$2M for EDC restructuring restored in 2010 budget

The beleaguered R.I. Economic Development Corporation finally had something to celebrate last week.
The agency, which has been under fire for its business-development efforts in a sputtering economy, avoided a deep budget cut when the House leadership restored a $2 million appropriation to the EDC in the $7.76 billion fiscal 2010 state budget plan. The late decision to put back some money overrode a House Finance Committee recommendation that the EDC’s $6 million budget be slashed by $2.6 million next fiscal year.
“I think they recognized the value of the EDC,” said Keith Stokes, a longtime agency board member. “A cut like that would have been devastating.”
Laurie White, president of the Greater Providence Chamber of Commerce, said the funding was needed for the pending restructuring of the agency, including hiring a new executive director. The previous director, Saul Kaplan, stepped down in December, and J. Michael Saul has served as interim director.
“We need to recruit a first-class economic-development leader to Rhode Island,” White said. “If you cut the EDC budget, think about what message that sends.”
The restoration of the EDC funding was one of several developments that the business community saw as positive as the House passed the tax-and-spending package and forwarded it to the Senate for its expected approval last week.
All in all, the business community fared pretty well in the budget-making process, according some business leaders.
John Gregory, president and CEO of the Northern Rhode Island Chamber of Commerce, praised the House for turning back a late effort to alter the alternative flat tax for the wealthy, and for restoring the R.I. Office of the Health Insurance Commissioner. But it wasn’t all good for business.
The budget also included a 2 cent increase in the gasoline tax, with the additional money going to the R.I. Public Transit Authority, and the end to preferential tax treatment of long-term capital gains.
And another change that didn’t attract much attention, Gregory said: The budget would raise the bar on the requirements of the state’s Job Development Tax Credit, making it so companies would be eligible for the job-creation credit only on positions that paid 2.5 times the minimum wage rate, or about $18.50 an hour. The current requirement is 1.5 times minimum wage.
“We’ve got 12 percent unemployment,” Gregory said last week. “I know there has been lots of talk about the knowledge economy and higher wages, but this in essence mandates it.”
Yet, considering the fiscal woes of the state, Gregory and others business leaders weren’t going to gripe.
State leaders have been struggling to close an estimated $586.6 million deficit for next fiscal year, which starts July 1, and have considered various ways of raising the money, including hiking the sales tax and eliminating the controversial flat income tax.
A flat tax amendment introduced in the House during the budget debate would have frozen the flat tax at 7 percent instead of dropping it to 6.5 percent in tax year 2009 as scheduled. The additional proceeds would have been used to restore some of the $55 million in revenue sharing with municipalities that the budget eliminates. The amendment was defeated 52-23.
In the end, the budget proposal relied heavily on the federal stimulus money – $236.5 million – to close the gap. In another bit of good budget news for Gregory, the House restored $1.5 million for charter schools, including the Mayoral Academy in Cumberland and a new charter school in Central Falls.
The decision to plug $650,000 back into the budget for the Office of Health Insurance Commissioner – which saves Commissioner Christopher Koller’s job – followed a week in which Republican Gov. Donald L. Carcieri and Democratic Lt. Gov. Elizabeth H. Roberts publicly opposed the House Finance Committee’s decision to eliminate the office.
EDC officials acknowledged there was also a late lobbying push to get more funding for the agency, including discussions among Carcieri and the House leadership.
While restoring $2 million to the state appropriation for the EDC, it would still fall about $600,000 short of what Carcieri had recommended.
The governor had proposed giving the agency slightly more than $6 million – the same as in fiscal 2009 – while the revised budget now calls for the EDC to receive about $5.5 million.
But Stokes said the EDC isn’t the only agency that will have to deal with some reductions. “Everyone at this point is taking a hit,” he said.
The budget also includes changes to retirement benefits for state employees and teachers.
Starting Oct. 1, the date when current workers would become eligible to retire would vary based on their age and length of service. New workers would have to be at least 62 years old to retire. The value of their pensions would now be based on their average salary in their five highest-paid years, rather than three.
New judges would receive maximum pensions worth 65 to 80 percent of the average salary in their five highest-paid years, rather than 100 percent. &#8226