As chairman of the House Finance Committee, Rep. Steven M. Costantino was one of the architects of the fiscal 2008 state budget approved by the General Assembly last month – a highly controversial document that has been called both anti-business and unfair to the poor.
Costantino spoke with Providence Business News about the reasoning behind some of the choices made in the budget, which required closing a $350 million deficit.
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PBN: What did the budget accomplish?
COSTANTINO: It was an extremely challenging budget. And going into it we knew that we had to make some very, very hard decisions to try to offset what we call long-term structural deficit problems. I believe [this budget is] a step in the right direction. Is it as far as we need to go? Absolutely not, but to get to where we need to go is probably a three- to five-year process.
PBN: Why is it a step in the right direction?
COSTANTINO: When the budget was originally proposed, we actually had an out-year structural deficit problem that was probably $32 to $40 million more than what the budget we passed. So we actually helped that situation in terms of spending. Ultimately, we were about $72 million less than the original budget for the out years. … Next year’s budget is going to be even more challenging than this year’s budget. Until we get a hold of this structural flaw … that’s pretty much how we’re looking at things these days.
PBN: What is the structural flaw?
COSTANTINO: It’s been over the years the reliance on one-time fixes. … [In addition], as well as doing all the tightening on the expenditure side, we need good job growth in the state and we need that job growth between the $75,000 to $125,000 [salary] range.
PBN: How are the structural issues beginning to be resolved with this budget?
COSTANTINO: We’re trying to rely less on one-time fixes. And when you have one-time fixes, you try to use them for one-time expenses, such as paying off debt, pay as you go … like we did with the Dunkin’ Donuts Center rather than doing the 30-year debt payment with interest.
PBN: What about the $154 million in tobacco-settlement bonds?
COSTANTINO: We actually relied less on one-time fixes in this budget than the governor’s budget. … What a lot of people do not know is the governor presented us with a budget that had $80 million in it from the AIG settlement. … That was an insurance settlement, a one-time settlement … that never came. And that money was booked as operations. So that put us in dilemma because we had to backfill that $80 million out of tobacco.
PBN: What is your response to some of the criticism that says the budget is anti-business, for example, with the 2-percent tax on imaging in doctors’ offices?
COSTANTINO: The governor proposed that, and we accepted it. … And I did put in some new language in there so that it would not hurt the small physician doing some medical imaging. … What’s also launched in this is that under tremendous stress and strain on this budget, we did not increase broad-based taxes. We did not increase the income tax. We did not increase the sales tax, which was a major achievement … and we held capital gains to where it is.
PBN: What about eliminating the preferential treatment of REITs? Was that anti-business?
COSTANTINO: I don’t know what anti-business is. … Maybe this is my small-business perspective, but I don’t see small businesses as being able to take advantage of any of these [tax shelters]. And when you have a tax policy, particularly those types of issues which are now broad-based tax policy … the burden gets placed on small businesses.
PBN: How so?
COSTANTINO: Since these large corporations are avoiding the payment of taxes … where does the tax burden shift to? It shifts to small businesses who can’t participate in these types of programs. … The other question on this is whether or not [the tax shelters] are working as they should be … did they grow jobs? Were there major investments in the state because of them?
PBN: Do you think there will be a comprehensive evaluation and overhaul of the tax system?
COSTANTINO: I think at some point there has to be, because we have a lack of job growth. … I think companies are looking at three or four issues on whether they want to invest. Tax policy is a piece of it, public education … access to a good [work force] and natural resources. Biotech won’t invest in the state if they know there is an access to water problem. … I really don’t feel as a state we’ve put together an economic policy to deal with all those issues.
PBN: Were there any discussions about historic tax credits?
COSTANTINO: There were discussions over the year about historic tax credits and the fact that in 10 years its cost us $500 million. … I think what House Finance would like to see is … if the program has to change, it would be nice to have the people who are involved in the program come up with something that tweaks it. … I think cities and towns have benefited greatly because they’ve put some new projects on the tax roll.
PBN: Is the budget going to help job growth in the long run?
COSTANTINO: I think the fact that we’ve stopped the trend of increasing on the structural deficit helps … but we need an aggressive economic policy that we don’t have right now, because right now we virtually don’t have any… this may be the time for some blue ribbon commission to get together and say where do we want Rhode Island to be in the next 10 to 20 years.
Interview: Steven M. Costantino
Position: State representative (D-Providence), chairman of the House Finance Committee, co-chairman of the Permanent Joint Committee on Healthcare Oversight
Background: After graduating from college, Costantino became a community organizer, then an operations manager for Providence Community Action. From there he became executive director of the Drug and Alcohol Treatment Association of Rhode Island. Costantino held that position for nine years. He quit the association to run for office in 1994. He was sworn in January 1995 and has been serving as a state representative since then. After being elected, he became an owner and administrator of the Providence Medical Health Care Center, a walk-in medical facility. For the last four and a half years, he has helped manage Venda Ravioli and Costantino’s Ristorante and Caf?, owned by his brother.
Education: B.A. in psychology, 1979, Providence College
Residence: Providence
Age: 50
