Education, housing and health care come out on top in lawmakers’ revised fiscal 2025 budget

Copies of the proposed fiscal 2025 Rhode Island budget await distribution at the State House on Friday, May 31, 2024. (Alexander Castro/Rhode Island Current)

Good news for transit riders, Medicaid providers and public school students, all of whom stand to benefit from the revised fiscal 2025 budget given first passage by a panel of House lawmakers Friday night.

The $13.9 billion spending plan unveiled late Friday falls just shy of the $14 billion high water mark that characterized fiscal 2024’s approved spending plan, but is $271 million more than what Gov. Dan McKee proposed in January.

The updated spending plan includes enough money to stave off service cuts at the financially struggling Rhode Island Public Transit Authority while offering Medicaid providers long-awaited reimbursement rate hikes in a single year, rather than the three-year incremental uptick McKee proposed. Meanwhile, a nearly $33.8 million boost in state aid for K-12 schools, above what McKee called for, will offset a steep drop in federal funding, along with more dollars for multilingual learners.

“Through this budget, we are emphasizing education at every level and supporting children,” House Speaker K. Joseph Shekarchi said in a statement Friday afternoon.

Shekarchi stressed the changes as the result of a “truly collaborative process” including lawmakers in both chambers as well as Gov. Dan McKee.

However, lawmakers have axed several components of Gov. Dan McKee’s original, $13.7 billion spending proposal, including $60 million in bonds to help pay for a new, dedicated state archives and a proposed rewrite of state income taxes for banks intended to stop Citizens Bank from shifting its investments, and employee base, outside the state.

“It has been a dif ficult budget because we feel the pain of Rhode Islanders,” Shekarchi said, speaking to reporters Friday night. “We tried to do the most good for the people that need it most.”

The House Committee on Finance’s 13-1 vote Friday sends the updated spending proposal to the full House of Representatives for consideration on June 7, with Rep. George Nardone, a Coventry Republican, casting the sole vote in opposition. Lawmakers must approve a final spending plan before the new fiscal year begins July 1.

Top priorities: Housing and Washington Bridge

Acknowledging the skyrocketing cost to demolish and replace the I-195 Washington Bridge, the spending plan includes $80 million to cover the state’s share of the estimated $400 million cost. This includes repurposing unspent pandemic aid, as McKee suggested, but replaces the governor’s proposal to borrow against future gas tax revenue by instead allotting $40 million in long-term capital spending for the cost.

Combating the housing crisis, a top priority for Shekarchi, takes an even bigger role in the revised spending plan, with a historic $120 million bond to stimulate housing production, including authorization for a state public housing developer. This is $20 million more than the borrowing amount requested by Housing Secretary Stefan Pryor and included in McKee’s budget.

“We need to increase production, production, more production at every single level,” Shekarchi said.

Medicaid reimbursements, new health care initiatives

The updated budget also adds $40 million in state funding to the proposed increase in fee-for-service rates for Medicaid providers who work in behavioral health, community care and with infants and toddlers with developmental disabilities. The increase allows the state to meet the $100.3 million cost to offer rate hikes in a single year, as recommended by the Office of the Health Insurance Commissioner.

Meanwhile, the understaffed Department of Children, Youth and Families will see a $21 million funding boost to cover workforce expansion, foster care and congregate services, among others.

A new $1 million restricted receipts account, to be managed by the treasurer, will help residents pay off medical debt, one of the proposals in a 25-bill health package put forth by the Rhode Island Senate. A separate bill funding a scholarship program for doctoral and nursing students who stay and work in the state was also added to the updated spending plan.

Help for RIPTA’s fiscal cliff, green economy bond

Amid outcries over service cuts to the embattled transit system, lawmakers allotted an extra $5 million to RIPTA – still $3 million shy of closing the agency’s funding deficit but enough to stave off any reduction in bus route locations or schedules, Shekarchi said.

Also heeding advocates’ calls to preserve and protect forest and farmland, a $53 million green economy bond now includes $13 million for the cause, while money to help rebuild the Newport Cliff Walk was trimmed from $8 million to $3 million to account for a newly awarded federal grant.

Retirees

Retired state workers and teachers clamoring to reinstate the compounded cost-of-living adjustments that ended under a series of pension reforms enacted in 2012 still won’t get exactly what they asked for. Rather than reinstatement and retroactively applying COLAs — an estimated $169 million cost according to a legislative review that ended earlier this year —the revised budget includes new COLAs effective July 1 for retirees who stopped working before the pension reforms took effect.

“These people are the oldest, the people who have been retired the longest,” Shekarchi said. “They didn’t have the opportunity work longer into the system.”’

For other retirees, the budget preserves McKee’s proposal to raise the minimum income that retired workers from any job can earn without being taxed – from $20,000 to $50,000 (or double for joint filers).

Higher ed bonds

Two separate bond proposals supporting a Biomedical Sciences Building for the University of Rhode Island, and a separate Institute for Cybersecurity and Emerging Technologies at Rhode Island College were increased above McKee’s recommendation to reflect full funding requested by each school: $87.5 million and $73 million, respectively.

A fifth borrowing proposal, borrowing $10 million for three specific arts projects as well as grant money administered by the state arts council, was also added to the lawmakers’ version of the budget.

New state archives is out

No longer in the borrowing list: a $60 million bond that would have covered a portion of the $100 million price tag for a new state archives, a top priority for Secretary of State Gregg Amore.

Shekarchi cited lack of details on where the archive would go or a funding partner to cover the rest of the cost as reason why the revised budget does not include any borrowing for the project.

No tax rewrite for Citizens

The need for more information and time is also why Shekarchi said a proposed tax rewrite intended to benefit Citizens Bank was nixed from the updated spending plan.

“I don’t want to be the speaker who loses Citizens Bank,” Shekarchi said in a statement Friday. “I will roll up my sleeves and get to work with them over the summer so we can prefile legislation that can be vetted early in the year, but right now, we don’t have enough information to know whether this plan is the right move for our state.”

Rory Sheehan, a spokesperson for the bank, issued an emailed response Friday.

“We are disappointed that Budget Amendment 19 was not included in the State Budget,” Sheehan said. “This decision will make it difficult for the state to compete on a level playing field with Massachusetts and other states and is not in the best interest of Rhode Islanders.  We urge the Rhode Island General Assembly to address the issue before the end of the session.  We are committed to working diligently to achieve a positive outcome.”

No sales tax cut

McKee’s budget proposal offered a wishlist of extra spending items if state revenue beat expectations, including trimming the state sales tax. Senate President Dominick Ruggerio has also pushed for reducing the state sales tax to remain competitive with neighboring states.

Shekarchi’s response to a prospective sales tax cut?

“Absolutely not,” he said Friday.

The revised budget maintains the existing 7% sales tax while striking McKee’s proposal to cut the corporate minimum tax. However, McKee’s proposed 25-cent tax increase on cigarette packs survived, as did a slightly different version of the governor’s recommendation to tax vaping products.

Unlike years past, McKee and Ruggerio did not attend a press briefing on the budget held Friday night at the State House. Each indicated general support for the revised spending plan in prepared statements.

“I am pleased that the budget will invest in many Senate priorities, particularly in the areas of health care, child care, education and providing some needed relief to retirees,” Ruggerio, a North Providence Democrat, said.

“The Speaker and I are aligned in our priorities of improving the education, housing, and health of all Rhode Islanders, and this budget makes key investments in all those areas,” McKee said. “Like the Speaker, I too appreciate the collaborative spirit in which this budget was shaped.”

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