Patrick Anderson,Katherine GreggProvidence Journal
General Assembly leaders Friday proposed a new $13.95 billion state budget with money to rebuild the Washington Bridge, prevent cutbacks in Rhode Island Public Transit Authority service and restore pension benefits snatched from retirees 13 years ago.
The tax and spending plan for the year starting July 1 is $271 million larger than the budget Gov. Dan McKee proposed in January.
It was presented to the House Finance Committee late Friday night and passed 13- to-1 with Coventry Republican Rep. George Nardone the only dissenter. It is expected to be voted on by the full House next Friday.
Highlights include:
- A $120 million housing bond, the state's largest ever and $20 million more than McKee proposed in January
- $10 million in borrowing to help boost arts organizations including Trinity Rep, the TomaquagIndigenousMuseum and Newport Ballet
- No cuts to formula-based state aid to local schools
- A $4.7 million tax cut on retirement income, including pensions and 401(K)s, by raising the amount exempted state from $20,000 to $50,000
- A 25-cent per-pack hike in the cigarette tax
- $1 million to buy delinquent medical debt
- $13 million for preservation of open space in a $53 million "green bond"
- Medicaid rate increases for behavioral health services, children’s services, and long-term home care
"It has been a difficult budget because we feel the pain of Rhode Islanders, rising costs across the board have affected everybody from the grocery store to the gas pump to wages," House Speaker K. Joseph Shekarchi told reporters in a Friday night briefing. "It's been difficult. So what we have tried to do with this budget is to do the most good to the people who need it the most."
Lawmakers out of time to address Citizens Bank issues
Some high-profile requests did not make the cut, including Citizens Bank's ask to change how financial institutions in the state are taxed.
After losing access to millions of dollars a year in tax breaks from a jobs incentive program, Citizens argued for a change to state bank tax law that the company says would put Rhode Island in line with its neighbors and end what it describes as penalties for banks with large footprints in the state.
The late-in-the-session proposal drew opposition from rank-and-file House members; Shekarchi said he is open to considering it next year.
"I don’t want to be the speaker who loses Citizens Bank," Shekarchi said in a news release earlier Friday. "I will roll up my sleeves and get to work with them over the summer so we can pre-file legislation that can be vetted early in the year. But right now, we don’t have enough information to know whether this plan is the right move for our state."
Last week Shekarchi pulled the plug on a proposal from McKee to buy an East Providence office building from Citizens and move state agencies there.
“This decision will make it difficult for the state to compete on a level playing field with Massachusetts and other states, and is not in the best interest of Rhode Islanders," Citizens spokesman Rory Sheehan said in an email about the tax proposal being left out. "We are committed to working diligently to achieve a positive outcome.”
Still no state archives
Few people are more popular in the House of Representatives than Secretary of State Gregg Amore, who formerly served in the House, but that didn't help him any more than predecessor Nellie Gorbea getting funding in the budget for a new state archives building near the capitol.
McKee wanted to borrow $60 million for the archives, but Shekarchi said a lack of an identified site or funding to cover the remainder of the estimated $100-plus million cost were reasons not to.
And no change to the CRMC
Despite a push from environmentalists and Attorney General Peter Neronha to reform the state Coastal Resources Management Council -- by removing the politically-appointed Council itself -- the budget leaves the agency alone.
Shekarchi cited cost concerns about leaving shoreline decisions to paid staff alone.
The state budget office estimates replacing volunteers with paid employees would cost between $1 million and $3 million per year.
Pension boost
The budget promises pension boosts this January to a select group of retired public employees: those who retired from the state, local or public school teaching jobs before the Raimondo-era suspension of annual cost-of-living adjustments aka COLAs took effect on July 1, 2012.
Shekarchi said the lawmakers singled out this groupbecause they are, for the most part, the oldest retirees, who left their jobs at a point in time they believed they could count on annual increases in their pensions.
The move will benefit an estimated 19,357 retirees.
But the restoration of this benefit - and other pension moves - will increase the required state contribution to the pension fund by $27.5 million in FY25 alone, and the required local contribution by another $15.1 million.
It is not yet clear how much each of these retirees will each get under the complicated formula that has been used for the last decade to calculate COLAs given municipal employees in pension funds that are already 80% funded.
But the new budget will also lower the threshold for reinstating annual COLAs to all retirees in the state-run retirement system from 80% to 75% funding, and base the future pensions paid current-day workers on their final three-year-salary average, instead of a five-year average.
And that's not the end of it.
The budget also raises from $18,000 to $25,000 the amount a retired teacher - who returns to the classroom - can earn without forfeiting their benefits, and allows them to work unlimited days. Their school district would be required, however, to make contributions to the pension system for each of them, as if they had been hired as a new employee.
Rebuilding the Washington Bridge
The House budget funds the $83.6 million McKee requested to pay the state's share of the cost of rebuilding the westbound Washington Bridge.
But the House plans to increase the amount of unused COVID cash by $20 million and replace $40 million that would have been borrowed against future gas tax revenue with $45 million in state cash reserved for capital projects.
The total cost of replacing the bridge, which was abruptly closed in December out of concern it could collapse, is $408 million.
Money for transit agency should 'help RIPTA avoid any service cuts'
In January, RIPTA's budget gap was projected at $18 million for next year and McKee proposed giving the bus agency a one-time, $10-million boost of COVID cash.
The House budget ups that total to $15 million. Shekarchi Friday said that RIPTA management assured him it will be enough to prevent cuts to bus service for another year.
More money for housing, but no Airbnb tax hike
The proposed $120 million housing bond is a big win for affordable housing developers, on the heels of the more than $250 million mostly federal dollars previously dedicated to housing since the pandemic.
Of the total in new borrowing, $90 million would go the production of new homes, most of it to subsidize projects by non-profit affordable developers.
Shekarchi said the budget authorizes state Housing Secretary Stefan Pryor to use $10 million of that $90 million, if he so chooses, to create a public housing development revolving fund. Such a fund inspired by one in Montgomery County, Maryland has been discussed for three years now.
McKee had wanted a good chunk of the housing bond to promote middle-income home ownership, but only $10 million from the bond would be dedicated to that, Shekarchi said.
And a Pryor proposal to apply state hotel tax to whole-house rentals on sites like Airbnb or VRBO -- and use the money for homeless services -- was left out of the budget. Several lawmakers had also sought to tax whole home rentals the same as room rentals.
Other budget highlights include:
- $160 million in Medicaid rate increases for behavioral health services, children’s services, and long-term home care, which McKee proposed phasing in over three years, will happen immediately.
- A funding boost of at least $21 million for the understaffed Department of Children, Youth and Families, though there were some conflicting numbers provided Friday night.
- The $3.8 million increase in spending on Early Intervention services in McKee's budget
- A $70.9 million year-over-year increase in state aid to public schools, $33.8 million more than in McKee's budget
- $813,000, as proposed by McKee, to provide free breakfast and lunch to the 6,500 students who now get reduced-price school meals.
- A $160.5 million bond, pending voter approval, to build a state-of-the-art Biomedical Sciences Building at the University of Rhode Island's Kingston campus ($87 million) and new cyber-security center ($73 million) at Rhode Island College
