Budget to dominate Assembly

Old and unfinished business could hinder lawmakers’ efforts to improve the Rhode Island economic climate in 2014.
For the first time in several years, General Assembly leaders have begun the annual legislative session without new, high-profile initiatives like the pushes for same-sex marriage, expanded gambling or pension reform that dominated prior years.
Instead, passing a new budget appears to be the most important, and potentially most difficult, objective House Speaker Gordon D. Fox and Senate President M. Teresa Paiva Weed will face this election year.
Not only does the state face a $100 million budget gap for the year ahead, but some of the big challenges leaders took on in previous years appear ready to resurface in potentially difficult ways.
Those issues include the historic state pension overhaul of 2011, repayment of the 38 Studios loan guarantee and raising tolls on the Sakonnet River Bridge.
In both pure dollar terms and potential for political strife, the outcome of a yearlong, court-mandated, secret mediation effort over the pension overhaul, which is being challenged in court by public-sector workers, carries the highest stakes.
If union workers and state officials reach a deal to end the lawsuit by scaling back any of the pension cuts in the 2011 overhaul, lawmakers would be charged with approving it and replacing any savings lost in the budget.
But neither Fox nor Paiva Weed have promised to revisit the pension overhaul they fought hard to pass in November 2011 – and is estimated to save the state and municipalities $250 million this year alone – even if there is an agreement.
“I am proud of the reform legislation the General Assembly enacted after a great deal of study and debate in 2011,” Fox said in an email statement. “I have not been privy to the discussions in the court-ordered mediation. We are not obligated to bring an agreement before the House and without any details, it is difficult to comment further.”
Brown University political science professor Wendy Schiller described the pension case as the issue with the most potential to cause havoc in the budget.
“I think the legislative leaders are not going to reopen the entire pension legislation,” Schiller said. “Until they know what the pension-mediation proposal is, they can’t start making deals on anything else. So they may not do anything on a pension deal and may only deal with 38 Studios.” On 38 Studios, lawmakers must decide whether to pay a scheduled $12.5 million installment to bondholders for the $75 million loan given to Curt Schilling’s failed video game startup.
Last year, lawmakers at the urging Fox, Paiva Weed and Gov. Lincoln D. Chafee appropriated an initial $2.5 million to begin paying down the 38 Studios debt, which reached just under $90 million, including interest. The current payment schedule calls for seven annual installments of $12.5 million starting this year to retire the debt.
In the raucous debate that led to the initial $2.5 million payment last year, lawmakers also appropriated $50,000 to study what the true costs of defaulting on the debt would be to the state.
No financial expert submitted a bid to do the work in October and the Chafee administration has not yet reissued the request for proposals.
Without more detailed information on the true costs of a default, leadership could find it even more difficult to find support for cuts elsewhere in the budget to pay off the unpopular 38 Studios debt.
Then there is the toll on the Sakonnet River Bridge, which led to a budget revolt last year and forced Fox to draw up a stop-gap measure that kicked the issue into this year.
Instead of the tolls Chafee and state transportation officials had sought last year – 75 cents for drivers with a Rhode Island E-ZPass transponder, $3.75 for out-of-state EZ-Pass and $5.25 for drivers with no E-ZPass – lawmakers approved a 10-cent toll for everyone and created a special committee to study transportation funding throughout the state.
If the General Assembly cannot agree on a new funding mechanism, the R.I. Turnpike and Bridge Authority will be authorized to implement its earlier price scheme, something East Bay lawmakers have vowed to fight and could derail the budget again.
House Minority Leader Brian Newberry, R-North Smithfield, said the combination of finding votes for a 38 Studios payment while facing another possible insurrection over bridge tolls could open the door to special-interest legislation. “I suspect that in terms of big issues you will not see much of anything outside of the budget, which could be a heck of a fight depending on certain factors like 38 Studios and the tolls,” Newberry said. “On the House side, it is obvious that there is an enormous variety of discontent in a number of quarters and that is not even taking into account anything on pensions.”
Newberry, who opposes paying back the 38 Studios debt, says leadership has moved in the right direction with its focus on the economy and business competitiveness.
Fox in an email said he is interested in a “healthy discussion” on tax policy and a proposal from the Greater Providence Chamber of Commerce for cuts to the corporate tax rate, the corporate minimum fee and the estate tax. The General Assembly is also awaiting a report from a commission formed last year to look at reducing the state sales tax.
Fox also said he plans to find new funding sources for the struggling R.I. Public Transit Authority and ways to pay for full-day kindergarten in every community.
Paiva Weed in an email said lawmakers should re-examine the state tax structure this year and look toward a reduction in the corporate tax, estate tax or sales tax. She said she also anticipates dedicating more money in the employer-funded Job Development Fund toward job-training programs.
Schiller at Brown said the most likely sleeper issue she could see grabbing attention before the fall elections is municipal pensions, many of which remain in bad shape and impact gubernatorial candidates.
In the legislature, Schiller said lawmakers are feeling a newfound vulnerability and are less likely to go along with unpopular votes.
“They realize voters are about the most dissatisfied at the state and local level as they have ever been,” Schiller said.
As for Chafee, who made reducing the corporate tax rate the centerpiece of his budget last year, spokeswoman Christine Hunsinger said his budget proposal planned for release this week will build on the same priorities he’s had since taking office.
“Education, infrastructure and aid to cities and towns – that is the strong foundation he has been dedicated to,” Hunsinger said. •

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