House budget bill: The good, the bad and the booze

Rhode Islanders best not blink in June. If we do, we might just miss much new state policy being swiftly passed in the annual budget bill.

The tax and spending plan, and oftentimes some new policy tucked in for good (bad, or indifferent) measure, typically breezes through the General Assembly in the waning days of the legislative session. Any public debate happens during marathon late night meetings. Elected officials actually suspend open meeting laws to do so. Rhode Island’s budget process is truly democracy at its worst.

To that end, the best news about 2013 House Finance Committee’s budget – and the benefit is bipartisan – is that this year’s proposal didn’t sneak in any big picture policy changes; at least none that have been identified yet.

Last year’s budget bill retooled public education oversight but this year’s version does not yet include retooling economic development oversight as some expected. Tax and spending priorities belong in the budget bill, not public sector structure.

Similarly, regardless of whether one feels we should repay 38 Studios bondholders or not, the budget bill was not the ideal place for the state to make this decision. The proposal puts money aside to pay if that proves the most prudent path, and an additional $50,000 to study the ramifications.

The budget bill will also not decide if the new Sakonnett River Bridge be paid for by a use fee (capitalism) or by the people of Rhode Island (socialism). We should certainly have this conversation, and it should be done in the context of how to fund the nationally recognized need for better roads and bridges.

On spending

The budget bill doesn’t do much to help Rhode Island’s struggling cities, another great gift for bankruptcy lawyers. It ignores, for the second year in a row, Governor Chafee’s attempts to help urban areas hit hardest by the recession and state aid cuts. It did keep his $40 million new funding for public education, which is much better than a sharp stick in the eye but not nearly enough to neutralize the head start suburbs enjoy over cities in the race to the top.

Interestingly, creates a new state mandate that school districts to refinance construction debt. There are all sorts of repercussions to mandatory refinancing of debt, including giving schools a more vested interest in 38 Studios bonds. Update/clarification: the budget calls for a higher municipal share of refinance savings.

Social services were again cut, leaving some 6,500 poor people off of RIte Care, reports the Providence Journal.

The historic tax credit – technically a spending item – would be reinstated. It would allow the private sector to not pay up to $34 million in state taxes, but it’s capped at $5 million per project. Sorry Superman Building.

On taxes

Income taxes weren’t increased on the affluent nor were corporate tax rates cut. CVS keeps its lucrative loophole worth $15 million.

And the pharmacy giant isn’t the only drug dealer to make out in this year’s budget. Wine and spirit sellers will be given a sales tax holiday for two years. Beer, for some reason, wasn’t included (there’s something that feels regressive about lowering sales tax on wine and spirits but not beer).

The most interesting tax experiment, I think, is making locally-made art tax free. It seems to me that more people would cross state lines to buy art than have their dog groomed, but art is, by definition, subjective. Some may consider their poodle’s haircut art. It could also mean a giant tax break for a company like Alex and Ani if jewelry is considered art.

But despite opportunity for abuse, if the state is going to incentive growth through tax cuts, I’m glad it’s going to artists as this is the sector that has the best chance of building us a better economy.