Governor Gina Raimondo on Thursday touted her $8.6 billion budget for the fiscal year starting July 1 as a plan that will begin the rejuvenation of Rhode Island's economy.
At the same time, some parts of the spending plan rely on uncertainties, including $46 million in unspecified Medicaid savings and the wiping out of millions of dollars in un-budgeted pay hikes promised to state employees during the Chafee administration.
Raimondo struck an optimistic tone while delivering her first budget address to a joint session of the General Assembly, repeatedly invoking Rhode Islanders' struggles "and how every hardworking family deserves the chance to make it."
"Despite starting with a nearly $200 million deficit, this budget is balanced, makes significant progress toward eliminating our structural deficit, involves no broad-based tax increases, and calls for significant investments in economic growth and education," Raimondo said.
Including federal funds, the $8.6 billion spending plan is down by $212 million, or 2.4 percent, from the current budget. On general revenues, the $3.49 billion budget grew by less than one percent, or $3.2 million, from the current spending plan.
The budget raises the state's minimum wage, from $9 to $10.10 and expands the earned-income tax credit, from 10 to 15 percent over the next two years. It fully funds the education funding formula and creates measures intended, Raimondo said, are targeted to attract high-quality companies and retain businesses already here. In a nod to House Speaker Nicholas Mattiello, the budget eliminates tax on Social Security income for individuals earning less than $50,000 and couples earning less than $60,000.
On taxes and fees, the spending plan adds a new statewide property tax, at the rate of $2.50 per $1000 of value, for non-owner occupied second homes that are worth at least $1 million. And it introduces a tax on health insurance premiums of all Rhode Island consumers, to the tune of about $6 million, to help fund Health Source RI, the state's version of Obamacare.
Raimondo's spending plan includes $20 million to seed a School Building Authority within the state Department of Education. The governor said the program will help to spur construction jobs while modernizing school buildings.
"This budget sets us on the path to Rhode Island's comeback by focusing on three things," Raimondo said. "First, building the skills our students and workers need to compete in the 21st century. Second, attracting entrepreneurs and investment. And third, fostering innovation, including in our state government, to enhance accountability and deliver value to taxpayers."
The budget also includes cuts to hospitals and nursing homes likely to face sharp opposition.
While the Raimondo administration said local aid to cities and towns was essentially level-funded, the City of Providence is facing a $4 million hit from the elimination of a $5 million payment for payment in lieu of taxes.
On the $25 million in un-budgeted cost of living adjustments pledged to state employees in the current year, with $37 million more, the administration said it will work with the employees to finds savings "while avoiding significant layoffs."
Most of the $190 million deficit for the fiscal year starting July 1 was cut through spending reductions, the administration said.
The budget restructures general obligation debt to create $64.5 million in new resources for economic development initiatives. It also bolsters funding for the Commerce Corporation, the new Commerce secretariat, and for tourism promotion. The spending plan also includes $25 million in incentives for an I-195 Development Fund. Administration officials said the money will not be used as part of a possible Providence ballpark for the Pawtucket Red Sox.
The governor's budget proposal cuts a $356 million projected deficit for fiscal 2017 to $75 million, and the $496 million projected deficit for fiscal 2019 to $377 million.
Legislative leaders reacted favorably to Raimondo's budget and said they're not concerned about assumptions in the plan.
"We’re targeting tax cuts for economic development," said Speaker Mattiello. "I believe that it is a good economic budget, it’s a good budget to improve our economic condition and create jobs, so I’m very pleased. However, the budget needs to be vetted. We have to look at the details and we’ll have further discussions."
Mattiello, in particular, praised efforts to cut the state's structural deficit as long overdue, and said the details of the budget will be vetted by lawmakers in the months to come. Senate President Teresa Paiva Weed called the projected Medicaid savings a chance to improve how the state delivers healthcare.
“This is an opportunity to save money and deliver better outcomes," Paiva Weed said. "Other states have done it, and I’m confident Rhode Island can do it as well.”
Republicans, meanwhile, in a response delivered by Representative Michael Chippendale (R-Foster), expressed concern about tax and fee increases, including the plan to tax healthcare premiums to help support HealthSource RI.
Raimondo said the budget includes steps to improve the state's competitive position, including the eliminating of what she called burdensome licensing regulations for more than 30 professions, and the repeal over 5 years of a sales tax on commercial energy.
This post has been updated.