As Rhode Island lawmakers return for the 2020 legislative session on Jan. 7, some of the most pressing questions they’re expected to face this year will have a familiar ring, including how to deal with a perennial structural budget deficit that is now projected to approach $200 million.
Political observers say most of the contentious issues that will be revived or introduced in the General Assembly this session will directly affect the state’s $10 billion budget, and state leaders will be under pressure to raise revenue and control spending to close the budget shortfall.
House Speaker Nicholas A. Mattiello, D-Cranston, has emphasized that getting the deficit under control is among his top priorities this year, as well as implementing the fourth year of a six-year phaseout of the automobile excise tax.
He’s insisted bluntly that he would not consider a budget that raises taxes.
“We want a budget that addresses the structural problems of how government is doing business,” Mattiello said in written responses to questions about the new legislative session. “We have to be more efficient and get a better bang for our dollars.”
In a recent interview with PBN, Gov. Gina M. Raimondo shot down growing speculation that her budget proposal for the next fiscal year would include a hike in the gas tax, which now stands at 34 cents per gallon. “I will not be proposing an increase in the gasoline tax,” she told PBN in December. “Not happening.”
Also not likely to happen is an expansion of the Rhode Island Promise tuition-free program, which is in its third year at the Community College of Rhode Island. Raimondo failed in her attempt last year to expand the scholarship program to Rhode Island College, and she has said she probably won’t reintroduce the expansion proposal this year because the price tag might be too big in light of the projected budget gap.
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RECREATIONAL MARIJUANA: Gov. Gina M. Raimondo last year introduced a proposal to legalize and regulate recreational marijuana in Rhode Island but it was not approved. While she prepares to reintroduce a similar proposal, both House Speaker Nicholas A. Mattiello and Senate President Dominick J. Ruggerio have expressed opposition to such a measure. / ASSOCIATED PRESS FILE PHOTO[/caption]
The legalization of recreational marijuana had been expected to fuel much debate this year, as Raimondo prepared to reintroduce a proposal to regulate and tax what would amount to a new industry in Rhode Island. But even before the start of the General Assembly session, the idea faced strong opposition from leaders in both chambers.
Senate President Dominick J. Ruggerio, D-Providence, publicly stated he is opposed, based on the way the medical-marijuana system has been managed by the state so far. And Mattiello said the governor should not include the issue in her budget proposal.
“Legalization should not be done for budgetary reasons or because neighboring states are doing it,” Mattiello told PBN. “There is little appetite for it in either the House or Senate. We are still dealing with the ramifications of the expansion of medical-marijuana compassion centers and that needs to be dealt with first.”
Ruggerio urged caution when it comes to a move to legalize recreational marijuana. Employers have significant concerns about worker safety and federal workforce requirements, which is important given the large defense industry, he said.
“Marijuana legalization would be detrimental to our efforts to improve education, police the black market and enforce traffic safety,” he said. “I am concerned about insurance rates because states that have legalized marijuana have seen auto insurance costs increase.”
Still, Raimondo appears ready to push forward, asking Ruggerio and Mattiello to keep an open mind.
Her proposal would not be the same as the measure she introduced in 2019, the governor said in a PBN interview last month, although she acknowledged that the details were still under review. Last year’s measure would have generated about $22 million annually, through a 10% tax on marijuana products, on top of the state’s existing 7% sales tax.
“For me it’s about health and safety. It is in our state, whether we like it or not,” Raimondo said. “I think we should regulate it to keep people safe.”
Employers have been watching the issue carefully.
If it is reintroduced, the measure should allow employers to retain control of their environments, said Laurie White, president of the Greater Providence Chamber of Commerce.
“We will continue to push for employer rights, specifically around their ability to ban the use, sale or possession of recreational marijuana in the workplace,” she said. While some advocates of legalization have compared recreational marijuana to alcohol use, in terms of business concerns, White said employers are worried it is harder to detect and measure.
“It’s a lot different. It’s become a lot more widespread,” she said.
Another controversial issue that heated up last year and continues to simmer is the battle for the state lottery contract between International Game Technology PLC and Twin River Worldwide Holdings Inc.
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LOTTERY CONTRACT: Tiverton Casino Hotel in Tiverton is run by Twin River Worldwide Holdings, a Rhode Island-based publicly traded company, along with the Twin River Casino Hotel in Lincoln. Twin River Worldwide Holdings is contending with International Game Technology for the state’s lottery contract. The contract is currently held by IGT, which is seeking a renewal. / PBN PHOTO/DAVE HANSEN[/caption]
IGT is seeking a 20-year renewal of its contract to run lottery programs, including thousands of video lottery terminals located at the state’s two casinos. But Twin River, a publicly traded company that runs those casinos, has challenged IGT for the contract.
Although the Raimondo administration has negotiated and sought an extension of the contract with IGT, officials say the state needs to keep both companies healthy. The decision to be made by the General Assembly will have immediate implications on the state’s budget.
Lottery revenue is the third-largest share of state overall revenue, behind income and sales taxes. Of the nearly $400 million in lottery proceeds transferred to the state in fiscal 2019, $317.5 million came from casino slot machines.
While the spectacle of two large corporations with local ties attacking each other last summer with ads and public statements has faded, the contract will resurface once a House-hired consultant releases a report that evaluates which company is better positioned for the work.
Mattiello said the House would review it and collaborate with the Senate on the best way to move forward. He implied the review would be thorough and include public testimony. “There [are] still three years remaining on the current IGT contract,” Mattiello said. “And the state has a lot of options that we will explore. I also look forward to the public’s input.”
IGT, which has its North American headquarters in Providence, employs 1,200 people locally. Twin River has said its partnership with a technology company will enable it to match that.
Christiansen Capital Advisors LLC is expected to return with its report in mid- to late January. The $147,600 review will provide some clarity and expertise for lawmakers, said House Minority Leader Blake A. Filippi, R-Charlestown.
“We’re making decisions for the next 20 years that are going to deal with $8 billion in tax revenue,” he said. “You can’t be penny-wise and pound-foolish with this. You need to hire experts when you don’t know the subject matter.”
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CALL TO ORDER: Rep. Marvin L. Abney, left, chairman of the House Committee on Finance, and Rep. Alex Marszalkowski, convene a meeting of the Subcommittee on Human Services in December. / PBN PHOTO/RUPERT WHITELEY[/caption]
The lottery contract carries significant political weight.
Wendy Schiller, a professor of political science at Brown University, said legislators who will be seeking reelection in November will have to justify their decisions to voters. It’s a “whole lot easier” to explain a five-year deal than a 20-year contract, she noted.
“There are potential pitfalls on both sides of the issue,” Schiller said. “If IGT cuts jobs in Rhode Island, the legislature and the governor will take the blame. But if Twin River gets the contract and their systems do not work as well, the legislature and the governor will also take the blame.”
What other matters will draw a lot of attention in the business community over the next six months? Here are some likely candidates:
Minimum Wage
Measures to raise Rhode Island’s minimum wage failed to get past the General Assembly last year, but legislative leaders have already indicated they’re looking at it favorably this time around.
When asked about his position, Mattiello pointed out that Rhode Island is no longer competitive with neighboring states. Rhode Island’s rate of $10.50 an hour trails both Connecticut, at $11 an hour, and Massachusetts, at $12.75 an hour, Mattiello noted.
To address the concerns of employers, he said the legislature took a break from an increase last year. There’s a good chance that a hike will be approved this year.
“We try to be competitive with our neighbors and we want our citizens to have a quality standard of living,” Mattiello said. “But we will always keep the business concerns in mind as well.”
Raimondo hasn’t indicated whether she will seek another increase.
Housing Development
The state has a shortage of affordable housing, meaning apartments that are available with rents that are within the budget for working Rhode Islanders.
Raimondo, who convened a summit on housing in the fall, said she is considering whether and how to create dedicated and continuing funding for housing production.
Although some observers have said she is considering a fee or assessment on real estate transactions, Raimondo said she has not committed to a mechanism.
“Rhode Island is very unusual. [It is] one of only a handful of states that doesn’t have a dedicated revenue stream for housing,” she said. “We do have a housing problem.”
Ruggerio had identified housing as one of his top three concerns. The Senate, he said, would be looking at an incentive program to encourage more housing construction in communities, possibly through a program that provides an incentive to cities and towns that experience additional costs in education.
Brian Daniels, executive director of the Rhode Island League of Cities and Towns, said the organization is among several promoting an infrastructure grant program that would help municipalities extend utilities to new developments, as well as programs that reward communities for increasing their housing densities.
The lack of available homes has crept into conversations about economic development, according to Daniels. “We’ve definitely heard on a local level that affordable housing is keeping [employers] from expanding here, because they just can’t find affordable housing,” he said.
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BUSY SESSION: From left, House Speaker Nicholas A. Mattiello, Senate President Dominick J. Ruggerio and Gov. Gina M. Raimondo must work together to tackle a host of issues in the upcoming legislative session, including a structural budget deficit, the state lottery contract, the minimum wage and marijuana legalization and regulation. / PBN PHOTO AND FILE PHOTOS/MICHAEL SALERNO[/caption]
Real Jobs Rhode Island
The Rhode Island Manufacturers Association is among the advocates for making funding for Real Jobs Rhode Island a standing part of the budget.
The program, created under Raimondo in 2015, provides state-sponsored training for positions that are needed by industry. Last year, although the program received funds, legislators cut $1.5 million off of Raimondo’s funding request.
“All the manufacturers support it,” said David Chenevert, the association’s executive director. “We’re trying to make it a sustainable program, so a generation from now, we still don’t have that void.”
Education aid
Education aid to cities and towns, and a statewide focus on outcomes, is also expected to be a top issue this year.
The state’s largest school system, in Providence, is now under state control. It isn’t clear if Raimondo’s budget will seek more funds for the capital city schools. But municipal lobbyists say they are keen to make full funding of the state’s school funding formula a priority.
Ruggerio, when asked if more funds would be forthcoming, noted that K-12 reforms may not require more revenue. “The state provides significant resources already – a billion dollars in this fiscal year. We are looking at additional ways to improve education.”
Civics education, financial literacy and additional resources for English learners are also vital, he said.
Medicaid employers
Raimondo has not indicated whether she will again seek approval of a fee on employers whose workers, part time and full time, qualify for state-supported Medicaid.
Last year, her proposal would have allowed the state to impose a fee of up to $1,500 for every employee, per year, who qualified for Medicaid, and was intended to help offset the state’s costs in providing that coverage.
The assessment was expected to generate $15.6 million for the state in its first year, but it drew sharp criticism from businesses and their advocacy organizations.
As the state enters 2020, employers and their associations are tracking it carefully, given the state budget pressures.
Chenevert, of the Rhode Island Manufacturers Association, said he has spoken to the governor on the issue. The way the proposal was presented last year, he said, it would have directly harmed employers, many of whom employ people part time and have no idea if they qualify for benefits through a spouse or another source.
“A staffing agency in particular, it would have cost her $750,000,” Chenevert said. “They employ a lot of workers who are at the low end of the pay scale.”
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GETTING READY: Rep. Marvin L. Abney, right, chairman of the House Committee on Finance, chats with clerk Steven Sepe before a subcommittee meeting at the Statehouse in December. The finance committee soon will have its hands full as state leaders attempt to close a projected $200 million structural budget deficit. / PBN PHOTO/RUPERT WHITELEY[/caption]
Vaping
Raimondo issued an executive order in September banning the sale of flavored vaping products in the state, citing public safety concerns among youngsters. Now top legislators have indicated they’re interested in making the state’s reaction to e-cigarette use more permanent.
The governor has said she is likely not looking to enforce a total ban on vaping but is waiting to hear the recommendations from a group studying the issue.
“I support Gov. Raimondo’s executive order regarding vaping, which is a serious health concern,” Mattiello said. “I anticipate legislation will be introduced this session and we await the testimony from public health experts as we address this issue carefully and responsibly.”
Mary MacDonald is a PBN staff writer. Contact her at Macdonald@PBN.com.
