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6/5/2014 House Finance Committee approves 2015 state budget
STATE HOUSE – The House Finance Committee today approved a revised budget bill that closes an unexpected $67 million gap, fully funds education aid while averting bridge tolls and tax increases, establishing a steady source for transportation funding, promoting economic development and reducing the corporate and death taxes.

With a 14-to-2 vote, the committee approved the $8.7 billion budget, which will come before the full House of Representatives next week.

“With a lot of hard work and collaboration, we’ve developed a plan that is responsible, delivers on our commitment to strengthening our economy, and supports public schools and higher education. We looked for fair sources for revenue we needed instead of raising taxes, and we lowered some taxes in order to make Rhode Island a better place to do business. This budget reflects our commitment to helping citizens and businesses to thrive in Rhode Island,” said House Finance Committee Chairman Raymond E. Gallison Jr. (D-Dist. 69, Bristol, Portsmouth.)

The budget bill (2014-H 7133A) closes the deficit in part by requiring state departments to identify money for the recently negotiated raises for state employees – which account for $24.3 million of the $67 million budget gap, with the rest caused by higher-than-expected human services caseloads – through their existing department budgets. Another $14.7 million in savings was identified through an accelerated recertification of human services caseloads. The remaining gap was bridged through program reductions, rejections of new initiatives and maximizing revenues.

The plan permanently eliminates the toll on the Sakonnet River Bridge on July 1, currently set at 10 cents as placeholder for what could have been higher future tolls. Instead, it includes a 1-cent gas tax effective July 1, 2015, which would be indexed to rise along with inflation every other year, to help fund bridge maintenance and other transportation infrastructure.

The plan would create a new fund for maintenance of roads and bridges and gradually redirect all vehicle-related fees, which currently go to the state’s general fund, to that fund over the course of five years. The plan involves eventually moving all vehicle-related revenue to the fund, and using the fund to pay for all transportation infrastructure costs.

As part of the plan, the cost of the vehicle inspection required by car every other year would rise from $39 to $55 starting July 1 to raise a total of $4.8 million in new revenue, and the fee for having a violation dismissed on the basis of previously clean driving record would rise from $35 to $60, to raise about $600,000.

To those funds, the budget adds unallocated proceeds from bonds and funds from the Rhode Island Capital Plan Fund. Beginning in the 2016 fiscal year, the state would gradually start moving revenue from other fees collected by the Division of Motor Vehicles into the transportation infrastructure fund.

The bill as approved by the committee reduces Rhode Island’s corporate tax from 9 percent to 7 percent. The governor had proposed a reduction in the corporate tax rate, but only if Congress first passed legislation to allow states to collect “remote” sales taxes for online and catalog sales. The committee did not include that contingency.

As a means to help Rhode Island better capture all its tax revenue, the budget implements a “combined reporting” requirement for multi-state or multi-national corporations. Under combined reporting, corporations that have businesses in other states or countries must combine all their subsidiaries as a single entity and then pay taxes to Rhode Island based on the percentage of net single sales generated by its operations in this state. Combined reporting is expected to net an additional $2.2 million.

To help make Rhode Island’s tax structure more competitive with that of other states, the bill raises the credit on the death tax from $921,655 to $1.5 million, and eliminates the “cliff” provision that currently requires heirs to pay taxes on the entire estate if it exceeds the amount. Once adopted, the provision would limit the taxable amount to only the amount above $1.5 million. The $1.5 million credit would be adjusted annually for inflation.

The committee eliminated the Historic Preservation tax credit program from the proposal, for which Governor Chafee had proposed $52 million.

The committee restored the lead paint abatement program, which was slated to be cut under the governor’s plan, by identifying a new funding stream: An increase in the real estate conveyance tax from $2 per $500 of value to $2.30. Also helping to restore that program is a $600,000 grant from the Attorney General from the federal mortgage settlement.

The committee made no changes to the governor’s proposal for municipal aid.

The plan fully funds the continued implementation of the state’s education aid formula, adding $34.2 million over the 2014 level. Also included is an additional $10 million for the Community College of Rhode Island, Rhode Island College and the University of Rhode Island to extend their tuition freeze.
It also includes two new facilities for higher education. One would transform the former South Street Power Station – also known as Dynamo House – in Providence into a nursing education facility and administrative offices for Brown University. Both RIC’s and URI’s nursing programs would be housed in a new 132,500-square-foot facility there, and Brown University would lease about 135,000 square feet for its offices. The construction would be privately funded. The budget authorizes the lease.

The other would put a $125 million bond referendum on the November ballot for the renovating and expanding URI’s College of Engineering complex as a means to strengthen a program that attracts top students to the school and plies Rhode Islanders with the advanced skills they need for highly paying jobs in growing sectors.

Another bond question included in the bill would allow $35 million for the construction of Rhode Island Public Transit Authority hubs at the Garrahy Judicial Complex and the Amtrak station, both in Providence. That grant is a $5 million reduction from the governor’s proposal.

It also includes a ballot question for a $53 million for numerous environmental and water initiatives, including a new proposal for $18 million in improvements to Roger Williams Park and Zoo.

The committee included a proposal by the governor to allow $45 million in borrowing to fund construction of a new garage with retail space at the Garrahy Judicial Complex, but included a recommendation that it not be constructed until at least three of the parcels at the adjacent land formerly occupied by the old Route 195 are under purchase and sales agreement.

Also included is $60 million revenue bond for a runway extension at T.F. Green Airport in Warwick.

The committee avoided the governor’s proposal to slash $43 million in Medicaid funds from hospitals and nursing homes by raising the hospital licensing fees, which allowed hospitals to leverage more federal funding, then putting the revenue from the higher licensing fees back into the Medicaid reimbursements to facilities and insurers.

The committee eliminated a proposal b the governor to require families in the Katie Beckett program, which allows severely disabled children a waiver to receive Medicaid-funded treatment at home instead of in a medical facility, to pay a $250 co-share.

Included in the budget is $12.3 million for payment of bonds for the collapsed 38 Studios, as a means to protect Rhode Island’s bond rating and save on interest for current and future debt.
No funding is included for any redevelopment proposals for the Industrial Trust Building, also known as the Superman building, in downtown Providence, nor was Chafee’s request for 10 new employees for the HealthSource RI.

The committee did include some of the money that Twin River had requested from the state’s share of video lottery terminal income to boost its marketing efforts at a time when the Lincoln gaming facility will soon face increased competition from expansion of gaming in Massachusetts. Twin River had requested $3.6 million more, but the committee granted it $1.1 million as a means to protect one of the state’s biggest sources of revenue.

For more information, contact:
Meredyth R. Whitty, Publicist
State House Room 20
Providence, RI 02903
(401) 222-1923