Rhode Island Gov. Dan McKee’s latest $14.2 billion budget proposal adds about a quarter-billion dollars from the current spending plan, reflecting the challenge of fueling the government in a state where expenditures continue to outpace revenue.
McKee said his budget, which he unveiled Thursday, would close an approximately $250 million deficit without any broad-based tax increases. “It will not just protect Rhode Island’s progress, it will protect the taxpayers of our state,” McKee said.
The proposal banks on $10 million in revenue from the eventual restart of the RhodeWorks truck-tolling program, following a recent court decision, and predicts that amount will grow to $40 million in fiscal 2026-27.
The spending plan includes investments meant to spark economic growth, increases in education aid, and a proposed ban on new sales of the semiautomatic rifles sometimes called assault weapons.
But as McKee notes, the 3.7% annual rate of increase in state spending he is proposing is greater than the projected 2.5% yearly growth in state revenue projected for the next five years.
If the governor’s budget is enacted, state budget officials say it will make a slight reduction in the gap between expenditures and revenue, although the imbalance also explains why bigger deficits are expected in future years, although McKee’s proposals would cut an $683.5 million in fiscal 2030 to under $400 million.
Despite efforts to restrain spending, state Office of Management and Budget Director Brian Daniels said during a Smith Hill briefing that cutting costs is difficult because core educational spending is based on an average of New England states and entitlement programs like Medicaid, the healthcare program for the poor, are largely available to anyone signing up.
“So we have about almost two-thirds of the budget when you look at health and human services and education that are tied either to entitlement programs or to the education funding formula,” Daniels said, “which is why it was particularly incumbent upon us to take a look at the things more in our control — so the contracted services, the operating costs, and making the long-term efforts in health and human services to try to constrain some costs.”
While state employee salaries and benefits climb 4.5% in the governor’s budget, aid to cities and towns remains flat. Contract professional services and operating supplies and expenses are each cut by more than 4%. The budget also proposed saving money by shifting some state operations to state-owned buildings and cites savings from a previous boost in spending for the state Department of Children, Youth and Families.
The General Assembly will now spend months reviewing the governor’s budget proposal during committee meetings before making a series of changes and passing an amended version in June.
Last year, McKee proposed a $13.68 billion budget and the legislature added about a quarter-billion in additional spending.
Rhode Island’s budget has grown by billions of dollars since 2018-19, the last spending plan before the pandemic. A gusher of federal aid during the pandemic fueled an uncharacteristic string of surpluses in the state.
Here’s a look at some key parts of McKee’s proposed budget.
Guns
The governor’s budget includes a sales tax exemption for gun safety goods, such as lock boxes, safes and trigger locks, as a way of justifying including a ban on new sales of semiautomatic rifles. Previously obtained guns would be grandfathered in, provided they are registered with local police — an issue that may spark howls of protest from gun rights advocates. There are certain exemptions for some law enforcement and military personnel, and retirees.
Investment
McKee’s plan includes an increase of $2 million to pay for more than 1,000 additional youth learning opportunities. More than $2 million is added to train 500 more Rhode Islanders through the Real Jobs RI program.
Primary Care
The budget calls for using $400,000 for a loan repayment program to encourage primary care doctors and pediatricians to practice in the state for two years.
Education
The governor recommends $43.4 million more in general revenue spending for K-12 schools. His plan includes almost $11 million more for the state’s public institutions of higher learning, with $1.7 million going to support services for career readiness, career placement and internships. The Rhode Island Promise Scholarship at CCRI is funded with an additional $1 million and the Hope Scholarship at RIC an additional $2.1 million.
Taxes/Fees
McKee recommends extending the research and development tax credit from 7 to 15 years to match Connecticut and Massachusetts.
The budget raises the cigarette tax by 50 cents per pack, to $5.
To make up for slumping gas tax revenue, the budget proposes a new e-vehicle and hybrid registration fee — $150 per year for a battery-operated vehicle and $75 per year for a plug-in hybrid. The new fees are projected to raise an additional $1.7 million of vehicle registration revenue, climbing to $214.7 million in fiscal 2030.
Transportation
The governor supports making RhodeRestore, a statewide road improvement program, permanent and includes $27 million for statewide infrastructure.
Homelessness
While federal aid is declining, McKee proposes two new ways to raise funds to assist people experiencing homelessness: applying a 5% tax on homes rented through services like AirBNB and using an increase in the 0.92% conveyance tax, to 1.25%, on properties sold for more than $800,000. The two sources are projected to produce an additional combined $4.4 million in the next year, as part of almost $16 million in spending on homelessness response.
