LEGISLATIVE ALERT: BUDGET WEEK
RI's Budget - Running in Place but Will it Pass?
The Budget bill, along with its individual Articles 1-23, will be up for a vote in the House on Thursday, June 12, starting at 2:00 pm.
So what's in the House Budget Bill? Before we get to that, let's play a little Jeopardy!
I'll take RI politics for $200.
The answer is "more taxes, more fees".
What is a synonym for the word 'solution' in RI?
Let's take RI politics for $300.
The answer is "the Sakonnet gantry"
What costs $5 million to erect and then disappears before your eyes?
I'll take RI politics for $400.
Why did the RI General Assembly create a law to establish a toll, spend millions of dollars installing the infrastructure to collect that toll, spend two years creating uncertainty in a local business community and then decide they didn't want the toll?
And therein lies the problem with RI's government.
Little or no forethought, analysis or understanding of the economic impact of their decisions, the decisions that ultimately become RI law. Two years ago, this toll was included as part of the budget at the last minute, with no analysis performed or provided to the people who would vote on it (exactly like the budget article that consolidated the two education boards into one with no explanation for the change, never mind the impact it would ultimately have). And yet, it came as a surprise to our legislators that businesses would pack up and leave if the toll was instituted. We are befuddled, that after years of businesses testifying against burdensome regulations and taxes that increase the cost of doing business, after the governor's own office distributes a survey requesting input on regulation and other burdens placed on small businesses, after commissions and departments having been established to review and address the cost/benefit of regulation and cost burdens placed on small business, that legislators were surprised by the backlash. Go figure.
OSTPA fully supported the movement to remove the Sakonnet tolls because the General Assembly unfairly placed the burden of maintaining the entire state's roads and bridges on the backs of a small community. However, we espoused the reduction of non essential spending. Unfortunately, General Assembly leaders provided a novel approach to RI's infrastructure maintenance requirements - increase the gasoline tax 1 cent (3% increase), increase the vehicle inspection fee (40%) and increase the good driving fee (100%). It only took 2 years to come up with that novel solution.
Beginning in July, 2015 you will pay an additional 1 cent tax to partially fund transportation infrastructure. That will mean Rhode Islanders will pay 34 cents a gallon compared to Massachusetts' 26.5 cents a gallon. That's 28% higher than our neighbor. By the way, were you aware that the current 33 cent tax includes 1 cent for an environmental protection fee? As a result of indexing, the gasoline tax will continue to climb in the future. These seemingly small additions are what are known as "death by a thousand cuts" for which RI is so famous. Don't be disheartened by this because RI is nowhere near the bottom on the gas tax issue. While there are 36 states which have a lower tax than RI has, at least there are 13 states that have a higher tax. Oops, after this increase, make that 12 states that will have a higher tax.
There are two more details regarding the legislators' change of heart. It's been reported that the Sakonnet gantry cost $5 million to erect and that there may be an additional $2 million to pay the contractor, Law Enforcement Systems, LLC.
It seems this will be a very costly change of heart. What happened to 'measure twice, cut once'?
It's the uncertainty - Is it in or is it out?
This approach to legislation is what provides uncertainty for the business world. Let's tax the tourism packages extra (2011), then reverse it (2012); let's cut benefits to the developmentally disabled (2011), then restore a portion of those benefits (2012); let's put up a toll on the Sakonnet Bridge (2012), then reverse it (2014); let's consolidate the Education Boards (disrupting the entire education system) (2012), then return to the original construct under the new organization (2014). The business world recognizes this lack of vision for RI's future, the misguided starts and stops and this uncertainty keeps them away.
The Budget looked at RI's tax structure.
There are two budget items that have the potential to begin helping the ailing RI economy. The increase in the estate tax exemption, along with the elimination of the 'cliff ', although very late to the party, may help stem the tide of residents leaving RI to find safer havens for any accumulated life savings. We have reported, on countless occasions, the Ocean State Policy Research Institute's (OSPRI) report that examined RI's mass exodus and the loss of substantial wealth, all resulting from a change in Florida estate tax law. OSPRI reported that the average annual income leaving the state increased 44% after the 2004 FL estate tax change. More information was reported at RIEstateTax.com. Will RI be able to recoup this loss of people and wealth? Probably not, but it may provide the current population of people with wealth less of an incentive to move as they age.
The drop in the corporate tax rate from 9% to 7% could be seen as an indication that RI wants businesses to locate here, except if you operate in more than one state, then you will be hit with a new combined reporting tax.
There was an upside in this budget. The seduction of a 'private/public' partnership, otherwise defined as, 'the private markets won't touch this thing so I need help', was resisted in this phase of the budget process. There was no $39 million subsidy for the Superman building. The process isn't over yet, so we can't guarantee the subsidy won't pop up in the next week or so. Unfortunately, there is also that very expensive Garrahy Courthouse Parking Garage for $45 million that the Governor proposed and the House has included in its budget. That's $45 million for 1,250 parking spaces. Although the House budget requires that 3 parcels of I 195 land be under a purchase and sale agreement prior to beginning construction, that's still $45 million to build 1,250 parking spaces. Is there such demand in the area for parking to warrant a cost of $36,000 per parking space?
As our elected leaders attempt to make it look as if they are working to improve the economy and provide an inviting landscape in which to do business, the budget lacks the integrity of a thoughtful process, it lacks vision. The proposals to improve funding for infrastructure, in addition to the changes in tax structure, may indicate to the business community that there has been a shift in priorities, but the $1 billion in deficits, that continue unabated for the next 4 years, indicates that there wasn't even a passing thought to address RI's structural deficits. This is the concept that concerns potential new business operators. If the state projects significant future deficits, it can only mean one thing - the 'solution', synonymous with more taxes, more fees. That is not an inviting economic landscape. Our own House Finance Chair acknowledged the future deficits but said "We're going to have to deal with it when they come. We don't know. It's a concern. It's always been a concern. We're hoping Twin River can do better." So the elected leadership is putting all their eggs in the marketing basket of Twin River to solve the $1 billion in deficits, because clearly, they just don't have the courage to do what is needed. The budget does, however, include an increase in the Twin River marketing budget as it relates to the state's share. Whew!
Of course the budget includes a payment of $12 million for 38 Studios. Ken Block's commentary in the Providence Journal sums up nicely why the Speaker should not be paying the 38 Studios bond in this year's budget. Too much new information is coming to light and it looks like Rhode Islanders, as usual, have been duped. Following the trail of information seems to lead to insider dealings underscored by non-disclosure agreements signed by key players - long before anyone originally thought 38 Studios was even on the radar screen.
Taxpayers' should not be footing the bill for this bailout particularly when investigations into what actually happened are stymied. Oversight Chairwoman MacBeth plans to continue her fight to find the truth, as are Representative Chippendale and Representative Dickenson. But we believe the Oversight Committee must have subpoena power. Even without it, their plan is to forge ahead.
One of the best subterfuges in recent memory is the trick of providing $25 million in state employee raises but not including them in the budget. It appears the Speaker has determined that the Governor can do what he wants with raises but this budget will not include the revenue to cover those raises.
The second best subterfuge in the budget is the hide and seek of the additional $52 million in Medicaid enrollments not projected by the crew of the sinking USS HealthSourceRI. Although it was mentioned that $15 million in savings was budgeted for accelerating the recertification process to verify Medicaid eligibility, that doesn't come close to covering the $52 million in unanticipated expenditures. Isn't that type of budgeting illegal?
Beyond kicking the can down the road.
This budget does not address RI's healthcare exchange. It doesn't include the annual cost of $23 million to maintain the system, but neither does if provide for the federal government to take control of and maintain the exchange. Apparently, the issue of RI's insurance exchange will hang in limbo for a new General Assembly to address.
So where's the beef?
Missing from this budget, like all budgets prior, is the desire to fix broken government systems and reign in outrageous fraud and copious amounts of waste. The list is endless. The unemployment system, the Temporary Disability Insurance System (TDI), the Medicaid system, the welfare and food stamp systems and the outrageous overtime paid to state nurses just to name a few. Legislation or budget articles to address these items would go a long way in reducing our structural deficit, but for some reason, leadership does not want to reduce or eliminate fraud and waste in RI's governmental systems. Where is the legislation eliminating the numerous business regulations that were found to strangle small business and found to have very little benefit in comparison to cost?
When the ATM runs out, there is always more debt.
As with any election year, it wouldn't be complete if the General Assembly did not ask to place RI taxpayers deeper into debt - to the tune of $248 million, half of which will build a new URI engineering school (necessary?), $35 million for 'mass' transit hub, as if RI has any need for 'mass' anything, $35 million for arts and culture, that's a must-have when faced with $1 billion in deficits, and $53 million for clean water, open space, and healthy communities. Review the list of items for yourself. Do you think we should be putting them on RI's credit card?
The General Assembly will need to walk and chew gum for the remainder of the session.
With the proposed budget out in the open, it is time for the General Assembly leaders to focus on the good government bills. The House has passed the Master Lever bill. Let Senate President Paiva Weed know that she needs to let the bill come to a floor vote. It is the will of the people – tell her not to make next session the 52nd year the Master Lever will be an issue. It's really getting old.
Both chambers need to pass a real Ethics Reform bill, one that includes General Assembly oversight, one that provides Rhode Islanders with a reason to believe in its government again. We implore you to write both House Speaker Mattiello and Senate President Paiva Weed and let them know you want a meaningful Ethics bill that includes oversight of the General Assembly members.
Lots to be voted on the floor this week.
As is the case every year, the 'bad' bills are held until the end of session and then passed in a flurry of activity. One set of House/Senate bills, to be voted on Wednesday in each chamber, is the Green Energy Distributed Generation bills (H 7727/S 2690) that will increase your electricity costs by forcing National Grid to buy electricity at much higher-than-market rates and then turn around and charge you much higher rates. The next distressing bill, to be heard on Wednesday in the Senate, is the diluted, Ethics 'Lite' bill (S 2824) which has no teeth and, therefore, no meaning, but is simply a decoy to say they did something with a good government bill. Increasing the minimum wage (S 2249), in a state with the highest unemployment, is also up for a full vote in the Senate on Wednesday.
On the up side, each chamber, having passed their own bill on a joint resolution to pose a ballot question regarding a Constitutional Convention, will now vote on the other chamber's bill (S 2538/H 8060) on Wednesday.
Legislative Hearings 6/10/14 - 6/12/14
TUE, JUN 10
Room 313, 3:00 pm
APPOINTMENT OF RICHARD LICHT - JUSTICE OF THE RI SUPERIOR COURT
TUE, JUN 10
Room 211, 3:00 pm
S 2344 Removes the requirement for competitive bidding on state contracts in certain instances.
Sponsors: Lombardi, McCaffrey, Lombardo, Conley and Jabour
Room 211, Rise (4:30)
S 2219 Implements pre-payment prevention and recovery solutions to combat fraud, waste and abuse in the Medicaid system. A must now that expanded Medicaid has surpassed original projections and is expected to cost Rhode Islanders an additional $52 million next year.
Sponsors: Crowley, Sosnowski, Miller, Pearson and Jabour
TUE, JUN 10
Room 35, Rise (4:30)
H 7248 Prohibits payment for 38 Studios moral obligation bond.
Sponsors: MacBeth, O'Neill, McLaughlin, Dickinson and Chippendale
H 7295 Creates a commission to investigate the failure of public loan guarantee programs.
Sponsors: Chippendale, Morgan, Hull, MacBeth and Nunes
WED, JUN 11
Room 101, Rise (4:30)
H 7255 Requires students to have a minimum GPA of 70 out of 100 for all years the student attends a public high in order to graduate.
Sponsors: Philllips, Casey, Mcnamara, Shekarchi and O'Brien