Government

Governor McKee 2024 budget features tiny tax cuts, EACA funding

Rhode Island Governor Daniel McKee submitted his FY24 RI State Budget proposal to the General Assembly on Thursday, immediately generating praise and condemnation. Tax cuts, what the McKee Administration refers to as “Tax Relief” does address the state’s sales tax. But most of the substantive tax cuts are aimed at business owners.

Published on January 20, 2023
By Steve Ahlquist

“My Fiscal Year 2024 budget proposal is aimed at making further progress toward our RI 2030 goals,” wrote the governor as an introduction the his budget. “There are three goals in particular that remain at the top of my mind: raising incomes for all Rhode Islanders, improving educational outcomes that meet Massachusetts levels by 2030; and creating a healthier state where we reduce chronic illness and improve health outcomes.”

Tax Cuts

Tax cuts, what the McKee Administration refers to as “Tax Relief” does address the state’s sales tax. But most of the tax cuts are aimed at business owners. Brian Daniels, Director of the Office of Management and Budget explains the reasoning behind the tax cuts here.

  • Reducing the state sales tax: Incrementally reducing the state’s sales tax starting this year with a reduction from 7 percent to 6.85 percent resulting in a total taxpayer savings of $35 million annually. The State’s sales tax was increased during the banking crisis of the 1990s with a promise that it would be later reduced – that promise was never kept.
  • Reducing the corporate minimum tax: Lowering the corporate minimum tax from $400 to $375. This tax most negatively impacts Rhode Island’s smallest businesses.
  • Stopping the gas tax increase: Providing relief at the gas pump by stopping the scheduled 3-cent increase on the gas tax that is required by law to go into effect on July 1. This proposal will provide nearly $25 million in tax relief over the next two years.
  • Delivering energy bill rebates: Providing Rhode Islanders with a rebate for the 4 percent gross receipts tax on their electric bills and 3 percent gross receipts tax on their natural gas bills. This will result in $35 million in total relief.
  • Eliminating the litter tax for businesses: Ending the litter tax which is paid by local businesses. Under the current structure, the nearly $1 million collected from this tax are not directed to support litter or environmental initiatives. In its place, the governor is proposing targeted funding for the Keep Rhody Litter Free initiative.
  • Workers Comp: Directing more than $4 million into the Workers Compensation Fund to prevent an increase in the premiums paid by Rhode Island businesses.
  • Truck trade-in: Exempting from the sales and use tax the trade-in value of trucks with a gross weight of 14,000 pounds or less to mirror exemptions for passenger cars and motorcycles. The exemption for trucks is projected to save individuals about $3.7 million next fiscal year.

It’s important to note that the sales tax reduction McKee is proposing would only save Rhode Islanders 15 cents for every $100 they spend and still leave the state well over a half percent higher than the sales tax in Massachusetts.

Asked for evidence of Rhode Islanders crossing the border to avoid higher sales taxes, Brian Daniels admitted that there are no studies indicating that. “That’s a good question. It’s hard because we’re such a small state it’s difficult to model some of that – but at the very least we want to make sure it’s not a factor in people’s decision as to where they buy goods.”

Asked why we are skipping the increase in gas taxes during a time when we should be doing everything we can to discourage fossil fuel-powered driving due to climate change, Daniels avoided answering that aspect of the question directly, simply saying that we are using one-time budget surplus dollars to provide “tax relief” to drivers. Added to the truck trade-in tax cuts, the use of gasoline in large vehicles seems to be encouraged by McKee’s proposed tax policy.

“I don’t see anything related to advancing Act on Climate goals,” said Patrick Anderson from the Providence Journal, citing climate legislation signed by Governor McKee two years ago. There’s also nothing in the budget about free RIPTA buses or increasing the use of public transportation.

There is also the question of how Rhode Island will pay for these tax cuts. The Working Families Party released the following statement from New England Regional Director Georgia Hollister Isman:

Governor McKee’s approach to lowering costs is backwards. Without requiring the wealthiest Rhode Islanders to pay more, McKee’s tax cuts take money away from the things we need to be investing in – including mental healthcare, child care, housing, transportation, and green energy. This budget puts the burden of much-needed services on the backs of working families. While the governor’s budget does follow through on funding the ‘Equality in Abortion Coverage Act’, it leaves far too many Rhode Islanders behind. Increasing taxes on the wealthy is a common-sense solution that will greatly improve the lives of working families across our state, and it’s time Rhode Island leadership treated this like the political imperative it is.”

Rhode Island’s Economic Progress Institute was also critical of the tax cuts that favored businesses rather than low-income Rhode Islanders. In a tweet thread, EPI writes that when it comes to tax relief, “more impactful proposals for low-income and modest-income Rhode Islanders might include making the child tax rebate permanent and doubling the state’s Earned Income Tax Credit to bring us closer to our neighbors.”


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“The budget should also include provisions to strengthen the state’s paid leave and RI Works cash assistance programs, to increase the minimum wage more quickly, & to improve tax fairness and raise sustainable revenue for when the extra federal aid and budget surpluses go away.”

Finally, EPI notes that though the Governor’s proposed budget calls for “equity and calls several times for applying a ‘race equity lens,’ the FY2024 budget barely mentions or invests in equity.”

You can read the EPI thread below:

The proposed budget:

  • Adds $2.6 million to the Small Business Assistance Program which connects businesses struggling to obtain lines of credit with community-based lenders.
  • Expands the Wavemaker Fellowship student loan forgiveness program to include teachers.
  • Makes a $45 million investment into the life sciences sector which includes the development of wet lab incubator spaces.
  • Invests $25 million to support offshore wind growth through Phase 2 of the South Quay Marine Terminal Project in East Providence.
  • Provides $5 million for Small Business Assistance in energy efficiency investments.

Abortion coverage and health care:

Governor McKee earned praise for keeping his campaign promise and including proposals to fund abortion coverage for state employees and Rhode Islanders covered by Medicaid. The cost of providing this coverage, according to Brian Daniels, amounts to just under $30k for state employees and just under $600k for Medicaid recipients. This money cannot come from the Federal Government due to the Hyde Amendment, which prohibits federal dollars from being used for abortion, and will come from state funds.

What these numbers don’t seem to acknowledge is the lower costs associated with providing abortion services as opposed to bringing a pregnancy to term, which is many times more expensive. It will be interesting to see what the General Assembly comes up with regarding costs, as last years identical bills in both the House and Senate were assigned different costs by the same budget office which serves both chambers.

“This will help ensure that vital health care services are accessible to those who need them,” writes Andrea Palagi, the governor’s Communications person. “We thank the General Assembly members who have introduced standalone legislation to address this crucial issue. Governor McKee reaffirms his commitment to signing the Equality in Abortion Coverage Act (EACA) legislation as soon as it reaches his desk.”

The EACA has already been introduced as a standalone bill in both chambers of the General Assembly.and it is still important that it pass as a standalone bill, said Jocelyn Foye from The Womxn Project.

While it is important to have a budget without harmful amendments denying health coverage for abortion, Rhode Islanders should NOT have to worry year to year if they will have coverage for care they need! That is why we want it in the budget as well as passed as legislation.

To pass a piece of legislation that includes the protections means we permanently get rid of these bans for state regulated insurance programs to ensure whether someone uses a private or public insurance program to get their healthcare they will have coverage for abortion. That means that YES we need a budget without bans AND we need to #PassTheEACA!  

Some people use federal insurance programs (government employees, servicemembers, Indian Health Services, Peace Corps) and these programs also deny insurance benefits for abortion care. There is ongoing advocacy to end these harmful policies.” 

“Earlier today, Governor Dan McKee introduced his proposed budget for 2024. We are thrilled that he included health coverage for abortion for state employees and people who use Medicaid. This is such an exciting move forward after years of advocacy” wrote the Steering Committee members of the Campaign for Equal Abortion Coverage in a statement. “For too long, access to abortion services have been restricted based on the type of health insurance people use. Our campaign partners and countless Rhode Islanders fought hard to protect the right to an abortion in our state, and in these post-Roe days, that is something to be proud of. By making strides to ensure that services are affordable, the governor and his Administration are showing real leadership on this issue. People should not be denied the ability to make decisions about their healthcare simply because they use a public health program to afford health services.

“This legislative session, we look forward to working with the Administration and the General Assembly to ensure harmful abortion bans stay out of the budget,” continued the Steering Committee. “Passing the Equality in Abortion Coverage Act (H5006 and S0032) will also be critical, so that no one has to wait year to year to see if the state budget reflects the values of Rhode Island and the commitment to reproductive freedom. There is still work to be done to see this through and get the EACA enacted, but today we celebrate. Thank you, Governor McKee.”

“Governor McKee’s immediate action to include the EACA in his budget proposal demonstrates his commitment to expand access to abortion and ensure people have the power to make their own private medical decisions without political interference. While politicians across the country continue to attack reproductive freedom and ban abortion outright, our champions are fighting for Rhode Islanders to access the abortion care they need and deserve,” wrote Gretchen Raffa, Vice President, Public Policy, Advocacy, and Organizing, Planned Parenthood Votes! Rhode Island. “Right now, state laws prohibit residents enrolled in Medicaid and those on state employee plans from using their health insurance to cover abortion, impacting more than 85,000 people of reproductive age in Rhode Island. The right to abortion is meaningless if you can’t afford or access care. Two thirds of Rhode Island voters support the EACA — we thank Governor McKee for listening to the will of the people and making abortion access an urgent priority.”

“We thank Governor McKee for including funding for the Equality in Abortion Coverage Act in his proposed budget. This is a critical step in making abortion accessible to all by ensuring residents enrolled in Medicaid and those on state employee plans can use their health insurance to cover abortion,” wrote the Rhode Island Coalition for Reproductive Freedom in a statement. “Abortion is health care, and Rhode Islanders deserve the resources to make private medical decisions about their health, their bodies, and their lives without political interference. We thank the governor for his leadership in the fight for reproductive freedom and urge the General Assembly to take action to support the EACA.”

Other health initiatives included in the governor’s proposed budget:

  • Investing $7.5 million for reimbursement rates for the provision of care at Certified Community Behavioral Health Clinics that are coming online in FY24.
  • Providing an additional $1.6 to operate the 9-8-8 hotline.

Governor McKee continues to struggle with the issues of housing and homelessness, often exhibiting a callous disregard for those who are unhoused. After firing Secretary of Housing Josh Saal last week, the governor announced Stefan Pryor as the new Housing Secretary. Pryor does not begin his job until February, leaving no one in charge of this issue while hundreds of Rhode Islanders are sleeping unsheltered every night in our state this winter.

Housing:

  • Builds on the governor’s goal to build a robust Housing Agency to support the implementation of last year’s historic $250 million investment to create more housing across Rhode Island by proposing an additional 21 FTEs for the year old Department of Housing.
  • Adds $30 million to expand shelter capacity to better meet the needs of individuals experiencing homelessness.

Climate, Energy, and Clean Water

Despite the gas and truck tax decreases in the budget, there are some climate initiatives being pushed in the budget.

  • Transfers $28.5 million in surplus funds to the Rhode Island Infrastructure Bank to satisfy the state match for the Clean/Drinking Water State Revolving Funds through Fiscal Year 2028.
  • Proposes directing $4.5 million to the Executive Climate Change Coordinating Council (EC4) beginning in January 2024 and a total of $31.5 million over seven years to the EC4 to implement the Act on Climate efforts.
  • Eliminates the utility shareholder incentive for administering the State Energy Efficiency Programs.
  • Extends the State Energy Efficiency Program and the Renewable Energy Fund through the end of 2030; requires the Office of Energy Resources to issue a Request for Proposal for a potential administrator of the State Energy Efficiency Programs between 2025-2030.

Education

Finally, there is education. Though not in the budget, Governor McKee has promised to unveil an education program in the next few weeks that focuses on meeting Massachusetts educational outcomes. Some of his idea, however, can be seen in the budget:

  • Invests $7 million to preserve 800 Pre-K seats funded by an expiring federal grant and $1.3 million to prepare 35 new classrooms for the 2024-2025 school year.
  • An increase in year over year in K-12 education funding by $57.8 million which includes fully funding the multilingual learner categorical and the special education categorical.
  • Provides $2.5 million to the Community College of Rhode Island in one-time funding for the Fresh Start Scholarship that will work to re-enroll 1,000 students who left the college before completing a degree. The funds will provide tuition and fees for one semester, after which students then become eligible for federal financial aid.
  • Provides support to the RI Reconnect program in the Office of the Postsecondary Commissioner (OPC), using $8 million to improve postsecondary degree and credential attainment among underserved, working-age Rhode Islanders. OPC staff will work with students to address barriers to education and workforce training completion, particularly among communities of color and in Qualified Census Tracks to enhance the economic stability of working-age Rhode Islanders.

You can view Governor McKee’s full budget submission here.

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