New budget even draws a few GOP votes
By Nancy Lavin, Rhode Island Current
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Not this year. A $13.96 billion fiscal 2025 budget breezed through the Rhode Island House of Representatives Friday night.
The 69-5 vote came after a mere 3 1/2 hours of discussion that included high praise for funding of critical and often contested issues like state pensions for retirees, K-12 education and health care provider rates.
“Through this budget, we are emphasizing education at every level and supporting children,” House Speaker K. Joseph Shekarchi said in a statement Friday night.
“This budget is the result of a truly collaborative process between my colleagues here in the House, the dedicated members of the House Finance Committee, our partners in the Senate and Governor McKee and his team to carefully create a plan that meets Rhode Island’s needs for education, students and children first, while addressing our challenges, such as housing and health care.”
The $13.96 billion spending plan falls just shy of the $14 billion high water mark that characterized fiscal 2024’s approved spending plan, but is $271 million more than what Gov. Dan McKee proposed in January.
Four of the nine Republican members, including House Minority Leader Mike Chippendale, also voted for the revised spending plan. Chippendale credited Shekarchi and the leadership team for giving deference, and a listening ear, to his party’s priorities.
“This has improved the process I’ve come to know over the last 14 years,” Chippendale, of Foster, said. “While this is the work product of high times, I suspect we will have more challenges in the future.”
Indeed, the revised spending plan relies on the windfall federal pandemic aid to fill gaps at the Rhode Island Department of Corrections and Rhode Island Public Transit Authority while also making use of federal relief on urgent crises like homelessness and the estimated $400 million price tag to demolish and rebuild the Interstate 195 Washington Bridge.
But with the federal deadline to commit American Rescue Plan Act dollars looming at the end of the calendar year, lawmakers and budget analysts have warned that tough choices lie ahead.
For that reason lawmakers nixed some of the tax and borrowing proposals McKee pitched. Among the discards: a $50 reduction in the corporate minimum tax, which would have helped an estimated 70,000 business entities in the state.
Also on the cutting room floor: a last-minute pitch by McKee to overhaul how the state calculates bank income taxes — ostensibly aimed at keeping locally headquartered Citizens Bank from uprooting its employee base to tax-friendlier pastures across the border.
No lawmaker attempted to resuscitate the Citizens Bank tax rewrite Friday, despite a dire warning from the Greater Providence Chamber of Commerce that the state could and would lose one of its top employers if the tax change was not included.
Speaking to reporters Friday night after the budget vote, Shekarchi said he was still in talks with bank leaders and state officials, with the possibility of returning ahead of the January 2025 legislative session to incorporate the tax change for Citizens.
While the budget historically is not changed after the House vote — with the subsequent Senate review more of a perfunctory stamp of approval — Shekarchi also hinted that a last-minute policy update was still on the table.
“It’s not over till the last gavel bangs,” he said.
Legislation introduced in March by Rep. Joe Solomon, a Warwick Democrat, offers the tax policy change to achieve the same end — though without the necessary budget funding — and remains under review in the House Committee on Finance as of Friday night.
Republicans George Nardone, of Coventry, and Patricia Morgan, of West Warwick, insisted the revised spending plan did not go far enough to help small businesses and residents suffering the brunt of rising expenses. They were among the five Republicans to vote against the budget, joining Robert Quattrocchi, Brian Rea and Sherry Roberts.
Despite Republican reluctance on the overall revised spending plan, several of the most hotly debated articles of the budget were met with unanimous support, including education, medical services and pensions.
More money for education, Medicaid providers
On education, the revised spending plan makes sweeping changes to the much-maligned education funding formula that determines state aid for K-12 schools, adding in money for multilingual learners along with extra funds to offset a decrease in federal aid. The $70.9 million increase in state education aid is $33.8 million more than what McKee proposed in January.
The troubled Providence Public School District, which has remained under state control since 2019, will get an $11.7 million boost, compared with the $300,000 cut it would have seen under McKee’s budget proposal.
“PPSD cannot hide behind the excuse of having insufficient funding in order to ensure our schools are well-staffed,” Rep. David Morales, a Providence Democrat, said Friday.
Meanwhile, the updated budget adds $100 million to what McKee proposed for rate hikes to Medicaid providers who work in behavioral, community and at-home care settings. The full $160 million cost ensures that providers will get the long-awaited payment rates recommended by the Office of the Health Insurance Commissioner in a single year, rather than the three-year phase-in McKee had planned.
“This is the first step, in my opinion, to really fixing our health care crisis, especially in a way that addresses some of our most vulnerable constituents,” said Rep. Enrique Sanchez, a Providence Democrat. “This body is treating it with the urgency it needs and deserves.”
Some state retirees see cost-of-living increases
The accolades parade marched on as lawmakers across the political spectrum heaped praise upon the advocates and policy team behind a partial reinstatement of cost-of-living increases for retired state workers and teachers.
Rep. Charlene Lima, a Cranston Democrat and retired teacher, has been one of the most vocal critics of the 2011 pension reforms that suspended annual cost-of-living increases for retirees, accusing those who supported it of “pension robbery.”
Lima adopted a decidedly different tone Friday in light of the spending plan’s inclusion of $27.5 million for pension plan revisions, including reinstating annual, compounded cost-of-living increases for the 19,000 retirees who stopped working before the 2011 reforms took effect.
“I’ve been fighting for years to get retirees the justice they deserved,” Lima said. “Until today, we’ve not seen a substantial effort to correct this injustice.”
She continued, “We will continue to do more to get retirees what they deserve next session.”
Shekarchi, however, told reporters in a later interview that he was making no commitments for next year, including additional money for retirees.
The fiscal 2025 spending plan also reduces the target funding ratio at which time COLAs would be universally revived from 80% funding to 75% funding — a change unlikely to affect the 2030 date of achieving this funding balance, according to the Rhode Island Office of the General Treasurer.
While Treasurer James Diossa said he supported the pension changes, he also cautioned that the projected $417 million increase in the pension shortfall and potential future debt service could weaken the state’s bond rating.
Shekarchi dismissed Diossa’s concerns regarding state bond ratings Friday.
On borrowing, the House spending plan calls for $343.5 million in state issued bonds to be put before voters on the November ballot across four questions. The largest, a $160.5 million borrowing proposal, would pay for a Biomedical Sciences Building for the University of Rhode Island, and a separate Institute for Cybersecurity and Emerging Technologies at Rhode Island College.
Meanwhile, a separate $120 million housing bond — the largest in state history — offers money for housing production, revitalization and home ownership, including up to $10 million for a state public housing developer.
An amendment approved Friday shifts $10 million from the bucket for affordable housing production to unspecified home ownership programs, which could include the popular down payment assistance program created and quickly spent last year.
A $53 million green economy bond was updated to give some green for state forest and farm preservation ($13 million) while money to help rebuild the Newport Cliff Walk was trimmed from $8 million to $3 million to account for a newly awarded federal grant.
Secretary of State Gregg Amore’s wish for a $60 million bond to help pay for a new state archive building was axed entirely, but a new, $10 million arts bond was tacked on, though the proposal was met with mixed reviews by the arts community.
Clouded conversation on flavored vapes
Perhaps the most heated debate, though rising only to a slight simmer, was e-cigarette products, or vapes. The spending plan preserves (with some modifications) McKee’s proposal to tax vape products and increase cigarette taxes by 25 cents per pack. It also codifies language enacted under a 2019 executive order banning sale of flavored vapes.
While technically already outlawed, a handful of lawmakers, including Morgan and Sanchez questioned whether the flavor ban would hurt smoking cessation efforts, echoing comments made by vape users and former smokers earlier this year. An attempt to revive flavored vape sales for adults over 18 was defeated, in part because it would conflict with the regulations already on the books though not yet incorporated into state law.
“I find it very disingenuous that the only salvation for individuals struggling to quit is through use of flavored vapes,” Rep. Teresa Tanzi, a South Kingstown Democrat, said. The revised budget brings back menthol-flavored offerings, but keeps fruity options like bubble gum and cotton candy off-limits, while ramping up enforcement against retailers who flout the rules.
“Our kids will be safer tomorrow, or whenever the budget is signed, than they are today,” Tanzi said.
Several other Republican-backed amendments, including to add an inspector general within the Office of the Lieutenant Governor and to end the contested motion picture tax credit program also failed, with votes mostly along party lines.
Other key provisions of the revised spending plan include:
- $84 million from various funds, including unspent federal aid and state long-term capital projects money, to cover the state share of the Washington Bridge rebuild
- $60 million to the Department of Children, Youth and Families including money to increase pay to contracted support providers
- $15 million for RIPTA, not enough to cover its entire $18.1 million shortfall but sufficient to stave off service cuts, as the state transit agency confirmed in its own announcement Thursday
- $1 million to start a new medical debt program helping low-income residents pay off longstanding medical debt
- $500,000 to pay for providing municipal fire and emergency services to Rhode Island T.F. Green International Airport, replacing money previously given by the Rhode Island Airport Corp. but no longer permissible following a federal audit
- $60,000 for the Rhode Island Fire Academy to provide training on dealing with lithium ion battery fires
The Rhode Island Senate is expected to take up the revised fiscal 2025 spending plan the week of June 10.
A new budget must be approved before the fiscal year starts on July 1.
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