Rhode Island’s 2021 budget (H7171A) passed the House and the Senate this week, and now heads to Governor Gina Raimondo‘s desk to be signed. Far from being the austerity budget that many feared, one that would make deep cuts to social programs and education, this “pared-down” or “skinny” budget restored cuts that had been proposed by the governor, and in some cases temporarily instituted, to municipal aid including distressed communities and car tax reimbursements, provider rates and social programs. The bill fully funds state aid to education according to the state education formula. The committee was also able to avoid proposed fee increases at the Veterans Home.
This was also the first budget passed in many years that did not cut Medicaid.
I am so happy that we passed the first budget in many years that does not cut Medicaid. Stopping the Medicaid cuts was one of the main reasons I ran for office, and I thank from the bottom of my heart the activists who worked so hard to make this happen.— Sam Bell (@SamuelWBell) December 18, 2020
The Economic Progress Institute (EPI) pointed out the dangers of an austerity budget back in June, writing, that “austerity and stimulus produce very different results” and it “is not simply a matter of common sense or theory. There is strong evidence, including from the Great Recession of a decade ago. For example, a recent analysis from EPI demonstrates that states which maintained their public employment levels during the Great Recession experienced on average a return of private employment to pre-recession levels a year and a half more quickly than states, like Rhode Island, that embraced a more austerity-focused mindset and made deep cuts. More generally, if state and local governments had not functioned as ‘relentless anti-stimulus machines’ during the years following the Great Recession and had instead followed the approach taken with the recession of the early 1980s, recovery would have arrived four years earlier, in 2013 instead of 2017. In light of this experience, cutting jobs, services, and spending would prove an irresponsible move.”
These cuts were prevented in part due to the successful election of over a dozen new progressive legislators (See: Here, Here and Here), but also due to the efforts of Reclaim Rhode Island, a group formed by Bernie Sanders supporters in May. Reclaim Rhode Island made stopping budget cuts and raising taxes on the rich its top priority and played a decisive role in shifting the debate and achieving a no-cuts budget. UpriseRI has provided extensive coverage of Reclaim Rhode Island:
- Reclaim RI campaign has a simple demand: tax the rich, no cuts
- As state budget hearings commence, Reclaim RI calls for divestment from carceral systems
- Reclaim RI backed candidates sweep primary election
- Newly elected RI lawmakers are saying ‘No’ to Raimondo’s austerity budget
- Reclaim RI decries Brett Smiley’s implementation of funding cuts to Providence and other “distressed” communities
- Coalition rallies for taxes on rich to fund essential services
Despite these 2021 Budget wins, the 2022 budget battle may be harder, as some of the key battles were avoided due to a smaller than worst-scenario budget gap of $275m versus a projected $900m. One of the lines in the General Assembly press release reads, ominously, “The bill includes no cuts to state agencies that would result in staff layoffs at this time.” Emphasis mine.
Layoffs of public sector employees have cascading effects. These layoffs inevitably result in an increase in unemployment, but also contribute to a decrease in public services, as understaffed government agencies struggle with staff shortages. The 2007 layoffs led by Republican Governor Donald Carcieri and his Democratic enablers such as House Speaker William Murphy are a significant part of the “austerity-focused mindset” that delayed Rhode Island’s recovery last decade.
Avoiding these layoffs will be important to Rhode Island’s ability to recover post-Covid and to provide essential services to those most affected by Covid.
Another important issue the 2021 budget avoided was taxing the rich.
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“We have not yet won a tax hike on the rich,” writes Reclaim Rhode Island in their press release. “And Rhode Island’s budget still falls far short of meeting working-class people’s needs for education, healthcare, transportation, and housing. But the political consensus, thanks in part to grassroots organizing, is rapidly shifting in favor of taxing the rich. We look forward to winning that fight in 2021 and securing a budget that respects the dignity of all Rhode Islanders. Next year’s budget gap must be closed through taxes on the rich and divesting from a system of mass incarceration that has become more lethal than ever under pandemic conditions.”
Reversing the austerity inspired, anti-stimulative tax cuts on the rich and creating new taxes on higher income Rhode islanders is essential.
“A modest increase on the marginal income tax rate for the top 1% of taxpayers (who often maintain considerable wealth in addition to high earnings), would raise valuable revenue from those most able to afford it (and those who are much more likely to be able to work remotely and keep safer from COVID-19 infection, while others must take greater risks),” writes EPI. “Legislation introduced by former Senator William Conley (Democrat, District 18, East Providence, Pawtucket) and Representative Karen Alzate (Democrat, District 60, Pawtucket) would raise an estimated $128.2 million by increasing the top marginal personal income tax rate from 5.99% to 8.99% on taxable income above $475,000.”
The budget also includes borrowing in the form of bonds.
The proposal includes $400 million in bonds in seven ballot questions that will be put before voters in a special election March 2, to be conducted much like June’s presidential primary, with mail ballots encouraged but also polling places available in every community.
The bond questions include:
- Question 1 – $107.3 million for higher education, including $57.3 million for a fine arts center at URI, $38 million for the Clarke Science Building at RIC and $12 million to renovate CCRI’s campuses.
- Question 2 – $74 million for environment and recreational projects, a total of $10 million over the governor’s original proposal.
- $4 million for local recreation projects
- $3 million for natural and working lands
- $15 million for clean and drinking water
- $7 million for municipal resiliency projects
- $33 million for state beaches, parks and campgrounds
- $4 million for the proposed park on the former I-195 land in Providence
- $6 million for Providence River dredging (included in the 2018 green bond, but funding proved insufficient)
- $2 million for the Woonasquatucket Greenway
- Question 3 – $65 million for affordable housing, an increase of $40 million over the original proposal, included in the amendment offered by the governor in July.
- Question 4- $71.7 million for transportation initiatives
- Question 5 – $15 million for early childhood care and the educational capital fund
- Question 6 – $7 million for arts and cultural infrastructure, including $6 million for the cultural arts and economy grant program, and $1 million for the state preservation grants program.
- Question 7 – $60 million for commerce infrastructure, including $20 million for the Port of Davisville at Quonset and $40 million for industrial site development.
“Borrowing at today’s low rates provides the opportunity to invest wisely in people, jobs and retraining, and education, to keep the local economy moving and to build the sort of infrastructure that makes Rhode Island a wonderful place to live and to grow businesses,” writes EPI.
Unfortunately, by not putting these bonds on the November ballot, and scheduling the public’s consideration of these bonds for November, the General Assembly has incurred for Rhode islanders an extra cost of $1.5m for a special election. Looking forward, the Economic Policy Institute has put forward several options for future bonding:
- Designating special entities to borrow for specific purposes;
- Selling bonds to the new Municipal Liquidity Facility created by the Federal Reserve Bank to assist municipalities and states;
- Selling bonds secured by future expected revenue (as is sometimes done, for example, with bridge and highway tolls); and
- Issuing “Human Capital Bonds” as investments in education and possibly other areas.
“At the beginning of the summer, Rhode Islanders were facing steep cuts to cities, towns, schools and vital programs like Medicare and Medicaid,” said Kinverly Dicupe, Reclaim Rhode Island Organizing Co-Director. “We organized to roll back illegal cuts and prevent further degradation of our social programs. We should be proud, but this upcoming year we’re not playing defense anymore – we’re coming for all the big ticket policies that have defined the progressive agenda: Medicare-For-All, Green New Deal, $15 minimum wage, Criminal Justice Reform. The time is now to push the boundaries of what’s possible.”