R.I. officials praise Chafee’s proposed budget plan

If the budget passes, the state will see no new taxes, and corporate taxes will decrease

Senior Staff Writer
Thursday, January 31, 2013

Chafee proposed additional funds to public schools, colleges and universities in an effort to improve the economy.

Gov. Lincoln Chafee ’75 P’14 P’16 received generally positive reactions from academics and officials for his proposals to cut the corporate tax rate and tentatively cap tuition at the state’s public colleges and universities in the Jan. 17 State of the State address.

Presenting his third budget to the General Assembly, Chafee asked for “no increase in taxes, fees or charges of any kind” on individuals or businesses, adding that the corporate tax rate should be lowered from 9 to 7 percent — a lower rate than both Connecticut’s and Massachusetts’.

Speaker of the House Gordon Fox, D-Providence, told WPRI that he thinks the budget “is a great starting point,” but added that “the devil’s always in the details in terms of lowering the corporate tax … so until we get into the weeds and see how it all balances, we will hold further comment.”

House Minority Leader Brian Newberry, R-North Smithfield, told WPRI that he was “certainly happy about the lack of any taxes or fee increases” and supports “the idea of cutting the corporate tax.” He added that it was “an improvement over the last two budgets.”

“This is by far the best thing Gov. Chafee has done since he’s been in office,” said Leonard Lardaro, a professor of economics at the University of Rhode Island. He added that he thinks the budget will support long-term investment in Rhode Island’s economy. “It’s not an instantaneous thing … but if these are implemented, we’re definitely starting to move in the right direction.”

Lardaro praised Chafee’s proposals but argued that if the state passes the budget, it will be at risk of running a deficit. Politicians are supposed to present balanced budgets, but “this one is a little optimistic on revenue,” he said.

Recent data show revenue from state income and sales taxes is on the rise and expected to keep rising. But Lardaro said analysts may be predicting too great an increase. He added that he thinks Chafee might be creating a challenge for future leaders who will have to make cuts in order to balance the budget.

Rhode Island should also explore other policies that will help it stay competitive with neighboring states, Lardaro said. Massachusetts may be lowering its sales tax rate, he said, adding that “we have to assume that other states are going to keep competing.”

Chafee attributed Rhode Island’s high business operating costs to some of the largest local property taxes in the nation, proposing “an additional $30 million dollars in property tax relief” to combat the tax burden. He said the money would go to the cities and towns themselves to disincentivize tax increases as well as to fund infrastructure upkeep.

Cranston Mayor Allan Fung told WPRI he applauds Chafee “for the recognition of the need for help for the cities and towns, particularly in light of the significant drastic cuts that we’ve had to achieve over the past several years.”

In an effort to make college more affordable, Chafee proposed a $6 million increase in funding for higher education to help stave off tuition increases at URI, the Community College of Rhode Island and Rhode Island College, as long as the schools make $6 million worth of budget cuts to “meet (him) halfway.”

Lardaro said that though this budget was Chafee’s “best” yet, he did not think the governor put “adequate emphasis on the role of higher education in moving the state forward.”

“Our most glaring deficiency is the lack of skill in our labor force,” Lardaro said. Chafee did not provide the $14 million state higher education institutions had requested to keep tuition costs level and enable them to train tomorrow’s workforce, he said.

Rhode Island is trying to move toward knowledge production and away from manufacturing but will not be able to do so without significant increases to higher education funding, Lardaro said. Rhode Island was the 16th best state in the nation for innovative technology-based economies, according to the 2010 State New Economy Index.

Commissioner of Higher Education for the State of Rhode Island Ray Di Pasquale had a more positive reaction to the proposed funding, Special Assistant to the Commissioner Mike Trainor said in an interview with Rhode Island Public Radio. Trainor said the commissioner thought the budget exemplified “a continuation of (Chafee’s) three year trend now to reverse the hemorrhaging of state aid to public higher education that occurred under the prior administration.”

Chafee also proposed adding $30.3 million to public education and $14 million to vocational schools on top of the funds required by a state education formula , said Elliot Krieger, executive assistant for communications at the Rhode Island Department of Elementary and Secondary Education. The formula is based on district capacity, student aid and the district’s financial need. While some of the additional funds are going to districts in need, some will go toward special needs education, career technology education and early childhood education, among other projects, Krieger said. If Chafee’s budget passes, Rhode Island “will have invested $115 million in public K-12 and higher education” over the past three years, he added.

“The world sees us as a caricature: ‘What Not to Do,’” Lardaro said. “This is something I hope the politics don’t dominate and the economics do.”