House Finance passes budget, sends it to full chamber vote

(Updated, 5:30 a.m.)
PROVIDENCE — The R.I. House Finance Committee on Tuesday night approved an $8.7 billion state budget that maintains most of what Gov. Gina M. Raimondo had proposed in her inaugural budget proposal.
The fiscal 2016 spending plan emphasizes initiatives that will make Rhode Island more attractive to businesses, House leaders said, and actually proposes an increase in state spending beyond what the governor pitched because state revenue has increased more than she had anticipated in March.
“This is a budget that is pro-business and pro-jobs that will move our state forward,” said House Speaker Nicholas A. Mattiello, D-Cranston, in a statement after the vote. “[It] will serve as a catalyst for existing businesses to grow and prosper, in addition to attracting new businesses looking to locate here. That momentum began last year when we reduced the corporate tax rate to the lowest in the Northeast and raised the exemption on the estate tax and eliminated the cliff. This year, top priorities were to exempt businesses from paying sales tax on energy costs and reducing the annual fee paid by small businesses.”
The overall package includes $37.7 million more in appropriations than the governor had recommended in March, said state Rep. Raymond E. Gallison Jr., D-Bristol, chairman of the House Committee on Finance, thanks to the state taking in more revenue than had been anticipated when the governor first proposed her budget.
The committee voted on the package after 11 p.m. Tuesday night, after beginning its deliberations at about 9 p.m. The spending plan for fiscal 2016, which begins July 1, now heads to the full House next week for further discussion.
According to Gallison and Mattiello, the revised budget includes the economic incentives proposed by Raimondo to help spark the state’s economy, such as the $25 million incentive for development the governor had proposed for the former Interstate 195 land in Providence, to be spent at the direction of the I-195 Redevelopment District Commission and state commerce board.
The budget also will reduce taxes on business operations, including a reduction in the minimum corporate income tax from $500 to $450, as well as a complete elimination of the sales tax on utilities for all non-manufacturing businesses.
At the same time, the plan increases the earned income tax credit by 25 percent, said Mattiello. And it exempts from state income tax Social Security benefits for single filers with federal adjusted gross income of up to $80,000 and for joint filers of up to $100,000.
In her budget, Raimondo had proposed a five-year phase-out of the utilities sales tax.
In an emailed statement after the budget proposal was presented, Raimondo spokeswoman Marie Aberger said “the governor is grateful for the hard work of the leaders and the members of the General Assembly that led to tonight’s hearing, and she looks forward to continuing to work together to implement a comprehensive jobs plan and spark Rhode Island’s comeback.”
The budget includes language that reflects Tuesday’s court approval of the state employee pension settlement, but Gallison said it would not have a fiscal impact this coming year.
The spending plan does not include the proposed tolls on state highways and interstates for tractor-trailers, although Mattiello has said he is open to considering the Rhode Works program at a later date, when more information can be obtained about its impact on Rhode Island trucking firms.
The committee also removed any additional tax on luxury properties, the so-called “Taylor Swift” tax, which had initially been sought by the governor.
In tourism spending, the committee agreed to provide $4.6 million for a statewide marketing effort by redistributing funds from regional tourism councils. But it rejected the governor’s approach to selectively reduce only certain districts. Instead, all of the eight local tourism councils will have equally reduced budgets, and the effective date will be moved from July 1, 2015, to Jan. 1, 2016, to give the councils time to adapt, Gallison said.
The budget includes funding to maintain HealthSource RI, the state’s health care benefits exchange, although in a revised format that lowers the premium fess that Raimondo had proposed. Under the plan, the General Assembly will provide $2.6 million for technology and call center operations, along with reduced fees on individual and group business plans within and outside the exchange. Altogether, the fees on premiums and direct appropriate total about $6 million in the upcoming fiscal year, Gallison said, which is the amount HealthSource RI had sought for its operating expenses.
The monthly premium assessments would be lowered from the governor’s original plan from 3.76 percent to 2.86 percent for individuals and from 1 percent to 0.59 percent for group business plans, Gallison said.
In Medicaid expenses, the committee recommended a package of cuts that will lower state expenses, but not to the degree sought by Raimondo, he said. The structural changes to the Medicaid system sought by the governor were left intact, but specific reductions in reimbursements were lessened, including a 2 percent reduction for nursing homes, instead of the 2.5 percent reduction sought by the governor. The 2.5 percent reduction for hospitals was maintained, Gallison said.

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