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Chafee budget contains no tax increases

January 16, 2013

PROVIDENCE – Boasting a “Back to Basics” budget that contains no increase in taxes – and even a 2 percent reduction in the corporate tax rate over three years – Gov. Lincoln Chafee submitted an $8.1 billion tax and spending plan for 2014 to the General Assembly on Wednesday.
Of the budget total, $3.4 billion will come from state taxes and other revenues, with the rest provided by the federal government.
With a net surplus of $21.3 million expected to be left over from the current budget at the end of June, the administration is not asking the General Assembly for a supplemental appropriation for the 2013 budget.
Now that the governor has presented his budget, the House and Senate will hold hearings on its proposals. Near the end of the session, the House Finance Committee will produce a budget of its own, keeping some of the governor’s proposal, scrapping others and adding some of the legislature’s own initiatives.
Both Senate President Teresa Paiva Weed and House Speaker Gordon Fox gave Chafee high marks for his budget proposal.
Paiva Weed called it “extremely well-done,” but neither would make promises about how much of it would pass intact. Both applauded the fact that it doesn’t increase taxes and drops the corporate tax rate – which the legislature was considering as well, that it funds the education formula and helps cities and towns.
“We have avoided tax increases and are lowering the corporate rate through both good fiscal management and a strengthening economy,” Chafee told a joint session of the General Assembly. “As we move forward, it is important to keep investing in the building blocks of this progress – that is, investing in education, infrastructure, and workforce development.”
The governor’s budget spends $27.7 million to once again fully fund the state school aid formula, and adds another $2.7 million in “categorical aid” for local school district; expenses such as transportation, special education, career and technical training and early childhood programs.
As a result, the allocations for local school districts are: Pawtucket, $70.6 million, an increase of $2.4 million; Woonsocket $48.1 million, up $1.4 million; Cumberland $14.9 million, a $700,000 hike; Lincoln, $8.9 up $250,000 and Glocester, $2.7 million ie losing $95,000. The state-run Central Falls district will receive $38.2 million, a loss of $1.5 million.
The budget also allocates an additional $6 million in funding for the state’s schools and colleges, while at the same time prohibiting them from raising tuitions or cutting scholarships.
Chafee also proposes an additional $20 million in aid to cities and towns, particularly for distressed communities. Five million of that would come right away as part of the 2013 budget with the other $15 million coming after the July 1 start of the budget year. Of the $15 million in 2014, $10 million of that would come as part of a formula based on population. To get that money, the cities and towns would have to have a locally approved pension improvement plan in place by November.
Chafee is also asking lawmakers for an additional $10 million to help communities improve their roads and streetscapes. Based on the local road mileage in each community, Burrillville would receive $259,000; Central Falls would get $100,000 (the minimum amount); Cumberland, $280,000; Glocester, $222,000; Lincoln, $182,000; North Smithfield, $145,000; Pawtucket, $360,000, and Woonsocket, $211,000.
“We are proud of the last two budgets,” Director of Administration Director Richard Licht told reporters, “but this one is really outstanding. “It is evidence of terrific fiscal discipline.”
Licht credited the newly created Office of Management and Budget for imposing that discipline on the various departments of government by holding them to their budget allocations in the current year and keeping requests for the coming year low.
The governor is also proposing a “limited reinstatement” of the Historic Preservation Tax credits, basically allowing “abandoned” and unused tax credits approved in the past to be applied to new ventures. Preference will be given to projects that are ready to begin – what the federal government called “shovel-ready” – to help boost employment. There is currently $25 million available from abandoned projects, with the expectation that even more could be available after a May 15 deadline that will allow developers to abandon projects and have previously paid fees refunded.
Under Chafee’s plan to reduce the corporate tax rate, the 9 percent rate would drop to 8 percent in 2014. Costing the state about $5.3 million in revenue; to 7.5 percent in the 2015 budget, costing $12,9 million, and to 7 percent in 2016, at a cost of just over $20 million.
The administration said that if the rate reduction is approved it would move Rhode Island from a ranting of 43rd among the 50 state to 26th and lower than the other five New England states.
Chafee and other administration officials say this is the earliest a governor has presented his annual budget to the legislature in more than two decades. This year the budget books sport a portrait of Pawtucket’s Slater Mill by Lincoln artist Peter Campbell.

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