Raimondo outlines budget to ‘spark’ recovery

John Howell
Posted 3/17/15

Only 65 days into her administration, Governor Gina Raimondo last week advanced an $8.6 billion budget plan for the coming fiscal year, with long-term, intermediate and immediate programs designed to …

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Raimondo outlines budget to ‘spark’ recovery

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Only 65 days into her administration, Governor Gina Raimondo last week advanced an $8.6 billion budget plan for the coming fiscal year, with long-term, intermediate and immediate programs designed to “spark the Rhode Island comeback.”

In the big picture, her plan is built on the principles of building skills for students and workers; attracting entrepreneurs and new investment; innovation in government and the economy, creating opportunity; and fiscal responsibility. But it is the details of the budget that will be the focus of debate, and surely the lobbying efforts of those that will either win or lose.

Thursday evening was Raimondo’s time. From the standing ovation by general officers and legislators as she entered House Chambers, to the applause that punctuated her remarks, Raimondo was the focus of attention. She said there were no easy decisions or choices to the budget.

“The people of Rhode Island are counting on us,” she said. “This is our opportunity to deliver for the people of Rhode Island.”

She called on legislators to “be a part of the team that sparks Rhode Island’s economic comeback. Be a part of the team that restores people’s faith in government by showing that we can get things done.”

Leadership in the House and Senate called the budget “bold,” and in the opinion of House Speaker Nicholas Mattiello, it is focused on the economy and job creation.

There is a lot to the Raimondo package.

In some respects it is a recasting of the way things have always been, such as the elimination of the Rhode Island Higher Education Assistance Authority. It continues dependence on some of the state’s quasi-agencies like the Rhode Island Airport Corporation to share in their revenues, and seeks the consolidation and streamlining of government functions to attract and enable businesses to grow.

With a call for a minimum hourly wage of $10.10 and elimination of state taxes on Social Security benefits for low- and middle-income seniors, her budget makes friends with the unions and the elderly.

The Raimondo budget also expands the Earned Income Tax Credit from 10 to 15 percent over the next two years, putting more money directly in the pockets of working Rhode Islanders.

“If the revenue forecasts in May improve, I’d love to see us go to 15 percent this year,” she said.

On schools and education, Raimondo would create a new School Building Authority, seeding it with $20 million this year, to work with municipalities to address building renovations; increase pre-kindergarten classrooms; allocate $1.4 million for all-day kindergartens in every community; and restructure the current student grant program to help those who would otherwise be unable to afford higher education.

Raimondo referenced 38 Studios, calling it a mistake that can’t be made again, but emphasized the state must partner with businesses and establish a good business environment to pull the state out of its “funk.”

“It is time for our economic development strategy to turn heads, change perceptions, and put Rhode Island back in the game. Now I know we’ve made mistakes in economic development in the past. We must learn from them and never repeat them. We must move forward,” she said. “This budget proposes investing to attract high-quality companies, and encouraging the growth of businesses already here.”

She would repeal the sales tax on commercial energy over five years, repeal unnecessary professional licenses and consolidate statewide tourism using hotel tax revenues to develop a state brand. She said she is turning to the state’s largest employers to have their suppliers and affiliates move to the state by offering them an “anchor” tax credit. She also wants to work with legislators for tax incentives for those employers creating new jobs.

In Raimondo’s words, “A key innovation priority this year is reinventing Medicaid.”

She said the current system, which has the second-highest cost per enrollee of any state, is not sustainable. She said the system cost is 60 percent higher than the national average, and that a small percent of the enrollees account for the vast majority of the spending.

“We have an opportunity to deliver better health care services to Rhode Islanders, and to make our system more affordable at the same time. To do so, we will have to crack down on fraud and waste; improve quality and coordination of care; and make Rhode Island a leader in health innovation by paying for value not volume.” Her budget proposes a 9-percent cut in Medicaid expansion this year.

Two elements of the governor’s plan to increase state revenues – a state property tax on second homes worth $1 million or more, and a refinancing of general obligation bonds – caught the attention of Warwick Mayor Scott Avedisian and state Rep. Patricia Morgan.

In an interview Thursday following the governor’s budget address, Morgan said she is not happy with some of the “gimmicks” Raimondo built in her budget to raise funds. She labeled the $22 million the governor hopes to save through personnel reforms a temporary fix that will cost the state in raises in another three years. Likewise, she views the refinancing of general obligation bonds as simply “kicking principal [payments] down the line.”

As for cutting the cost of Medicaid by $88 million, which will directly impact reimbursements to hospitals and nursing homes, Morgan called it a thorny issue. The plan also calls for a 3.8 percent premium increase on all health care plans. Avedisian agreed that this would be one of the contentious aspects of the budget. Morgan congratulated Raimondo for addressing the problem and for a budget that that is consistent with her goal to build the economy and create new jobs.

Avedisian also found the governor stayed on message. He is grateful that cities and towns will not see a reduction in state revenues and that Raimondo intends to follow the formula for aid to education.

He wasn’t as concerned as Morgan that the governor’s proposed property tax of $2.50 per $1,000 for second homes owned by Rhode Islanders worth more than $1 million would pave the way to a state property tax. The governor projects the tax would be $2,500 for a property valued at $1 million, and that it would generate $11 million a year.

If the state is going down the road of levying property taxes, Avedisian suggested the governor might consider state property taxes that would eliminate the need for local property taxes. Morgan wasn’t ready to sign on to that.

Avedisian also thought there could be advantages to pooling the refinancing of state and municipal general obligation bonds.

“When doing refinancing why not wrap in cities and towns,” he asked. “They could have the ability to hop on to even bigger savings.”

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