Metro

General Assembly, governor stare down structural deficit

Uncertainty remains over likelihood of bipartisan agreement on tax cuts for elderly

By
Senior Staff Writer
Wednesday, January 21, 2015

In the first month of Gov. Gina Raimondo’s term, plans for statewide economic recovery have and will continue to dominate discussion in both chambers of the General Assembly and in the Office of the Governor.

The new governor inherits a budget deficit of nearly $200 million and a structural deficit expected to reach $400 million by 2019. She will also need to grapple with Rhode Island’s unemployment rate, which is among the highest in the nation at 7.1 percent as of November, according to the U.S. Bureau of Labor Statistics.

The governor indicated throughout her campaign that ameliorating the unemployment crisis and budget deficit are priorities her. In both her inaugural address and an interview last month with Rhode Island Public Radio, she expressed her intention to eliminate the “unsustainable” structural deficit entirely over the course of her first term in office.

The state has developed a bit of a tradition in welcoming executives with budgetary woes: Former Gov. Lincoln Chafee ’75 P’14 P’17 entered office with a deficit of $300 million waiting for him, RIPR reported.

What remains to be seen is how Raimondo will address these significant financial issues, and the General Assembly awaits Raimondo’s proposed budget. Though normally submitted in early January, Raimondo, as a new governor, will have an extra month to complete the budget. It will then be debated, changed and eventually passed by the General Assembly, before being signed by Raimondo.

Meanwhile, party leaders in both chambers of the legislature have been vocal about their intentions to work closely with the governor in the coming year. Both Speaker of the House Nicholas Mattiello, D-Cranston, and Senate President Teresa Paiva Weed, D-Newport, have pledged to cooperate extensively with Raimondo in preparing legislation, the Providence Journal reported.

While both chambers of the legislature retain a Democratic supermajority, plans for recovery among party leaders differ somewhat.

Mattiello, who was unanimously elected as speaker this month by his colleagues, has advocated a plan to make social security benefits exempt from state income tax, which would eliminate about $20 million in tax revenue.

The state’s current tax policy makes Rhode Island an “outlier state,” said Larry Berman, Mattielo’s communications director, adding that Rhode Island is one of only 13 states to tax social security income. Social security tax reform would make the state more appealing to retirees, Berman said, which would generate enough economic output to offset the anticipated revenue loss.

House Minority Leader Brian Newberry, R-North Smithfield and Burrville, also endorsed this policy, adding that state Republicans have supported it for years. But “the real issue that the state needs to deal with,” he said, “is the structural deficit.”

The key to reducing the structural deficit will be reigning in the state’s “ballooning” social spending budget, Newberry said. He added that the social spending budget, in combination with the state’s pension system, made up nearly half the state’s budget in recent years.

Newberry said he is optimistic about how state Democrats will work with minority leadership to reduce spending, adding that Raimondo contacted state Republicans about what to include in the budget. While this is no indication of whether these policies will ultimately be included, “it’s good for a Democratic governor to reach out to Republicans in the legislature to at least understand where we’re coming from,” he said.

The Office of the Governor could not be reach for comment by press time.