The 2021 budget picture is unclear – progressives need to be ready

The timing of the FY21 budget is far from clear, and there are many ways it could play out over the coming months. Concerned Rhode Islanders need to remain vigilant — especially in light of the likelihood that it could emerge with little notice. The $11.8 billion Fiscal Year 2020 supplemental budget, whose purpose was to fill the $250 million

June 20, 2020, 8:58 pm

By David Segal

The timing of the FY21 budget is far from clear, and there are many ways it could play out over the coming months. Concerned Rhode Islanders need to remain vigilant — especially in light of the likelihood that it could emerge with little notice.

The $11.8 billion Fiscal Year 2020 supplemental budget, whose purpose was to fill the $250 million gap left by the economic crisis attendant to the pandemic — and to formally authorize and acknowledge certain expenditures of federal funds — passed a few days ago. The vote was 60-13 in the House and 31-7 in the Senate. Those who opposed it objected for a variety of reasons, among them the fleeting window during which the budget was available for analysis and spending on prisons and policing.

Those vote tallies look lopsided — but Rhode Island has a requirement that budgets pass with two-thirds majorities. That means they can be blocked if 26 representatives or 13 senators vote no. Government budgets are moral documents — and as the calendar and our attention turn to Fiscal Year 2021, progressives must work to organize blocs in the House and Senate that are large enough to prevent passage of an unjust budget. (Until the FY21 budget passes the state will run off of the FY20 spending plan.)

If I were in the leadership of either chamber or in the Governor’s office, staring down the FY21 budget — which most years would be passing right around now but is being delayed for at least many weeks, perhaps many months — I’d be terribly anxious about the prospect of securing that two-thirds threshold: While there were serious, legitimate reasons to have voted against the FY20 budget this week, its failings pale in comparison to what could soon befall us.

With a projected gap of on the order of $600 million, there will be no easy answers in FY21 — unless Washington comes through with a big new stimulus package, which is probably a minority likelihood in the near term. 

Without new federal support, activists have every reason to worry that austerity will be the default playbook: Remember, Governor Gina Raimondo proposed egregious cuts to the urban core (so-called “distressed” communities) in her pre-pandemic budget in January. As evidence mounts that much of the economic crisis is driven by a collapse in spending by the wealthy, we need to make the case that increasing progressive revenues would be the appropriate response.

Low-hanging fruit would include a new, even if temporary, higher top bracket on the top 5% or so of Rhode Islanders. A one-year pause in the car tax phase-out is worth $23 million. And there are many other options.

But beyond just making the intellectual and ideological argument, as Smith Hill leaders assess their options, now is the time for us to build power and demonstrate that the path of least resistance is one by which the state does not implement austerity — and is one which relies on new revenues to avoid cuts to cities, towns, schools, and critical services. My organization, Demand Progress, has this page up that lets you generate emails to your representative and senator in realtime to urge them to oppose austerity and Reclaim RI has a petition running, with more than 400 signatures, over here.

There is precedent for what we need to do: I wrote a few weeks back about analogous efforts a group of us undertook during the 2008-9 financial crisis — when I was a member of the House — to fight back against severe cuts that were being pushed by House and Senate leaders and the far-right Governor Don Carcieri. We didn’t win everything we wanted — but we got serious about building and wielding power and were able to meaningfully reshape the outcome. 

The timing of the FY21 budget is far from clear, and there are many ways it could play out over the coming months. Concerned Rhode Islanders need to remain vigilant — especially in light of the likelihood that it could emerge with little notice. 

It’s likely that state leaders will start by watching what Congress and Trump do over the next month or so. The $600 per-week boost to unemployment benefits that passed in the CARES Act peters out at the end of July, and could be an impetus for new federal action. Prodded along by big business, Republicans are desperate to enact a liability shield to protect against claims related to the pandemic, and the Senate could seek to drive this forward over the coming weeks. It is possible that Democrats will succeed at attaching funding to support cities and states to a package that passes during this window — or less profound, but still helpful, they might loosen restrictions on previous tranches of stimulus funds. They could also consider measures like Pramila Jayapal’s Paycheck Recovery Act, which would keep payrolls flowing — ensuring businesses stay afloat and mouths fed, with the added benefit of mitigating the anticipated collapse in income tax revenues. 

But sadly, it’s possible that they’ll do nothing at all — and probably more likely than not that there won’t be substantial support for states and cities. After all, Democrats failed to pass an anticipated “second stimulus” back in 2009, when they controlled the Presidency and both chambers of Congress.

If political dysfunction means fiscal policy isn’t an option, there remains the (even more meager) possibility that the Federal Reserve will step in. It has created a lending facility to enable borrowing by public entities — but these are loans rather than grants, and they come at a penalty rate. The Fed has succumbed to public pressure to widen eligibility for these programs, and if elected officials fail to step in there’s a chance it would do more — for instance, by lowering rates and extending the terms of loans to decades or even longer, essentially converting them into grants. 

But if none of this happens then the state — lacking the flexibility that follows from being sovereign in the currency it uses or being able to deficit spend — will be in the unfair position of having to resolve the budget crisis on its own. 

This will mean making sure that every last penny from the previous tranches of funds that is eligible to be used to fill the budget gaps is employed to underwrite key programs and expenditures that help ordinary Rhode Islanders. There will be many accounting gimmicks the state is likely to lean on. But there’d be no getting around the need for increases in revenues and/or cuts. 

The longer the state waits, the harder it will be to make up the gap — for instance, an income tax increase that could raise $200 million over 12 months would raise on $100 million over six. But at the same time, there will be all sorts of incentives to hold off — some electoral, and some related to legitimate policy considerations. 

The prospect of coming back to vote on such a budget during the weeks leading up to the September primary will be daunting to legislative leadership. Almost no lawmakers will want to vote for a budget that entails cuts to services or revenue streams their constituents rely. Some will be reluctant to raise taxes — even though progressive tax increases are a necessary response to this dynamic. Lawmakers will fear losing their primaries more than any non-electoral pressure that the Speaker or Senate President or Governor can bring to bear on them. Moreover, one tactic that is typically used to keep rank-and-file lawmakers in line during budget votes — the hope of passing, or the implied threat not to pass, their legislative priorities — won’t operate because so little non-budgetary legislation is being considered.

So it could be on to early fall, but there are at least two critical reasons why action then might be unlikely: Mattiello’s November general election is looking to be a tough one — and once we are this far into the fall it wouldn’t be unreasonable to want to wait to see how Democrats fair in their campaigns for the Presidency and United States Senate.

If we’ve made it to Election Day without action on the budget and Trump manages to win re-election, we could see a lame-duck session. If Biden wins — and especially if Democrats also take the Senate — it would be tempting to wait even longer, and see if they are able to pull together a new stimulus package and move it forward after Biden’s January 20th inauguration.

So this is all to say that it’s not at all clear how this will play out. But one thing is certain: Progressives should start organizing now to ensure that we are making the case for using progressive revenues to fix the budget — and also building the power to block passage of any budget that relies on cuts instead.

This is absolutely achievable, with even certain members of leadership sympathetic to the cause — for instance Senate Finance Chair William Conley has introduced legislation to increase income taxes on the wealthy. No lawmaker wants to be responsible for cuts to funding for their community’s schools or property tax hikes for their constituents. And recent electoral successes mean that there are enough self-identifying progressives alone that they could block the budget if they resolved to come together and do so. Let’s urge them to do so.