doesn’t, even though the service from Newport to Providence is excellent, with over 60 buses traveling back and forth every day. There aren’t even any members of the RIPTA board who are regular bus riders, besides Anna Liebenow, who has MS and uses a wheelchair. Two current board members have told me they made a point to get on the bus once or twice after their appointment, but that’s not quite the same thing, is it?

This isn’t to say that no one rides the bus. RIPTA provided 26 million rides last year, which works out to serving between twenty and fifty thousand people every day. Over half of them are riding to and from work (like me). Lots of them own cars, which they leave at home to leave more room on the highway and more parking spaces for you.

And, of course, lots of them don’t own cars, or can’t drive, and the bus is their lifeline, the way they get around this state. But who cares about them?  In the halls of the state house, RIPTA is widely viewed as a program for poor people. Consequently it is a poor system, and it’s therefore socially acceptable in that world to ignore it. There are a couple of seats on its board designated for people who represent either poor people or disabled ones, and that’s pretty much that.

The House budget does provide for some capital investment to buy new buses, but that’s not RIPTA’s problem. Their problem is that a big part of their budget comes from the gas tax, and when gas prices rise, more people ride the bus and less gas is sold. Since the gas tax is a set number of pennies per gallon of gas (9.25 cents out of the 32 cent per gallon gas tax), when gas prices rise they get more riders at the same time they get less money. It’s a crazy way to fund the system, but that’s nothing new. Now, despite several years of three-dollar gas and full buses — standing room is not unusual on the lines I ride — there has been zero constructive action to fix the problem.

You should understand a couple more things about RIPTA. One is that compared to other similar sized systems, we get very good return for our dollar from the agency. Comparing rides provided per year to expenses, RIPTA comes out very well in head-to-head matchups with its peers around the country. The other is that to my knowledge, except for a one or maybe two subway lines in Japan, there aren’t any public transit systems anywhere in the world that don’t have a subsidy of some kind. Just as there aren’t any road systems who don’t require a subsidy. Public transit is a matter of public infrastructure and should be supported as such. We’re not talking about a mint.  RIPTA’s deficit is estimated at about $9 million at this point, a little more than one thousandth of the overall budget.

At the current deficit, and with no change at all, RIPTA has approximately half a year left before they can’t make payroll. This won’t happen, of course. What will happen is service cuts that will be devastating for everyone who relies on the bus. Without buses there will be around 10,000 more cars on Rhode Island roads every day, along with many more people than that cut off from jobs they travel to, or just unable to get around because they can’t afford a car — or because they can’t drive.

So come on, tell your Representative or Senator that we need public transit. (And do it today!)  We don’t need more buses without the money to run them. Call Helio Melo, the House Finance chair and tell him that just because he doesn’t ride the bus doesn’t mean that nobody does. Tell Gordon Fox that not everyone can afford a car. Tell Teresa Paiva-Weed that our state will be a cleaner, more pleasant place to live — and drive — with a healthy and well-funded bus system. We need more people on the bus, not fewer, and letting RIPTA choke on gas tax fumes is exactly the wrong direction for our state to be going.

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Live Blog: R.I. House Budget Session


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3:39 a.m.: The amended budget passes, 57-15. We are done here – off to the sunrise. Get ready to pay higher bridge tolls, and hug your school bus monitor.

3:37 a.m.: Newberry: “This was a missed opportunity. This budget doesn’t do it. Thirteen things were laid on the table tonight. That’s not right.”

3:33 a.m.: Trillo takes on efforts to raise taxes on the wealthy: “Those rich people have lawyers. They have accountants. And they pay about 40 percent of our state’s taxes. When I hear this kind of talk, it drives me crazy. You don’t understand basic economics.”

3:30 a.m.: EDC stays alive, 56-16.

3:29 a.m.: Lima: “The car’s totalled. Junk it.”

3:28 a.m.: Melo opposes the dissolution, saying the governor’s office is studying reforms in consultation with RIPEC.

3:25 a.m.: Gordon wants to keep the EDC, although with removal of loan guarantees.

3:22 a.m.: Watson, who had proposed his own amendment to ban EDC, agreed with Lima but wasn’t certain the economic development portfolio belonged in the lieutenant governor’s office (which would inherit $2.5 million of its $4.6 million budget, with the remainder to go back into the general fund.

3:20 a.m.: Lima submits an amendment to dismantle EDC, less than 24 hours after the apparent demise of 38 Studios. “EDC has lost the trust and the confidence of the state of Rhode Island, and for good reason. ” Her measure would move the responsibility of economic development to the lieutenant governor’s office, and she feels it should be handled by an elected official.

3:12 a.m.: A Costa amendment would eliminate $2.3 million in legislative grants, redirecting the funds to programs for those with developmental disabilities. Rejected, 54-18.

3:09 a.m.: Newberry offers an amendment making a 20 percent health insurance co-pay mandatory for state legislators, an act he termed symbolic. Fox rules it out of order, Newberry challenges, and the body upholds the speaker 57-16.

3:04 a.m.: We’re out of new amendments. Melo offers an amendment cleaning up typos in the final appropriations document, and the changes are approved 70-4.

3 a.m.: DaSilva’s amendment is tabled, 51-16.

2:55 a.m.: DaSilva proposes a bill increasing income tax by 0.5 percent for those making $125,000 or more, and 1.5 percent on those making $250,000, with the new funding going to cities and towns. “We’ve just raised taxes on taxis, dog grooming, and things that are going to hurt the common person. This would given them a little bit of relief.”

2:50 a.m.: Fox rules because a similar bill was held in committee, the amendment is out of order. Baldelli-Hunt is not taking this lying down, sniping back at Fox, who calls for a vote upholding the chair, which passes 52-16.

2:45 a.m.: Baldelli-Hunt proposes consolidation of state advertising, which was passed in the House session but later repealed.

2:40 a.m.: Baldelli-Hunt offers an amendment to limit fees charged by check-cashing services and payday lenders, running up against an industry represented by former House Speaker Bill Murphy. “It takes hold of an industry that has existed since 2005, when special interest legislation was passed,” she says, noting that companies are allowed to charge rates as high as 262 percent under current legislation. The bill is tabled, 49-19.

2:35 a.m.: Lima amendment would force businesses applying for tax credits to sign sworn affadavits on financial records. It dies, 42-28.

Last year, I was in a Providence Newspaper Guild Follies number lampooning the zombification of state legislators at the end of the session (The Rocky Horror Show’s “Time Warp” with a chorus of “Let’s rush adjournment again!”). Tonight, I don’t need stage makeup to feel zombified.

2:20 a.m.:  John Savage (I-East Providence) offers an amendment proposing a 0.25 percent state tax hike on incomes over $55.000 and 0.5 percent on incomes over $125,000. It’s tabled, 48-20.

2 a.m.: Jared Nunes (D-Coventry) offers an amendent banning Department of Health employees being coverted from private contractors to state employees from pension and state health care eligibility. Amendment fails, 56-18.

1:57 a.m. Cimini’s amendment is tabled, 53-20, effectively killing it.

1:56 a.m.: Ajello: “In January, if the numbers don’t add up, I’m going to be poking everybody.” Met with a move to table.

1:53 a.m.: Cimini steps up with her amendment to repeal the tax cut for the wealthy.

“We have an obligation to more than offer a balanced budget every year,” she says, adding that workforce development and education must be priorities. Melo rises in opposition, claiming the amendment is retroactive.

Edith Ajello (D-Providence) compares Cimini’s amendment to the Buffett Rule. “I’m saying raise income taxes on highest income, not highest earners.”

1:49 a.m. Budget revision passes, 50-17. Melo asks for new articles.

 

1:48 a.m.: In response to a motion to table, Guthrie says, “It just seems like we do things to hurt people in this state.” He then raises the fighting phrase “flight of the earls.” Nonetheless, the vote to table carries, 50-22.

1:40 a.m.: Scott Guthrie (D-Coventry) offers an amendment to the revised budget that would restore revenue sharing for cities and towns. Here it is: the attack on the 2006 2 percent tax rate cut for those making more than $250,000, which he says reprsents half of a similar bill to be proposed by Maria Cimini (D-Providence). “If you want to consider the people that put you here, you should at least consider it.”

 

1:30 a.m.: Is there a General Assembly rule that reps must remain GQ on the floor? After nine hours, there should be a few loosened ties out there. I hardly see any.

1:20 a.m.: On to Central Falls, with a $2.6 million appropriation to fund payments to police and fire retirees who had their pensions reduced by up to 55 percent from fiscal 2012 to FY 2016 under city bankruptcy provisions. They would not receive more than 75 percent of their former pension payouts. It passes, 64-6.

1:17 a.m.: The taxes and revenues amendment, cut up for easy digestion, passes.

1:13 a.m.: This is where things get crazy, when an amendment is broken in sections for a final vote. Because Fox is a member of the PPAC board, which may be affected by the measure, he yields the gavel to Coderre for the first section, which is approved.

1:10 a.m.: Trillo on the main amendment: “This was a pretty good budget, but we loused it up with $10 million in tax increases. We gave something back to people we hurt, than slammed a bunch of new people.”

1:05 a.m.: Grace Diaz (D-Providence) is finally heard from, with an amendment to the definition of “little cigars” designed to keep them out of the hands of children. Backing her is another new voice this evening, David Bennett (D-Warwick). For seemingly the hundredth time tonight, Melo says, “I rise in opposition to this amendment.” It fails, 40-18.

1 a.m.: Baron, via Twitter: “I will give a dollar to any rep who has an amendment and doesn’t introduce it.” With WPRI’s Ted Nesi occupado with Studio 38 today, however, the aggregate tweet count from press row tonight is taking a hit.

12:57 a.m.: Peter Palumbo proposes an amendment to remove sales tax from cigarette rolling papers (or cigarette tubes, which he says are not sold in Rhode Island). The bid to remove tax from your E-Z Widers fails, 49-20.

12:47 a.m.: It’s not just stamina wearing down here; it’s also cell phone batteries. Brien just visited press row to borrow a phone charger from WRNI’s Ian Donnis, whose tweet total by the end of night will be as unbeatable at Wilt Chamberlain’s 100-point game.

We are debating yet another MacBeth amendment, this one limiting the use of tax credits to the party they were granted to. It fails, 48-15.

12:40 a.m.: To answer a question a composing room foreman at The Woonsocket Call used to ask me around this time of night, we’re not gonna make last call.

The Baldelli-Hunt amendment goes down, 42-27.

12:32 a.m.: Amendment from Lisa Baldelli-Hunt (D-Woonsocket) would eliminate pet grooming tax and eliminate annual $10 fee for retail permits. Also, the $42 right-to-know fee for businesses that maintain hazardous chemicals would be removed. To pay for it, $14 million would be raised from a revision of property tax relief for renters.

 

 

12:28 a.m.: From Laurence Ehrhardt (R-North Kingstown), a 14-page amendment revising state business tax credits. “It’s less than the million we came up with for the car wash folks,” he admits. Fails, 48-19.

12:20 a.m.: MacBeth amendment would push back implementation of new taxes from Oct. 1, 2012 to Jan. 1, 2013. It fails, 49-18.

12:15 a.m.: Finally, someone actually proposes a tax: Menard’s amendment would tax school housing facilities rented for purposes other than housing students, families of students, faculty members or school staff.

Menard to Fox: “For someone who believes in transparency, you’re allowing this to run amuck. This is a fairness issue. To lay it on the table like this is a cowardly vote.”

Amendment tabled, 45-23. We’re all up past our bedtime.

12:10 a.m.: Chippendale’s amendment is tabled, 49-20.

12:06 a.m.: Michael Chippendale (R-Foster) is going “there.” His amendment would exempt pet care and pay for it by cutting $1.3 million in legislative grants. In this chamber, cutting legislative grants = fighting words.

12:03 a.m.: The hacks stay under the proposed sales tax, 41-27.

Midnight: Trillo: “Taxi drivers are the working poor. They don’t get pensions or the things other people do. We’re cutting into their tips. What the governor has done is try to expand the sales tax into the service industry. It’s a slippery slope. If we were going to tax a group, the first on the list should be the lawyers, but we’ve got enough of them working in here right now!”

That is how you ring in the new day, the kind of late-night oration budget session buffs crave.

 

11:55 p.m.: Newberry offers an amendment to remove the taxi sales tax, which would generate $960,000. He points out the average meter fare from downtown to T.F. Green Airport is $26.50, with the average passenger giving the cabbie $30 (which also includes the $1.50 Public Utilities Commission fuel surcharge).

11:50 p.m.: Dickinson: “How many people have ever filled out a sales tax form? How many people have gone out of business because they decided it wasn’t worth the trouble?”

Amendment is defeated nonetheless, 47-23.

 

11:40 p.m.: Menard: “We’re supporting this (original) amendment in a year when we have a $100 million surplus?”

 

11:32 p.m.: A MacBeth amendment would remove all other services from the proposed tax hikes (charter buses, taxis, limos, pet grooming, etc.). Disclosure: as the proud owner of a Maltese-Shih Tzu that requires more grooming than the average dog, and also a former taxi driver, I’m not quite objective on this issue.

 

11:29 p.m.: Mic check! From the west gallery (behind me), OP lets loose with a brief vocal demonstration. Speaker Pro Tem Elaine Coderre (D-Pawtucket) gavels them down, and Fox orders their removal.

Meanwhile, the car wash lobby wins unanimous exemption from the proposed sales tax.

11:25 p.m.: Melo offers an amendment removing car washes from the additional items being taxed, saying people who wash their cars at home use 80 percent more water than a wash.

 

11:18 p.m. Big one: Removal of state education mandates finally passes, 49-23. Tomorrow will be a happier day for mayors, town managers and school departments. That, along with the earlier passage of the combined Board of Education, concludes the educational portion of our program.

 

11:12 p.m.: MacBeth: Woonsocket is considering cutting busing because they can’t afford the monitors. “They’re having to put students in harm’s way because of what we’re doing here.”

Menard: “We have been discussing this amendment for four years. This is a cement shoe, not a sledgehammer.”

Occupy has left the gallery. Minority Leader Brian Newberry (R-North Smithfield) disagreed with the banner confiscation, since it did not block other spectators’ view.

 

11:01 p.m: Rene Menard (D-Lincoln) offers an amendment repealing unfunded state educational mandates…one of the issues at the heart of the municipalities’ demand for help from the state. Jon Brien (D-Woonsocket) backs him up.

Meanwhile, upstairs, Capital Police have confiscated the OP banner. The delegation of about a dozen has remained orderly, however.

 

10:55 p.m.: Judging from the, well, casual dress of the folks filing into the East Gallery, some elements of Occupy have arrived.

 

10:45 p.m.: You can almost see the sweat rolling off Melo as he’s working his arguments. Given the bipartisan arguments against the one-board plan, though, we might finally see a leadership amendment defeated (or at least a close vote). Fox is actually enforcing time limits now.

 

10:33 p.m.: In one of the evening’s most rousing speeches, Spencer Dickinson (D-South Kingstown), whose district includes URI,  argues against the combined board: “You’ve got people advocating for kindergarten on the same board with (URI President) David Dooley, who is running an economic engine for this state. He needs his own board.”

10:25 p.m.: While Melo and DaSilva debate boards of education, almost half the reps are out of their seats chatting…at least until Fox’s patience with DaSilva ends and he hands Frank Ferri (D-Warwick) the floor. The late-night punchiness is setting in.

 

10:11 p.m.: Melo has spent the past 15 minutes or so defending the amendment creating one state Board of Education (and ending the Board of Higher Education and boards of regents for elementary and secondary education) from accusations that it’s not germane to the budget. This is exactly why the budget session causes you to miss David Letterman AND Jimmy Fallon (this debate is turning into a slow jam).

9:51 p.m.: Cut into three pieces, the East Bay Bridge System amendment finally passes. Adjust your E-Z pass budget accordingly.

9:46 p.m.: The Speaker has laid down the law: he’s ready to use parliamentary procedure. Bob Plain’s warning that I might see dawn when I leave here looks a little more realistic.

 

9:42 p.m.: The Pawtucket Times’ Jim Baron: “Bridge toll discussion going on for so long, I’m looking for one to jump off of.” https://twitter.com/#!/search/jim%20baron

 

9:30 p.m.: An amendment from Karen MacBeth (D-Cumberland) to reimburse residents and business owners in towns at either end of a toll bridge for debits from their E-Z pass accounts, money which Roberto DaSilva (D-East Providence) called “a $700-$800 tax hike,”  was defeated 48-24.

    

9:06 p.m.: Gordon, pleading on behalf of an elderly constituent who will have to pay to cross Sakonnet River Bridge for medical appointments, waxes biblical: “Let my people go!”

Fox: “If you can channel Moses, we don’t need that bridge.”

 

8:58 p.m.: Two failed amendments to the Finance Committee amendment on bridge tolls: One by John Edwards (D-Tiverton) to change the composition of the Bridge & Turnpike Authority for more local representation (currently gubernatorial appointments) and exempt Newport County from collecting gas tax, and one by Daniel Reilly (R-Portsmouth) to allow toll money to be used only in Newport County. The original amendment would also distribute money to Bristol County.

The car wash delegation, prominent in an upstairs gallery earlier, has departed. Meanwhile, according to its Facebook page, Occupy Providence has planned a march to the Statehouse if a floor amendment repealing for wealthy residents is heard tonight.

 

8:41 p.m.: Revised health fees pass 48-21 as we finally get some juices flowing in here. Citing rises in chiropractic license fees from $120 to $210, manicurist licenses from $130 to $170 and physicians’ licenses from $570 to $1,090, Doreen Costa (R-North Kingstown) calls it “a job killer. This is the worst amendment to the worst budget I’ve seen here in some time.”

 

8:30 p.m.: We’re back in session. Before we get to tolls, we review language in state Department of Health fees.

 

7:15 p.m.: But before we cross that toll bridge, Speaker Fox calls recess for dinner. Back at 8.

 

7:08 p.m.: We’re on the 19th amendment, involcing Medicaid global waivers. Coming up next: an amendment which would put the Jamestown-Verrazano and Sakonnet River bridges under the R.I. Turnpike and Bridge Authority. The tolls themselves would not be created until at least FY 2004, and would require federal approval.

The jocularity and bonhomie of two hours ago has faded. We’re battening in for a long night, folks. I sure hope the press row passer-by here who hoped to get home for the second half of Celts-Heat set up his VCR.

 

6:20 p.m.: We’ve just had a lengthy debate over the leadership-sponsored school aid amendment, which passed easily after discussion of maintenance of (local budget) effort provisions and maintenance of state school building assistance at 35 percent of construction cost.

With this, we have gone through 12 of the 23 amendments recommended by the House Finance Committee.  Many involve minor changes in wording or typos.

 

5:35 p.m.: We’re back…on a largely party-line vote, all referenda are approved for the November ballot. The breakdown just brought the pages handing out chocolate chip ice cream sandwiches to the floor a little early.

 

5:05 p.m.: In the midst of the bond debate, the voting machines crash. The proceedings take a break while the tech staff tries to fix the glitch – otherwise, we return to the thrilling days of yesteryear: voice votes.

The referenda slated for the November 2012 ballot include $94 million for a new veterans home/assisted living facility and renovations to the existing home, $50 million for building renovation/modernization at Rhode Island College, $25 million for affordable housing projects, and $20 million each for DEM watershed protection and Clean Water Finance Agency infrastructure loans.

 

4:55 p.m.: First good rejoinder of the day, from Joseph Trillo (R-Warwick) during the debate on $209 million in bond referenda. As Finance Committee Chairman Helio Melo (D-East Providence) was researching figures on state debt, Fox joked about “having someone entertain us.” Dan Gordon (R-Tiverton) angrily replied, “We don’t need an entertainer.” Trillo turned around and said, “You’re gonna have to sit down, then, because you’re the best entertainer in the room.”

 

4:28 p.m.: Fox gavels the House to order.

 

4 p.m.:  The bell! Speaker is in the House! We may actually be under way shortly, although anybody who took the under on the estimated start (mostly during the 3 o’clock hour) has lost.

Former Minority Leader Bob Watson (R-East Greenwich) may keep his 70-page amendment to abolish the Economic Development Corporation (EDC) sheathed, however, He indicated he may yield to a similar amendment proposed by Charlene Lima (D-Providence).

 

3:25 p.m.: The buzz in the building increases, but still no sign of House Speaker Gordon Fox (D-Providence) – we’ll be here awhile.

The lobbying activity continues out in the hall, with the car wash trade very well represented. Dean Perdikakis, owner of Freeway Car Wash, closed all four of his locations today to bring 15 employees, complete with blue uniform shirts and posters, out to the Statehouse Rotunda to lobby against the addition of a 7 percent sales tax to his business.

Freeway Car Wash employees outside the House chamber lobby for the removal of a new 7 percent sales tax from their trade from the proposed fiscal 2013 state budget.

“Three of our locations are right on the state border,” he said, adding that representatives from eight other car washes were represented outside the chamber.

2:05 p.m.: Looks like we’re running a bit late. Pages and various Assembly functionaries buzzing around the chamber doing their business in good spirits, a few legislators seated or on cell phones, and some idle chatter out in the hallway. (But really, you thought this would actually start on time? This is Rhode Island!)
 

Noon: Hello, regular RIF viewers, our Netroots Nation visitors, and anyone else interested in Rhode Island finances. Welcome to our live blog of today’s R.I. House of Representatives budget session, where the reps will debate nearly 150 amendments to the proposed $8.1 million budget for fiscal 2013. While not all will make it to the House floor, those expected to receive some lively debate include a proposal to roll back a tax cut given to the state’s wealthiest residents six years ago, an extension of the state’s 7 percent sales tax to include clothing items exceeding $250 and services including car washes, pet grooming, taxis and limousines, and increased aid to municipalities.

The session should start at approximately 2 p.m. and is expected to run late into the night, when the debate really gets lively and unpredictable. Stay tuned and/or check in with us throughout the afternoon and evening, whether you’re out at an NN function or home watching Game 6 of Celtics-Heat. Enjoy Rhode Island’s edition of the MDA telethon (alas, without Jerry Lewis, but with more entertainment value).

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As Legislature Spends Money, Cities Feel Pinch


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Woonsocket High School (photo courtesy of Woonsocket School District)
Woonsocket High School (photo courtesy of Woonsocket School District)
Woonsocket High School (photo courtesy of Woonsocket School District)

I see from the Providence Journal that the new state-appointed budget commission has decided that the city council and Mayor Fontaine were exactly right to request permission from the state to impose a supplemental tax increase on their citizens.

Last week, after an impassioned speech by Rep. Lisa Baldelli-Hunt, the House rejected Woonsocket’s request.  This week, the state-appointed budget commission asked that the request be reconsidered.

For some reason state legislators seem to get this idea in their heads that though they were elected on promises of fiscal responsibility, and intend to carry through on them, city council members and mayors get elected by promising to spend like drunken sailors.

This is not only bizarre, but entirely backwards.

By almost any measurement you care to make, it’s the state that has been the fiscal problem child over the past couple of decades, not the cities and towns. The difference is that the state has power over the cities and towns: they have more money, and stand uphill in a legal and constitutional sense, too.  But the General Assembly continues to resist the appeals of the duly elected leaders of our cities and towns, feeling that they know better.

This year, Governor Chafee infuriated organized labor by offering several “tools” to municipal officials to help them control pension costs.  I tend to agree with the labor folks here, that the state should stay out of these issues, and that passing state laws to trump local bargaining agreements is only a good idea in a very limited short-term sense.  But the Assembly has shown no interest in believing Mayors when they complain about financial stress, so if you don’t want more bankrupt cities, what should you do?  It seems to me that Chafee wasn’t so much sticking his thumb in Labor’s eye as making a realistic assessment of the Assembly and acting accordingly.

Or maybe not.  It appears that the Assembly leadership isn’t interested in Chafee’s suggestions, and pretty much none of them were put into the House budget.  This reminds me of the time in 2005 when the Carcieri administration came up with some personnel reforms that might have saved around $32 million.  They were the usual sort of benefit cuts, limits on vacation time and sick time and an end to “statutory status” which is a kind of state employee tenure.

Whatever you think about the wisdom of those reforms, it’s hard to praise the Assembly for what happened next.  The legislature rejected the reforms — but left the $32 million in savings in the budget.  So the administration was faced with finding $32 million in savings, but without the law changes to do it.  How, exactly was that responsible?

So now the Assembly is poised to do the exact same thing, and act to increase the pressure on cities and towns — not enough money to support their commitments, but no relief from those commitments, either.  The only difference this year from previous years is that now we have some Assembly appointees joining the Mayors in the hot seat, begging that they not be put in the same position as the Mayor and City Council of Woonsocket.  Mayor Leo Fontaine and the Council have failed to keep Woonsocket solvent, but a new budget commission won’t do any better unless the conditions change.  Right now, the only way the conditions will change is through the bankruptcy court, so mark your calendars.  I simply can’t agree with the people who imagine that dragging each of our cities into bankruptcy is a sensible strategy — in either the long or short term — for our state.

The Assembly can act here.  Sensible options are available, that take into account the actual realities facing our cities.  But will it?  So far, it does not appear likely.

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Netroots, Occupy Should Protest State Budget Bill


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Sometimes the stars align for good things to happen. Here’s hoping such is the case with the seemingly-destined convergence of progressive events to play out in Providence Thursday afternoon.

Netroots Nation will be in the middle of its first day inside the Convention Center. Occupy Providence will be protesting economic inequality outside on Sabin Street.

And, meanwhile, just up the hill at the State House, they will be ensconced in the biggest and most important night in local politics, debating the budget bill. This year’s spending plan – in spite of a high-profile campaign led by elected officials, organized labor and community activists – will likely not include income tax increases on Rhode Island’s richest residents.

It’s ironic to say the least. While literally thousands upon thousands of activists in and around the Convention Center will be pondering new ways to foster progressive change in America, less than a mile away local leaders will be ignoring calls for progressive change to Rhode Island’s tax code.

Imagine if Netroots and Occupy joined forces on Thursday and marched up to the State House to call upon the General Assembly to balance the state’s ailing budget by asking those who have benefited the most to pay their share?

Progressive legislators put forward bills this session that would have rolled back the tax cuts instituted under the previous governor Don Carcieri, a Tea Party supporter. But despite being supported by almost half of the House of Representatives, leadership didn’t like it and they never made it out of committee.

On Thursday, there will likely be tax-increase amendments proposed that will finally, if nothing else, force a floor debate on the issue. And given that very few politicians want to roll into election season saying they supported tax cuts to the top 2 percent of Rhode Islanders, a vote could be closer than otherwise expected.

Imagine if Netroots and Occupy could turn our State House into something like what happened in Wisconsin?

It would be a statement not just to the powers that be here in Rhode Island, but across the country. What media outlet could resist Occupy and Netroots in sleeping bags on the marble floors as the supposedly liberal legislature sided with the affluent?

The annual budget debate is famous for going all night. Reporters and legislators often see the sunrise on Smith Hill before the bill is finalized.  Tax equity will be one of the most hotly-debated topics of the night.

Imagine of Netroots and Occupy could work together to tip the scales towards a more progressive Rhode Island?

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Budgeting for Disaster: Like What We’ve Got? Good


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As has been amply reported by other writers here and in other places, the state budget has emerged from the mists of the Finance Committee, and will likely be voted on and passed this week. It contains no broad-based tax changes, though there are small increases in cigarette taxes, and small expansions of the sales tax, and tolls, to cover restoring 40% of the money cut from care to the developmentally disabled, and to fund the state’s education funding formula — the one that the legislature’s own study shows is inadequate. Due to more encouraging revenue projections than were the case last fall, some money has been restored to important places, but it’s just a bit here and there.

This graph is still the policy of the state:

That lower line is the effective tax rate on the median taxpayer. The blue line is the rate on the top 1%, and the red line is just thrown in there to show there is no relationship between taxes and unemployment.

The message overall from the legislature is that the cities and towns be damned. There seems no willingness to acknowledge that the fiscal crisis in the cities is largely the result of state policies. Tremendous cuts in state aid in 2008-2010 to both the municipal and education sides of city and town budgets brought fiscal havoc everywhere, and last week we had the spectacle of Lisa Baldelli-Hunt, a representative from Woonsocket, begging her colleagues in the legislature not to allow Woonsocket to fix the problems caused by her colleagues. Oddly enough, they complied, and now we have two more cities half a step from joining Central Falls in bankruptcy.

The sad fact is that by and large the people in charge of our cities and towns have actually been more fiscally responsible than legislators in the General Assembly, but they have less power, and so the Assembly leadership can pretend otherwise.

That’s quite a claim, isn’t it?  How to back it up?  How about this: as of 1990, Rhode Island cities and towns collected about $1.3 billion, between state aid, property taxes and various municipal fees. In 2008 — before the worst of the state aid cuts — they took in a bit less than $3 billion. This does not count the car tax payments from the state, which only offset taxes that towns would have collected from their residents. If you’re keeping score, that’s growth of about 1.9% per year — after correcting for inflation. This is troubling, but it’s not necessarily evidence of mismanagement. Inflation measures the price of goods and a few services, while towns spend their money on services and a few goods.

So how best to measure this if not against the inflation rate?  If you want a yardstick with which to measure a service-oriented enterprise like a town, how about a private-sector service like Federal Express? Fedex is fiercely competitive, I hear, and non-union, to boot. How did they do?  In 1990, it cost $11 to send an overnight letter across the country, and today it’s about $25.50 for the same service. After correcting for inflation, that’s up about 2% a year.

What about the state?  After accounting for inflation in the same way, the state’s general revenue has gone up 2.4% per year since 1990, and overall expenses are up even more. (That’s the structural deficit and the rise in state debt you’re smelling.)

So who is being more responsible with tax dollars?  The General Assembly, with members like Baldelli-Hunt who give lectures to municipalities, or the towns, who have controlled costs not only better than the state, but better than Fedex. But it’s the towns who get cut while the state basks in the adulation of business leaders who praise legislators for their tax cuts.

The main message of this budget bill is continuity. This is a budget motivated by policy choices virtually identical to the ones of the previous year, the year before that, the year before that, and so on. The idea is to squeak through another year with minimal pain to everyone, especially the wealthy. But it was to a large extent that very set of policies that brought us to the status quo: high unemployment, bankrupt cities, ever-rising tuitions at the state colleges, and lower taxes on rich people.

Do you like the way things are going around here?  Hope you do, because the legislature is voting this week to give you more of the same.

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Progressives May Still Push for Tax Equity in Budget


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State House Dome from North Main Street
State House Dome from North Main Street
The State House dome from North Main Street. (Photo by Bob Plain)

Progressives had mixed reactions to the budget bill passed by the House Judiciary Committee late Thursday night, expressing disappointment with the lack of focus on the revenue side of the ledger. While there are few new cuts in this year’s spending proposal, and a few restorations, it didn’t include tax-the-rich revenue enhancers that organized labor and community activists lobbied for all session long.

“If this budget is passed as is, the wealthiest Rhode Islanders will skate by again while lower and middle-income Rhode Islanders get stuck with the bill,” said George Nee, president of the AFL-CIO who took an active role with Working RI, a group that led the charge for taxing the rich.

While legislative leadership and the local media widely predicted income tax equity reform wouldn’t pass this year, the fight isn’t over yet.  Progressive lawmakers are expected to offer an income tax amendment to the budget bill when it hits the House floor next week. Rep. Maria Cimini, a progressive Democrat from the Elmhust area of Providence, led the charge in the House this year, could be the one to offer the amendment. She’s a rising star to the liberal left and an increasing thorn-in-the-side of the more moderate House leadership.

Her bill would have raised the income tax rate on those who make more than $250,000 from 5.99 percent to 9.99 percent, what the rate was before former Gov. Don Carcieri cut taxes to the rich. It also included a job creator incentive that would have lowered the proposed increase by 1 percent for every 1 percent the state’ unemployment rate dropped.

But Rep. Larry Valencia, a progressive Democrat from Richmond, also could offer the amendment. He sponsored a similar bill for the second consecutive year that doesn’t include the job creator incentive, which he said would make the budget more volatile.

“You can tell by the kinds of bills I’ve introduced that I would have preferred some changes to a more progressive tax code,” Valencia said, right after voting for the bill Thursday night. While he was hoping for income tax reform, he said he was happy it included some new sales taxes and glad it didn’t increase the meals and hotel tax – which would have hurt the the local tourism economy, one of the state’s strongest sectors.

Rep. Scott Guthrie, a populist Democrat from Coventry, has sponsored several income tax reform bills during the past two sessions also could offer an amendment.

House leadership has communicated to progressive legislators that it doesn’t want an amendment to come up on the floor. Income tax reform is expected to be used as a campaign issue this summer and fall, as voters seem to support it more than politicians. A Flemming Associates poll showed that 68 percent of Rhode Islanders support a more progressive income tax code, and many conservative legislators don’t want to be put on the record as supporting tax breaks for the wealthy.

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Budget Would Create One State Board of Education


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Perhaps the biggest policy proposal in the draft budget is the idea to merge to board of regents, which currently oversees elementary and secondary public schools, and the board of governors, which oversees public higher education, into one board of education.

The nine member board would be appointed by the governor and would employ a chancellor of education whose responsibilities would be “determined by the board of education,” according to Article 4 of the proposed budget bill. The current commissioners of education “shall be subject to the direction and control of the board of education.”

House Finance Committee Chairman Helio Melo said the idea is to “make the education system in the state more efficient and effective.” Because of Rhode Island’s small size, he said, the two current education boards should be able to merge into one sort-of super committee that would oversee all public education in the state.

Melo and others said the proposal is in the nascient stages.

“Is it a plan to combine the staffs of the two [education] organizations, I don’t know,” said Tim Duffy, the executive director of the Rhode Island Assocation of School Committees. “There’s a lot that still needs to be straightened out.”

According to the bill, the change would take place in 2014.

Rep. Frank Ferri, a progressive Democrat from Warwick, said, “I don’t disagree that we need to see if we can make the system more efficient and responsive, but I’m concerned about the time limit. In Vermont and Florida it took five to seven years to create.

Melo said, “I don’t think it will take years but it will take months. It’s going to be  very long process.”

 

 

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Budget Bill Restores Previous Cuts, Adds Sales Taxes


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It’s been called the year of restoration, in part because this year’s proposed budget will restore cuts made last year to programs for the developmentally disabled and low-income dental insurance.

The “education funding formula will be fully funded for the second straight year,” House Finance Committee Chairman Helio Melo said, noting that $22 million is appropriated in the proposal.

The House’s proposal is $156.4 million more than the governor’s proposal and almost $400 million more than last year’s enacted budget.

Increases will be paid for by Chafee’s proposed luxury clothing tax, but instead of kicking in at articles that cost more than $175 as the governor proposed the House budget calls for taxing items that cost more than $250. This tax is expected to raise about $5.9 million. The governor’s proposal would have raised more than $11 million. A $.04 per pack cigarette tax is also called for and would raise an estimated $1.8 million.

Melo there will be $9.6 million for the developmentally disabled programs in this year’s budget, about half of which will come from the federal government in matching funds. Last year, $24 million was cut which resulted in some program cuts and pay cuts for low wage workers.

 

 

 

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Clothing, Cigarette Taxes Considered for Budget


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With the proposed budget expected to restore some funds cut last year, several revenue sources first identified in Gov. Chafee’s budget proposal may be used to pay for them.

House Finance Committee Chairman Helio Melo, who has been tight-lipped about the budget he has been crafting with staff for the last several weeks, said, “Revenues are always a good way to pay for expenditures.”

He added, “We’re still working on it.”

But lawmakers from both the House and Senate said ideas being strongly considered include: a new tax on expensive clothing, an increase in the cigarette tax and a tax amnesty proposal. All three proposals were first identified in Chafee’s budget proposal released much earlier this year.

The proposed tobacco tax increase of $.04 per tax could generate more than $4 million, according to Chafee’s budget. A tax amnesty is when people who owe back taxes are allowed to pay their delinquent bills without penalty.

Chafee proposed the tax on high-end clothing kick in at any item over $175 and is expected to generate more than $11 million. The House is inclined to start the tax at $175 or $200. Senators would rather see it start higher; one mentioned $250.

After a meeting with Speaker Gordon Fox late in the day Wednesday, Senate President Teresa Paiva Weed said a clothing tax would benefit big box stores that could avoid paying it. She also said it would take away Rhode Island’s competitive advatage over Massachusetts, which already taxes clothing more expensive than $175.

“Whatever we do in the budget on any area of revenue needs to maintain our competitive advantage,” she said. “It’s important that we remain competitive with our neighbors in Massachusetts.”

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House Democrats Offer Clues About Budget


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As House Democrats emerged from a closed-door caucus on Tuesday afternoon concerning the budget proposal, a picture began to develop of what might be included in the annual spending bill which will be released Thursday.

“There’s probably not going to be tax increases,” said Frank Ferri, a progressive Democrat from Warwick.

But he and other lawmakers said restoring funds cut last year for the developmentally disabled, DCYF and to nursing homes are being considered. One House member said in the closed-door caucus this year’s budget proposal was referred to as “the year of restoration.”

The big debate of this year’s budget meeting could be $2.6 million the governor’s office requested as part of the final settlement with Central Falls retirees. Part of the deal receiver Bob Flanders negotiated with the retirees called for the General Assembly to contribute to their retirement costs.

“My concern is it could be a slippery slope,” said Jamestown Democrat Deb Ruggerio. Several legislators told me they worry that it could set a precedent for other struggling communities to ask the state to appropriate funds as part of a deal with pensioners.

House Democrats also hope to include more money for public education, a Chafee initiative, to help expedite the new school funding formula. “It’s been a priority of the governor’s since Day One,” said Director of Administration Richard Licht.

It doesn’t seem like it will be funded by an increase in the meals tax, as was proposed by Chafee. “I’d say that’s dead,” one legislator told me after the caucus meeting.

Public transportation supporters made a big push for more operational money this year, but it seems, if anything, there will only be money for new buses.

Finance Committee Chairman Helio Melo, who has been logging long hours as of late putting together the budget proposal with staff, said this year’s bottom line will be helped by a one-time windfall from this year’s Poweball winners, which will inject an additional $15 million into state coffers for the next fiscal year.

The House Finance Committee will consider the budget on Thursday at the rise of the House. A summary of the proposal will be released earlier in the day.

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Tax Equity Still A Question for Impending Budget Bill


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Sen. Josh Miller and Rep. Maria Cimini, sponsors of a bill that would raise taxes on the richest 2 percent of Rhode Islanders.

One of the key ingredients in this year’s impending proposed budget from the House Finance Committee will be how to pay for existing services that have already been cut to the bone in recent years.

There’s the governor’s proposed 1 or 2 percent meals tax increase, which would raise some $20 to $40 million for education. There’s also Rep. Edith Ajello’s proposed soda tax, which would net another $40 million in revenue.

But the most talked-about revenue-increasing mechanism debated this year has been increasing income taxes on Rhode Island’s richest residents. The Miller-Cimini bill would raise state income tax rate on Rhode Islanders who make more than $250,000 a year from 5.99 percent to 9.99 percent, but the percentage would drop with every one percentage point decrease in the unemployment rate. Rep. Larry Valencia’s proposal would make a similar increases without being tied to unemployment.

House Speaker Gordon Fox, who pushed for tax cuts for the wealthy as majority leader when former Gov. Don Carcieri first proposed the idea, doesn’t want to touch the tax rate this year, but Majority Whip Patrick O’Neil has signed onto the Miller-Cimini bill. Fox has told lawmakers he doesn’t want a floor amendment on a tax increase during the budget debate.

Some speculate that a compromise put forward by local fiscal guru Gary Sasse of raising the rate slightly and earmark those additional funds to economic development.

“I don’t think anyone in this room could really defend the difference between 5.9 and 6.2 percent among certain levels of income,” he told the House Finance Committee on April 24. “My conclusion is there’s some room to make a modest increase to the top rate.”

Whatever happens, Rhode Islanders for Tax Equity, a group made up of community activists and organized labor, knows well this is the time of year the bill is being scrutinized the most. So they’ve flooded the marketplace of ideas with advertisements. In addition to buying space with RI Future, the group also put together a radio ad and this TV spot:

The TV ad was only seen on ABC6, though … that’s because WJAR and WPRI didn’t air the ad. WPRI didn’t, according to a source familiar with production of the spot, because it prominently features their news staff. WJAR, the source said, didn’t because it prominently features WPRI’s news staff. Sales reps for both companies could not be reached for comment.


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