Raimondo releases 2017 budget proposal: ‘Spark the Comeback’

PROVIDENCE – Gov. Gina M. Raimondo on Tuesday released a nearly $9 billion budget proposal that targets increased state investment in education and workforce preparation, as well as economic development initiatives.

The spending plan takes advantage of increasing state revenue, largely driven by an improving economy, and would attempt to lessen the tax burden on businesses by reducing the schedule of rates paid by employers for unemployment insurance. The savings is estimated to be $30 million.

The fiscal 2017 budget, presented by Raimondo to the General Assembly and highlighted in her state of the state address, is an effort to build upon economic development initiatives launched this year, and incorporate new suggestions for bolstering the state’s economy announced recently through a Brookings Institution study.

The proposed budget recommends $3.7 billion in general revenue spending, an increase of $100.3 million, or 2.8 percent. The General Assembly will now take up the spending plan.

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As described in a press briefing preceding the release, the budget takes advantage of stronger revenue and cost controls enacted in this year’s budget. A year ago, the state faced an estimated budget deficit of $190 million for fiscal 2016. The estimated deficit in the fiscal 2017 budget instead approaches $49.5 million, according to the governor.

Among the highlights of her plan:

Raimondo proposes to encourage innovation and collaboration among universities and private employers through a $20 million competition that would create new innovation centers, which could be located anywhere in Rhode Island.
The innovation campuses would have to target at least one of the five industries identified recently by Brookings as having potential for growth in creating jobs, including: biomedical innovation; design, food and custom manufacturing; defense shipbuilding and maritime; advanced business services; and software, Internet of things and data analytics.
“We will ask universities [such as] URI to partner with businesses to create a place where researchers can work alongside businesspeople to turn their inventions into new products, services, businesses, and – most importantly – jobs,” said Raimondo

She said a model for Rhode Island is the International Center for Automotive Research in South Carolina.

She said the state funded a partnership between BMW and Clemson University “that has helped create thousands of jobs in the region.”

The $20 million would be raised through voter approval of a general obligation bond, but Commerce Secretary Stefan Pryor told reporters that the state would expect the innovation partners to contribute funds as well. The idea is to encourage collaboration and new ideas in creating innovation campuses, he said. “We don’t want to prescribe,” he said. “We want to invite participants in a competition.”

The budget proposes to reduce unemployment insurance taxes by lowering the state-required reserve ratios, the amount of reserves required to be held in the unemployment insurance trust fund, and by lowering the tax rates. The state has previously adjusted benefits payable through the program; it is now moving to reduce the reserve required.
The fund has a reserve that has grown with the improving economy, according to officials. The state collected $113 million more in unemployment taxes last year than it paid out in benefits.
Rhode Island ranks 49th in the nation in unemployment insurance taxes. “Our plan will reduce UI taxes, without harming benefits,” she said.
The degree of savings will vary by business, based on their placement on the schedule, which is determined by how often they have used the program.
According to one average provided by the administration, employers will pay $631 in tax per employee, compared with $708 currently. That compares with what the administration said was $615 per employee in Connecticut and $640 in Massachusetts.

In general, to bolster revenue, the budget will introduce no broad-based tax increases, but proposes instead to generate $20 million in specialized taxes and fees, through additional regulation of the state’s medical marijuana program, by increasing the cigarette tax by 25 cents per pack, and by instituting a new fraud detection program.
To combat temporary disability insurance fraud, for example, the governor proposes a new claims review process that would require more information sharing across state programs, and the filing of claims within 90 days of an injury or illness.
One new tax program, called the Nexus program, would identify out-of-state-companies that do business in Rhode Island and collect appropriate taxes on sales. The effort is estimated to generate $1 million.

To generate savings, the budget again would look to Medicaid reform. This year, an estimated $70 million in expenses were eliminated from the program. This coming fiscal year, the governor has proposed identifying another $35 million through reforms that would include renegotiating contracts with private companies, and reducing administrative expenses in managed care.
Among other proposals, the budget seeks $10.8 million in savings by moving more Rhode Islanders with behavioral health needs to services provided through home- or community-based settings, rather than at state-run centers.

In spending priorities, Raimondo has identified investments in education, including what her chief of staff, Steve Neuman, described as “record investments” in K-12 education.
The budget will fully fund the school aid formula with an additional $33.4 million, and will also include an adjustment that will allow school systems with large enrollments in charter schools to save $350 per student to offset financial losses due school choice, according to state education officials.
The revised funding formula for public schools “levels the playing field between district and charter schools so that all schools can thrive,” Raimondo said. “It provides that when a student moves from a district school to a charter school, some of the money stays behind at the district school.”
The plan includes $9.1 million more in new funds for school construction and renovation, as well as a proposal to add $40 million more through a general obligation bond that would be presented for voter approval in November.

In other education priorities, the budget includes $2.5 million more to help schools address the needs of children learning English as a second language. Early childhood education will receive $1.2 million more. And $1.75 million has been restored for professional development for teachers and principals, an amount that was last made available in 2008.

In higher education and workforce development, Raimondo proposes expanding the P-TECH high school collaboration between private employers and school systems, by adding two to three more school systems.
Her budget also includes $500,000 for free SAT and PSAT tests for all sophomores and juniors in public high schools, to expand access to higher education.
Public colleges and universities will receive $17 million more in funds, including $10 million more in capital funds, intended to avoid tuition increases.
Last year, she said, the state created the Wavemaker fellowship to help repay student loans for college graduates who stay in Rhode Island.

“Tonight, I propose we expand that program so that anyone who graduates from a Rhode Island university – with a B+ average in a science or technology field – and who stays in Rhode Island in a STEAM job – will get help paying back their student loans.”

In other budget proposals:

The state will subsidize new air service routes through T.F. Green Airport, intended to provide additional transportation options for businesses. The governor has proposed $1.5 million to help create new direct service flights. The R.I. Commerce Corp. expects to be involved in the discussions of specific routes.

The Rebuild Rhode Island tax credit program will be supplemented with an additional $20.6 million, using funds generated by the restructuring of existing state debt. The program provides an incentive for developers to rehabilitate existing structures, as well as invest in new development.

The governor proposed bringing five general obligation bonds to the voters in the fall:

  • $45.5 million for higher education, which would include the $20 million for the innovation centers initiative, with the balance of the funds going to the University of Rhode Island.
  • $35 million for recreation, green spaces and healthy communities
  • $70 million for the Quonset port to rebuild infrastructure
  • $40 million for “housing opportunity”
  • $40 million for school construction

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