At the Northern Rhode Island Chamber of Commerce Breakfast held at the Kirkbrae County Club in Lincoln Monday morning, Rhode Island Governor McKee began his address by talking about his recent trip to Washington DC to attend the National Governor’s Association meeting, where it is, according the the Governor, “important to be networking, in the way that we’re able, to help the state of Rhode Island.” Around 100 chamber members were in attendance.

“They had country singer Brad Paisley [sing] to a group about this size in the White House,” said Governor McKee. “After having dinner with the President and the First Lady, with governors [from] around the country, with the cabinet members [including Commerce Secretary and former Rhode Island Governor Gina] Raimondo [with her spouse] Andy, we were able to have a face-to-face with Transportation Secretary Pete Buttigieg that’s going to help us out on a number of other infrastructure issues in the state. South Quay is a particular project that we’re going to get off the ground in East Providence. Then we were serenaded by the the President’s Marine Band. They were doing America the Beautiful and everything else. Music was filling up the chambers of the White House.

“Then we went in and listened to the concert, and at the end of the half hour / 45 minutes the President got up to the stage and told Brad Paisley, ‘We got one more thing to do.’ So they invited my wife, Susan, up the stage with the President of the United States, and the First Lady, to sing Happy Birthday, along with my friend, who’s the now Governor of Hawaii, Josh Green, who was a lieutenant governor when I chaired the National Lieutenant Governor Association.”

After this story, Governor McKee got into the meat of his presentation before the Chamber members, which was his “FY24 budget proposal, specifically his nearly $100 million tax relief plan and small business friendliness initiatives.” You can watch below or read the transcript following the video.

“Thank you so much for having me here today. I think that what we’re going to talk about is the business community and the efforts to think very deliberately about leveling the playing field between our state and Massachusetts and Connecticut on business issues.

“I get to do budgets now. When I was a mayor in Cumberland … we made sure that when we did budgets we budgeted for breakeven and managed for surpluses. We’re doing the same thing right now in the State of Rhode Island. We’re budgeting for breakeven – making sure that we’re responsible in the way that we put our efforts forward in terms of the different types of things we’re going to invest in, and then manage the surpluses.

“We love surpluses. If you’re in business, I think you like surpluses. You’d rather be on that side of the fence than the other side of the fence, right? We want to be on the black side, not the red side. That’s allowed us, in two budget cycles now that I’ve managed, to bring in some surpluses and take advantage of some of the momentum that is here. Not because of me or our administration as much as what’s happening federally with dollars coming into the state.[1]

For more about surpluses, see: RI Governor Daniel McKee’s Unofficial Line Item Veto

“But are we smart about how we spend those dollars? I think that we are being very intelligent. I’ve been meeting with the Speaker and the Senate President on a regular basis to be investing in the State of Rhode Island in a way that is going to pay dividends down the line for [my granddaughter] and others that are living in our state years from now.

“I was asked to specifically talk about the budget that we put in place that is under consideration right now [by the General Assembly]. I would encourage everybody in this room to talk to their legislators about passing the budget that we presented. It’s balanced, I can manage it, and we’re going to get great results from it.

“The first year I had 11 days to do a $12-15 billion budget. I had like 11 days. But we put a little something in there for the businesses. That was a signal of what was coming. I put in a simple thing that you didn’t have to pay the $10 sales tax license fee.

“That was the signal. I wanted everybody to know that we were going to continue to work in that direction to make sure that we are competitive and we will help our business community so that they can do well, so that they can hire – those J-O-B-S’s that we keep on talking about, those good paying jobs. That’s what’s going to keep our economy going.

“What I was able to do on a second year was to put in a larger effort… I encourage you to share with us. We’re about eight months away from putting the next budget together. What’s not in the budget today? What is the thing that’s missing, you think? We’ve got another shot at it in eight months [when we] start preparing [the next] budget.

“Last year we passed legislation, effective October 1st, that if you happen to be a motorcycle person and you trade a motorcycle in on a new purchase, the trade-in value is now taken off the calculation of your sales tax. [This puts us on par with Connecticut and Massachusetts.] We believe that if you keep on doing those things you are going to create a stronger economy in the State of Rhode Island. And we believe in this instance there’ll be more motorcycle sales at the motorcycle shops and for the people who sell all the different paraphernalia that goes with a motorcycle, those sales are going to increase. That’s a small example of what we did last year in a series of efforts to level the playing field between [ourselves and] Massachusetts and Connecticut.

“This year, we’re doing more. My administration is the first administration that I can recall that is actually proposing to reduce the sales tax. This is a big deal. There are some that say it’s not enough, but where were those individuals when budgets were coming out? There were actually proposals to increase the sales tax last year. Last year we made a proposal to lower the sales tax by half a point that didn’t whet the appetite of the General Assembly at the time. This year, we took an incremental strategy to move that sales tax down below or equal to Massachusetts and Connecticut as a first step, and meet the promise that we made in the early 1990s when we bumped up the sales tax from six to seven percent and told everybody that was listening that the tax was going to get pushed back down to six percent after the banking crisis of borrowing was paid off.

“Anybody who was listening was told that. And that’s probably why we’re not listened to [today], because when we say something and we don’t do it, that’s a problem. I would encourage you to call your reps and senators about moving the sales tax rate down incrementally, doing it in a way where we know we can manage it, but it can be balanced and we can manage a budget for surpluses going forward. An important thing for us to start signaling is that Rhode Island no longer has to be the state that’s first in and last out of economic downturns. It doesn’t have to happen.

“There’s other things that we have in the budget I think are equally as important, but I don’t think there’s anything more important than the sales tax. As small and as incremental as it is, it sends a message that we’re going to keep our promises.

“Last year’s budget surplus – we had delayed payments to our state pension, $63 million. That was a promise made back in the nineties, again, when we were having all these economic issues. It was not paid back last year. We asked the General Assembly to take that $63 million and finally pay off that commitment. Many people are not going to know this, but those people who are impacted by the pension do. We [need to] keep on working in a way that we keep the promises that we make, and we should be careful about promises that we make. Be slow to make the promise. But once you do and you make that commitment, you make sure that it happens.

“We’re also talking about the gas tax. I had an interesting meeting in DC. I was not just listening to people sing Happy Birthday to my wife. I was with the New England Governors and I was talking to them about about the gas tax. We are moving torward more and more electric vehicles – as a matter of fact by 2035 I don’t think any vehicles are going to be actually manufactured in the country that are not electric vehicles. What does that do to our gas tax? If the majority of your vehicles on the road are not consuming gas, and for every penny in our gas tax, it brings in $4 million to improve our infrastructure, what are we going to do?

“So I’m not inclined to increase the the gas tax. Right now, by state law, by statute and other factors, we’re in line to raise our gas tax by three cents and we become less competitive with our bordering states, in particular Massachusetts.

“What we put in the budget, using our surplus, was to delay any increase on the gas tax for two full years. That’s about $25 million of tax relief that’s going to come to the State of Rhode Island on top of the $35 million in tax relief on the sales tax. By the way, 50% of those sales tax [savings] will go right into the pockets of the business community. It’s another business friendly initiative. So I’d ask you to take a look at that. Why would we want to raise the gas tax in an environment when there’s going to be less gas sold?

“We should be looking at ways to make sure that everybody who’s using the roads is going to help improve the roads, right? I’ve asked the Governors from New England to take a look at a regional strategy to address that issue that not only we will have, but they will have as well.

“Continuing to slide down the scale of things to make us competitive, I was with Luke McGowan. Luke McGowan was working with a company called Thumbtack, and if anybody remembers, when I was Lieutenant Governor I brought Thumbtack into the State of Rhode Island because they were continually giving us an F on business friendliness. I called them up when I was running for Lieutenant Governor and I said, ‘If I get there, would you come to Rhode Island and tell us why we’re getting Fs?’

“So I did. I made that phone call about six weeks after I got sworn in as Lieutenant Governor. I said, ‘I got there. I’m the lieutenant governor. Would you come out and tell us why we’re getting Fs with the small business community in terms of your rankings?’

[Editor’s note: Rhode Island ranks all over the place depending on which business rankings you reference. For example, RI ranks #45 on CNBC’s rankings, 23rd on Forbes’ rankings, and 10th on US News and World Report’s rankings. As such, these rankings should be taken with a grain of salt: State rankings, like the one CNBC released today, are essentially meaningless, except as tools for pro-business extremists to hurt us

“And they did. And a young man named Luke MaGowan came out and helped us run multiple sessions. One of the issues was the corporate minimum tax that was driving people crazy. It was like $500 at the time. Now, coincidentally, Luke McGowan, who was working for Thumbtack, he wanted to go to the Kennedy School. He asked me to give him a recommendation at that time, about six years ago. He is working in the White House today as a Chief of Staff for Mr. Sterling, who actually manages all of the federal funds that have been appropriated over the last few years. That’s a personal friend in the White House. You never know who you’re talking to. You never know where these young people are going to end up, and that’s why we’re going to invest in young people.

“But anyways, our proposal is to lower corporate minimum tax again, from $400 to $375, and continually bring it down to a level where we’re competitive with our bordering states. We’re getting closer and closer to that, so support that. It’s incremental, but it’s important that we do it in a way that’s responsible.

“We’re also eliminating something that came up when we met with all the small businesses about what [they thought] we could do to send a message that we’re going to be small business friendly. What [about] the litter tax? About 4,000 businesses in the state pay a litter tax that ranges anywhere from $150 and then incrementally up based on the gross revenues. We’re asking the General Assembly to eliminate the litter tax. We’re collecting almost a a million dollars a year on a litter tax and we didn’t even use it to get rid of litter. How smart is that, right?

“So we’re saying get rid of the litter tax, but I also put in a line item in the budget to specifically talk about having a litter free Rhode Island. My wife Susan’s doing litter and literacy, and that’s going to be great. Go to litterfree.ri.gov. It’s a nationally recognized website. We received the national award from Keep America Beautiful. That’s something I did during a very heated campaign. We planted seeds, anticipating that we would get the support from the voters in the State of Rhode Island, and that we would have this opportunity, like we’ve never seen before, to keep these things going over the next four years.

“Finally, we know utilities are a big cost to us, right? So we’re requesting that the General Assembly provide 4% relief during the winter months on what is called the receipt tax on our electric and gas bills. That’s another $35 million in relief that we’re asking the General Assembly to do.

“I was with a business the other day – and this doesn’t matter if its a big business, small business or your home – I was with a business the other day that racks up about a $50,000 a month electric bills. [My proposal, saving] 4% over four months, [comes out to] $8,000 of money that business will have in their pocket. For a household, it might be a hundred dollars, $200, but that’s $35 million more on tax relief. You’re following the bouncing ball here? $35 million on sales tax, $25 million on gas, and then another $35 million on electric relief.

“In addition to that, our workman’s comp was scheduled to go up this year and we put $4 million in the budget so that our workman’s comp did not increase. Now, I could have said, ‘Well, let it increase,’ but I know that workman’s comp is a cost that our businesses have and that we need to be more competitive in that area. But it’s like the gas tax. Why would you increase the gas tax? Why would you increase workman’s comp rates?

“I was able, in the budget, to make sure that we were able to offset that increase. In addition to that, we’ve got money in the budget, $2.6 million, for small business assistance programs. And I get to chair the Commerce Board, as the people of Pawtucket know, and we are putting a focus on the Commerce Corporation. We’re putting good people on our commerce board. If you know people who would like to serve on the Commerce Board or or other boards in the state, you should let me know, especially if you’re interested in supporting the business community, which I am. So we put in $2.6 million for small business assistance programs, and another $5 million for energy efficiency investments for the small businesses.

“I could keep on going, but I know that you all got to get to work. This budget proposal is good for that. And I’d ask you to talk to your General Assembly members about what we’re doing in the State of Rhode Island right now.

“I said it during my inauguration. Look, this is our time. This is our moment to shine. Our turn to roll back these issues that have continually gotten in the way of a good economy, and we’re seeing the results of that. We’re seeing large surpluses. We may not be able to repeat them as we go along if there’s some sort of recession. I said in my state of the state address that there is some sort of an economic downturn [coming] or there isn’t. We’re going to be ready either way. I want you to have that confidence and I hope that you feel the same way.

“39 cities and towns, each and every one is important… Together we’re going to figure it out. Together we’re going to tackle those issues that are important, whether it’s housing, whether it’s energy, whether it’s education…

“I’ll end it with this. The three things that we’re working on in the State of Rhode Island right now are very easy to understand. Each and every one in this room knows about it. One, raise academic outcomes in our schools; Two, raise incomes for our families; and, Three, make sure that we’re all as healthy as we can be so we can enjoy living in this great State of Rhode Island. Thank you so much for having me.“

[1] During January’s 2024 budget briefing, Brian Daniels, Director of the Office of Management and Budget, briefly explained Rhode Island’s unexpected budget surplus. Noting that we had an “unexpected” surplus last year this time, Daniels explained that the source of this years “unexpected” surplus is due to better than expected revenue collection (i.e. taxes), federal COVID monies coming in longer than anyone expected and lower spending in state departments, due to it being harder to hire and retain people in state jobs.