Mixed Reviews On House Budget Proposal

Mixed Reviews On House Budget Proposal

The main bullet-points of the $7.7 billion budget passed by the House Finance Committee last week and scheduled for a full House vote this Friday have already been rolled out: The sales tax will expand slightly, but nothing close to what Governor Lincoln Chafee was hoping for; cities and towns fared well while social programs did not; and pension reform remains a question mark for the time being.

But going beyond the surface, how will the latest budget affect everyday Rhode Islanders?

We asked three of the state’s economic experts to analyze the budget and assess what it means for residents of the Ocean State. The results were mixed. While nobody is completely happy, some see the House budget as an improvement over Governor Chafee’s original proposal. Others say the House is balancing the budget on the backs of the poor. GoLocalProv has the complete breakdown.

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Sasse: A More Balanced Approach

For Gary Sasse, the budget passed by the House Finance Committee “makes the best of a very bad Governor’s budget.” Sasse told GoLocalProv he still believes the sales tax, which will expand to include items like digital downloads, over-the-counter drugs and sightseeing tours, is unnecessary, but he doesn’t believe it will negatively impact the state.

“The budget represents a more balanced approach to the state’s fiscal problems,” Sasse said. “The sales tax is unnecessary because they probably could have found the [projected] $17 million elsewhere. But it should not the make the state any less competitive.”

Sasse said he still wants to make sure that this year’s slight expansion of the sales tax isn’t setting the precedent for more to come over the next couple of years. He said his initial reaction to the budget was that it appears to be “relatively gimmick free,” but he did question how it will affect the “out years.”

And while he views the budget as a step in the right direction, the former advisor to Governor Carcieri said not every major issue impacting state finances was addressed in the House Finance Committee’s budget. “It didn’t make any progress on the entitlement programs,” he said.

Brewster: They’re Nickel-And-Diming Low-Income Families

Kate Brewster, Executive Director of the Poverty Institute, agrees that the House Finance Committee didn’t make any progress on the entitlement programs. As opposed to Sasse, however, Brewster believes the House Finance Committee failed to help distressed families.

“Our feeling is that they’re nickel-and-diming low-income families,” she said. “And they failed to close corporate loopholes.”

Brewster was critical of the Finance Committee for making health care less affordable for poor families and she said the budget also completely scrapped pre-k funding and reduced adult education, which “just about everyone agrees we should be funding.”

Brewster said she was also unhappy that the Finance Committee recommended a three year study on combined reporting, a law that would require multi-state or multi-national corporations to report their total income to Rhode Island. Big businesses were against the combined reporting bill, but Brewster said the majority of states, including four from New England, have adopted some form of the law.

While Brewster acknowledged that the budget passed out of committee is very likely to be the same budget passed on Friday, she said her team will continue working with folks at the State House to try to reverse some of the cuts that she believes will be devastating to working-class Rhode Islanders.

Lardaro: It Seems Too Easy

URI economist Dr. Len Lardaro said he is a little suspicious about the budget passed out of committee on Friday. His concern is that the Finance Committee was operating off of deficit numbers that could prove to be significantly higher and that the state may need to revisit the budget halfway through the fiscal year.

“It’s just seems like it was too easy to pass this budget,” Lardaro told GoLocalProv.

Lardaro said elected officials have still failed to address pension reform and that the plan to form a committee and study the pension system for two-three months only serves to put off the work that needs to be done. He said he is concerned the state is slipping into dangerous territory because of the pension problems.

Lardaro also said the economy is slowing down and that while unemployment is projected to dip, the reason is because many unemployed Rhode Islanders are leaving the labor force. He said the budget doesn’t appear to do much to promote job creation.

“Our employment rate is coming down for all the wrong reasons,” he said.

House Vote Friday

Now all eyes turn to Friday’s scheduled vote by the full House. While history suggests the majority of what is passed out of committee usually ends up getting passed by the entire House, there is still some question as to whether other legislators will step up to call for more cuts or fight for funding to be restored to some of the entitlement programs.

On Monday, the Governor gave his first reaction to the budget, saying he was pleased that his budget proposal appeared to lay the foundation to what the Finance Committee ultimately approved, but also expressing some disappointment with the fact that his plan to broaden the sales tax was mostly scrapped.

“I am disappointed that the General Assembly chose not to modernize our sales tax system by broadening the number of items subject to the tax while lowering the overall rate from 7 percent to 6 percent,” Chafee said.

 

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