Metro

Rhode Island begins operating under new budget

$8.7 billion budget promises tax cuts for some, education for others

By
Metro Editor
Wednesday, July 29, 2015

The Ocean State began operating under a new state budget July 1, after it was passed unanimously by the Rhode Island House of Representatives and confirmed by all but three state senators.

The $8.7 billion budget embraces many of Gov. Gina Raimondo’s suggested steps for improving the state’s economic conditions — under the new budget, most Social Security benefits are tax-exempt, businesses receive several tax exemptions and more funds are devoted to the state’s educational system.

“We’re laser-focused on jobs and the economy, and when we put out a pro-jobs, pro-economy budget, the members rallied around it and responded appropriately and supported it overwhelmingly,” said Speaker of the House Nicholas Mattiello, D-Cranston, after the budget passed June 16, WPRI reported.

Businesses around the state are expected to benefit from several measures in the budget. One measure allows businesses not to pay sales tax on electricity and heating fuels — a tax break already enjoyed by households. Also affecting businesses, the minimum corporate tax was reduced from $500 to $450, WPRI reported.

An important aim of the budget was to cut spending on the state Medicaid program, which provides healthcare to the elderly, disabled and poor. With nearly one quarter of the state receiving Medicaid benefits, Raimondo turned to the “Reinventing Medicaid” group she appointed, headed by Secretary of the Rhode Island Department of Health and Human Services Elizabeth Roberts. The budget cut the projected state cost of the Medicaid program by over $30 million while still keeping the reforms palatable for nursing homes and hospitals around the state.

HealthSource R.I., the state health insurance exchange, which was not guaranteed a future at the beginning of the legislative session, was also supported by the budget. Legislators had the option to abandon the exchange in favor of using its federally-run counterpart, HealthCare.gov. But lawmakers decided to fund HealthSource R.I. by levying a tax on insurance premiums for individuals and businesses.

The state budget also finalizes the pension settlement, resolving nearly all of the legal challenges to the state’s 2011 redesign of the pension system. The pension law, which was crafted by Gov. Raimondo while she was serving as the state’s treasurer, was intended to save taxpayers nearly $4 billion by cutting retirement benefits to state workers. It has been under scrutiny as many unions sued, charging that the law was unconstitutional. Under the terms of the settlement, “some of the nearly 60,000 retirees and workers impacted by the pension overhaul would receive small increases in their benefits in exchange for dropping the suit,” WPRI reported June 9.

Under the new budget, education program funding will increase by about $33 million, and an additional $20 million has been earmarked for school construction projects. The University of Rhode Island, Rhode Island College and the Community College of Rhode Island will each receive $7.5 million more under this budget than they did last year.

Though Raimondo’s RhodeWorks proposal — aimed at improving the state’s roads and bridges by imposing tolls on commercial trucks traveling along highway corridors — was not part of the final budget, General Treasurer Seth Magaziner’s Rhode Island Infrastructure Bank was created, and will replace the Rhode Island Clean Water Finance Agency to focus more broadly on projects regarding energy efficiency and state infrastructure.

Some taxpayers will also face additional costs under the new budget: A 25-cent hike will be added to the current sales tax on cigarettes, and elderly and disabled citizens earning below 200 percent of the federal poverty level will be required to pay half-fare to ride RIPTA buses, while all Rhode Islanders under the poverty line previously paid nothing.