PROVIDENCE – Gov. Gina M. Raimondo unveiled a fiscal 2020 budget proposal Thursday that would increase state expenditures for education, workforce training and business investment, while adopting new revenue sources, including legalized recreational marijuana and fees for large employers whose workers qualify for Medicaid.
The $9.9 billion budget, released to the General Assembly, includes $4.1 billion in general-fund expenditures. That’s a $128 million, or 3.2 percent, increase in spending from state revenue over the fiscal 2019 revised budget.
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The spending plan is directed at shoring up educational performance in Rhode Island, where K-12 test scores have distressed state leaders this year. The proposal includes $30 million more for public schools next fiscal year, through the state funding formula.
In early education, the governor proposes a move toward universal pre-K, which would allow parents throughout the state to enroll 4-year-olds in preschools. Her budget suggests $10 million more, to expand the number of seats and cover lapsed federal funding for the education.
The Rhode Island Promise program would be expanded at the Community College of Rhode Island and introduced to Rhode Island College. The governor proposes $5.3 million more for RIC scholarships, to allow students to continue tuition-free for their junior and senior years, and for adults who want to continue their degree or education at CCRI. The latter would be eligible for people age 25 and older, attending part-time or full-time.
Raimondo proposes to increase the state minimum wage, to bring it on pace with increases in neighboring states. If approved, the minimum would increase to $11.10 an hour, up 60 cents.
To bolster revenue, the budget proposes several new initiatives, including legal sales of marijuana for adults, an expansion of the state-approved medical-marijuana dispensaries, an increase in the state hotel tax from 5 percent to 6 percent, and application of the state 7 percent sales tax to additional business services, such as landscaping and janitorial services, political lobbying, as well as downloads of streaming services, such as Netflix.
The “adult-use marijuana program,” which state administration officials describe as the most conservative among states, would create a new Office of Cannabis Regulation within the state Department of Business Regulation to oversee the market.
The program would create a weight-based excise tax on marijuana cultivation and a 10 percent tax on marijuana products, in addition to the existing sales tax. Purchases would be limited to 1 ounce or less.
The Raimondo budget includes $6.5 million in anticipated new revenue from marijuana sales in fiscal 2020, assuming the proposal is enacted effective Jan. 1, 2020. In 2021, the budget anticipates receiving $22 million from marijuana sales.
Raimondo proposes that 15 percent of all marijuana revenue would go to cities and towns, and 25 percent to public health, public safety, regulation and enforcement. The budget includes $650,000 more for the Rhode Island State Police, for example, for enforcement purposes.
The governor also proposes six new compassion centers, where medical marijuana can be purchased. To drive more retail sales, home-growing activities would be curtailed. Only patients with a hardship could cultivate marijuana. The budget anticipates another $1.6 million from that.
In other new measures, the state is proposing a new Medicaid Employer Assessment Fee, a charge on large, for-profit companies that employ full- or part-time employees who earn so little they are enrolled in Medicaid, which is a state-supported health care program for low-income and disabled residents.
Those charges — 10 percent of an employee’s wages, up to $1,500 annually per employee – would be paid by businesses with more than 300 employees. The budget anticipates earning $15.6 million in revenue from the assessments in fiscal 2020.
In a briefing for reporters, administration officials on Thursday said about 140 companies have employees working in Rhode Island who could be subject to the program.
The proposal is modeled after a similar effort in Massachusetts.
Another new proposal is aimed at institutional nonprofits, such as hospitals and universities, that are not paying property taxes to municipalities. The state would reduce aid to cities and towns by about $6 million next year, and in turn, those municipalities could opt to try to tax the large nonprofits using lands for commercial purposes.
Budget documents state that towns and cities in Rhode Island annually forego about $150 million in property tax revenue on lands owned by tax-exempt nonprofit universities and hospitals.
The so-called “nonmission, nonprofit” property tax option would allow municipalities to charge up to their commercial tax rate for those properties owned by nonprofit hospitals and universities that are used for commercial purposes.
Examples could include leased office space that is owned by a university, or a bookstore, or is vacant land.
The budget also includes revenue from a proposed expansion of online sports betting in Rhode Island, assuming that $3 million could be generated through online sports betting accounts at Twin River casinos in Lincoln and in Tiverton.
Raimondo’s spending plan also includes provisions to reduce Rhode Island’s health insurance premiums through HealthSource RI with a reinsurance program and to establish a state-level individual mandate, replacing the federal mandate’s tax penalty, zeroed out by Republican-backed tax changes that took effect last year.
In July, the Market Stability Workgroup, established by HealthSource RI and the Office of the Health Insurance Commissioner, reported a reinsurance program that would cut health care rates by 10 percent would cost $26 million, with $15 million funded through pass-through savings and another $11 million needed before moving forward.
Since the federal tax penalty for not enrolling in health insurance was eliminated, members of the Market Stability Workgroup have expressed concern that the state’s record high 96 percent health insurance enrollment could be in jeopardy in coming years. Zachary W. Sherman, director of HealthSource RI, said the proposed state penalty for those uninsured would be $695 for adults and $347 for children, or 2.5 percent of household income, whichever is higher.
Brett Smiley, Raimondo’s chief of staff, said the budget plan is the result of a grueling process that took into account difficult spending decisions. “[Raimondo] is pleased … that once again, for the fifth year, to submit a proposal that balances a general revenue deficit, that does not raise any broad-based taxes but protects key investments in education, economic development, health care and the environment, while finding structural savings to our social safety-net programs, without cutting eligibility.”
PBN staff writer Rob Borkowski contributed to this report.
Mary MacDonald is a staff writer for the PBN. Contact her at macdonald@pbn.com.
