EDITORIAL: A Solid RI State Budget, But One Silly Provision that Sends the Wrong Message
EDITORIAL
EDITORIAL: A Solid RI State Budget, But One Silly Provision that Sends the Wrong Message
The budget passed by House Finance this week appears to have the support of the legislature and strikes a balance between supporting existing priorities, enhancing education and protecting the state from committing to new programs that would be immediately unaffordable in a recession.
Rhode Island’s reality is that existing spending programs are increasing in cost far faster than revenue is growing. Rhode Island has near perpetual deficits while nearly zero unemployment. Raimondo’s budget was littered with new or expanding spending programs funded on gimmicks.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTRemember Raimondo’s cook-the-books revenue estimates on sports betting for the current fiscal year? The Governor estimated $23.5 million on premises that the National Gaming Association said were a misuse of data. Through the first ten months of the fiscal year, sports betting has generated just $3.8 million. If Raimondo’s projections were correct, she could have funded her expansion of the RI Promise "free" college tuition program, but her budgets look more fiction than fact.
The House Finance-adopted budget included important resources to begin the process of improving Rhode Island schools, including an additional $41.9 million for education — and $5 million for English language learner programs.
The budget passed late on Friday night has collected a number of pro-economy provisions including the revamping of the 195 Commission’s powers to remove the obstacles to the largest private investment in Providence in the past 20 years — the $300 million Fane Tower -- a project that is being blocked simply by regulatory delay that Providence leaders — an inherent oxymoron — needed to review and vote up or down, but next-election politics and conflicts of interest slowed the project for nearly three years. Good for Ruggerio to require that the new review process be stripped from the city's oversight.
The new budget also put URI governance on a peer structure with other New England state universities. Some Providence College grads who now serve on the existing council will be disappointed, but the absurdity of their oversight role was flawed from the beginning.
The budget does include one significant and misguided provision. Sadly there is no paid lobbyist at the State House fighting for common sense.
The budget taxes digital downloads — streaming services and products like Netflix. The tax proposed by Raimondo was rightfully slammed by consumers in Rhode Island and the Wall Street Journal.
This type of tax policy is a message to the tech sector and to consumers that we have no idea what reality is and that we are oblivious to the future.
The WSJ’s criticism did major damage to Rhode Island's reputation by calling Raimondo one of the “Nickel and Diming Democrats.” All American CEOs do not agree with WSJ editorials, but they all read them.
The WSJ wrote:
"[Connecticut Governor] Mr. Lamont drew his toll inspiration from Rhode Island Gov. Gina Raimondo, who has lately been scrounging for cash to finance “free college,” universal preschool and Medicaid. Last month she proposed extending the state 7% sales tax to Netflix, e-books, iTunes, interior decorating, landscaping, shooting ranges, beach parking and more."
Mattiello was right to block the other misguided and regressive fees proposed by Raimondo, but unfortunately left this anti-consumer and anti-innovation tax in. The tax generates $5 million — but will generate far more million utterances of “that blanking State House.”
“The committee did let one part of her sales tax expansion stand: digital downloads and streaming services like Netflix will be subject to the sales tax under the version approved by the committee,” said the leadership’s press release.
Overall, Mattiello and Ruggerio deserve credit for cleaning up a mess. Make a floor amendment and clean up the Netflix blunder -- heck, would we really want people to read less expensive e-books?
House Budget - What Is In and What Is Out, June 14, 2019
IN
Legislature Cuts Sales Tax for Feminine Hygiene Products
A new addition to the budget which will take effect in the fall will be the elimination of the sales tax on feminine hygiene products.
The change will take effect in October, pending budget approval in the full House and Senate.
PHOTO: Wikipedia, Stilfehler
IN
Transforming URI's Governance
The proposal by URI President David Dooley to change the governance of the University from the state's Council which oversees Rhode Island College and the Community College of Rhode Island to a more independent board of trustees structure has been added to the budget -- functionally assuring its adoption.
In his remarks to the press late Friday night, Speaker Mattiello cited former Director of Administration Gary Sasse's comments on GoLocal LIVE that the measure is the "most important economic development this year" as his reason to put it in the budget.
Read the GoLocalProv Editorial HERE.
IN
Senate Majority Leader's 195 Legislation -- In the House Finance Budget
RI State Senate legislation sponsored by President of the Senate Dominick J. Ruggerio (D-Dist. 4, North Providence, Providence) that “takes a new approach to economic development on large tracts of state land. Spurred by delays and impediments imposed upon the [Fane] Hope Point Tower proposal for the I-195 Redevelopment District, the bill intends to create a more streamlined process for approvals on these state-owned parcels moving forward” is now an article in the budget.
“We have a rare opportunity for development at the former I-195 land and some other areas across the state,” said Ruggerio. “In the I-195 District, a developer is hoping to invest more than a quarter of a billion dollars to create an iconic structure that redefines the skyline. We should have welcomed this investment with open arms. Instead, we did everything we could to chase the developer away. Thankfully, he’s still here. This process has sent a terrible message to anyone looking to invest in Rhode Island.”
The legislation strips the remaining regulatory authority from the City of Providence.
Mattiello said that the 195 measure, along with the URI change in governance, constitute "economic development" -- the reason he said for placing them in the budget.
OUT
Commerce RI Takes a Hit
One of the agencies that took a hit is Commerce RI. Mattiello said the agency continues to enjoy $50 million in funding capacity, but the double incentive of Rebuild and sales tax exemption was removed. Tax exemptions in the future will be applied to the Rebuild program.
Rebuild and other Raimondo economic programs were trimmed.
OUT and IN
Raimondo's Beach Fees Out, Camping Fees In
Governor Raimondo's unpopular beach fee increase proposal is out.
Raimondo wanted to extend the hike for Rhode Island residents with a $2 increase in beach parking fees, bringing the cost to $8 during the week and $9 on the weekend.
Speaker Mattiello had indicated back in February the plan was dead on arrival -- read more here.
Camping fees are in.
The Rhode Island DEM proposed to increase camping fees, and depending on the offering (three different tiers), camping fees would increase by as much as $16 in 2019, or as little as $4 for residents.
OUT
Raimondo's Proposal to Expand RI Promise -- Free Tuition -- for RIC Is Out
Governor Raimondo wanted to expand the RI Promise program-- the "free" Rhode Island taxpayer-funded tuition currently at CCRI -- in two ways.
Raimondo wanted free tuition for Rhode Island College students and older students for both the Community College of Rhode Island and RIC.
Both expansions are dead.
OUT
Raimondo's Proposed Medicare Tax on Large Employers
Immediately after the introduction of Raimondo's budget that Wall Street Journal ravaged the proposal.
"She also wants to reimpose the ObamaCare penalty for individuals without health insurance. And she’d create a new $1,500 penalty on large “for-profit” employers for each employee who enrolls in Medicaid. This new tax is loosely based on legislation proposed by Bernie Sanders and would essentially punish businesses for hiring low-income workers," wrote the WSJ.
The Raimondo Medicaid tax -- dead.
OUT
Raimondo's Tax on Interior Designers
Governor Gina Raimondo's plan to tax the services of interior designers was roundly criticized. It was going to hit the small business for $1.4 million.
“I was pretty upset about it,” said designer Robin Garceau, who attended hearings at the Rhode Island General Assembly about the proposed tax on her business — and industry. “Why is [Raimondo] singling out certain services — why wouldn’t it be services across the board?”
IN
Expansion of Compassion Centers
The number of compassion centers under the approved House Finance budget is expanding from three to nine and the initial three owners have no claim on the new licenses.
The new licenses will cost $500,000 per license.
Lobbyists for the existing compassion centers tried to secure their rights to own the new licenses.
According to Mattiello's office, the expanded centers will be able to both grow and distribute.
OUT
Raimondo's Proposal to Legalize Marijuana Is Out
Raimondo had pushed for the legalization of marijuana -- it was estimated that the tax would generate $6.5 million.
Legislators were wary of the impact on business and cities and towns. Mattiello had repeatedly voiced concerns about lack of planning and societal impacts.
OUT and IN
Statewide Expansion of Pre-K Proposed by Raimondo Goes Down
Governor Raimondo said in her State of the State Address that she would push for a statewide Pre-K program -- it has a $10 million price tag, but her proposal is not in the budget.
"Tonight, I pledge to be the Governor who brings universal public Pre-K to Rhode Island. By the time I leave office, there will be a Pre-K seat for every four-year-old whose parents want it. The budget I'll submit later this week sets us on a path to make that happen. Let's get this done," Raimondo said.
Mattiello Friday night spoke to the House budget needing to address a shortfall of federal funding for Pre-K -- and that the proposal will expand the educational opportunity in Rhode Island, but will not be "universal" in 2020.
"We backfilled the Federal money $5 million — and added 280 high-quality seats. So it’s not universal. It’s an aggressive expansion to pre-K. The cost is $2.85 million," said Mattiello in a briefing to the press on Friday night, noting that the combined with the "back-fill" the state is investing close to $8 million next year.
OUT
Raimondo's Hospital Cuts -- Some Restored
"Hospitals were down $11M under [Raimondo's] budget — this is slightly better than proposed with a few million more in general revenues. They will be better off than proposed," said Mattiello.
IN
Raimondo's "Netflix" Tax -- In
The one Raimondo tax that was adopted was the so-called "Netflix" tax which places a 7% tax on digital downloads.
Mattiello said it put digital products on the same level as brick and mortar.
It is estimated to generate $5 million in new revenue.
IN
License Plate Fee
The cost of the issuance will be $8 per set of plates — 3M will do the initial issue.
The fee is to the citizen — and the $8 will cover the cost of the plates.
OUT
Raimondo's Cigarette Tax Increase-- OUT
Raimondo's increase in the cigarette tax was rejected to increase the cigarette tax by 25 cents per pack and 30 cents on cigars.
Mattiello said their decision was based on the impacts on small businesses, particularly border-town convenience stores who also benefit from sales of other products to people who come in to buy tobacco products.
IN
Education Financing
The bill fully funds the state’s education aid formula, increasing direct aid by $34.4 million over the current year’s amount. The committee granted the governor’s request for $5 million for more support for English language learners -- this initiative was strongly supported by the Senate leadership.
The budget also adds an additional $640,000 in funding for the Department of Education to help with education reforms.
IN/OUT
Double Loss for Raimondo -- PILOT Funded, But Her Enabling Power to Cities and Towns in Out
The House budget rejects both of Raimondo's initiatives. First, Raimondo's cuts to the PILOT program are restored. And, her initiative to allow cities and towns to create new local taxes on non-profits are out.
IN
New Tax on Opioids
Budget adopts Senate President Ruggerio’s proposed Opioid Stewardship Act (2019-S 0798) to establish a restricted receipt account for $5 million to fund "opioid treatment, recovery, prevention and education services" funded by a new tax to manufacturers and distributors on opioid products sold or distributed in Rhode Island.
Late negotiations added exemptions for those used for hospice care, addiction treatment and epidurals.
IN
GARVEE Bonds Are in the Budget
The budget includes up to $200 million in GARVEE bonds that will allow the state to take advantage of current low-interest rates to fund the reconstruction of the viaduct that carries Route 95 north through downtown Providence.
This is another freestanding bill dumped into the budget.
OUT
Raimondo's Minimum Wage Increase is Out
Mattiello said Raimondo's proposal to increase the minimum wage from $10.50 to $11.10 next year is OUT.
The General Assembly has increased the minimum wage in six of the last seven years.
Mattiello said that Rhode Island businesses were strongly opposed to an increase.
OUT
Defunded Vacant Positions
The House budget defunds all vacant state positions -- those positions that have historically been funded, but have not been filled by the Raimondo administration.
IN
Shekarchi's Small Business Tax-Cut Is In
House Majority Leader Joseph Shekarchi legislation to help Rhode Island small business owners who will be adversely impacted higher federal taxes as a result of President Donald Trump’s new tax laws is now a budget article.
Shekarchi’s plan provides a "work-around" for owners of “pass-through” entities whose state and local taxes exceed the new $10,000 cap on the state and local tax (SALT) deduction on their federal tax returns.
Connecticut passed similar legislation in May of 2018 and the proposed Rhode Island law “is carefully designed to be revenue-neutral for the state.”
“This bill will help small businesses, most of whom report their taxes as pass-through entities, by having the business entity pay the taxes on the business income and allowing a federal income tax deduction – which might have been limited if reported on the owner’s personal income tax returns,” said Willey. “Regular C-Corporations get this benefit, and this bill would put the pass-through entities on an equal footing with big businesses.”
IN
911 Revised, Federal Compliance, New Training, More Fees
The controversial 911 fees have been revamped. On one hand, the fee has been cut from $1 to $.50 and those dollars are now being placed in a dedicated restricted receipt account to meet federal law.
But, a new tax is being implemented on mobile accounts.
The budget adds $220,000 in funding to help train E911 operators to better provide CPR instruction to callers while they await emergency responders, and established restricted receipts accounts for E911 surcharge fees on phone bills.
To comply with federal requirements, the surcharges on phone bills will be split into two separate charges, one to support E911 operations and another for funding other public safety needs. Both will go into restricted receipt accounts. This creates a net new $10 million in new revenue.
