For Rhode Island legislators, what’s old is new again.
After three years of surpluses, state budget officials are now projecting that the government is facing a 2026 fiscal year deficit of more than $330 million, a gulf that could widen to more than $680 million by 2030.
It wasn’t long after lawmakers ended the legislative session last year that warning flags were raised.
A July advisory from Joseph Codega Jr., director of the R.I. Office of Management and Budget, instructed state department chiefs to keep a lid on new hiring and expenditures unless they could provide “substantive justification of critical need.”
“Simply stating that a position is within budgeted authority is insufficient,” wrote Codega, citing the new “constrained environment.”
Department directors were also told that in addition to submitting their normal fiscal 2026 budget requests to the R.I. Department of Administration, they should also submit requests that cut spending in each department by 7.5%.
It’s with this gloomy outlook that the General Assembly launches a new legislative session on Jan. 7. In addition to the state’s shaky financial position, lawmakers will find many challenges left over from the previous year awaiting them, such as whether to boost reimbursement rates for health care providers, how to ease the shortage of affordable housing and investigating the debacle surrounding the failure of the Washington Bridge.
Lawmakers will also likely resume the debate from previous sessions about the R.I. Coastal Resources Management Council, environmental issues, public education funding and state control of the Providence Public School District.
The most pressing task is sure to be the state budget for fiscal 2026, which begins July 1.
McKee must submit his multibillion-dollar budget proposal by Jan. 18, a hefty document setting the administration’s priorities for the next fiscal year. That proposal will undergo a monthslong review by the General Assembly, and early indications are the budget-cutting knives are being sharpened.
In addition to a projected deficit, political tides may be turning against the Democrat-dominated Ocean State, with 2025 ushering in a Republican president and national calls for federal downsizing. Rhode Island leaders expect to face increased pressure for belt-tightening.
In late December, House Speaker K. Joseph Shekarchi told Providence Business News that the upcoming budget session “will clearly be the most challenging by far” since he took the role of speaker in 2021.
“Because a lot of people have gotten used to the federal money, they will come and say they have a great program [that needs funding],” said Shekarchi, D-Warwick, referring to the millions of dollars in federal COVID-19 relief aid available to the state in recent years. “Well, everybody has a great program.”
Shekarchi, who successfully championed legislation last year on housing and the life science and biotechnology hub, instead wants his chamber to prioritize oversight and efficiency.
“Over the last two to three years, we have made a lot of strategic investments,” he said. “This year is about making sure our directives are carried out in an effective way.”
Meanwhile, Senate President Dominick J. Ruggerio, D-North Providence, and new Senate Majority Leader Valerie J. Lawson, D-East Providence, say they will direct their attention to continuing work on education and health care.
But the fiscal reality will likely constrain big-ticket ambitions.
In a December interview with PBN, Ruggerio said he has no interest in raising any taxes or fees. Calls for targeted income tax increases from progressives in the party, such as the so-called “millionaire’s tax,” are a nonstarter, he says.
“These things are going to hurt the economy of the state. We are very wary of these situations,” he said. “We can’t take these hits. So, we are trying to do whatever we can within reason. Because we are on the defense now.”
Ruggerio is concerned about developments in Washington, D.C., noting that the divide in Congress almost led to a federal government shutdown recently. While that crisis was averted, Ruggerio says the Trump administration may delay or put an end to state progress on renewable energy goals.
“It’s difficult for us to put together a budget when we don’t have all the information,” he said.
Michael DiBiase, CEO and president of the Rhode Island Public Expenditure Council, says one thing is clear for the 2025 session: There needs to be a change from recent years when the state was awash with cash.
“It’s a serious problem,” DiBiase said. “Spending is higher than revenue, even with a budget last year that was balanced using a lot of one-time money. When you do that and it is not available the following year, you have a structural problem. … You have to look at spending first.”
House Minority Leader Michael W. Chippendale, R-Foster, agrees.
He says the GOP caucus has several initiatives to address, including “runaway energy prices, failing public education [and] the collapse of our health care system.”
However, none are more important to him than creating an independent Office of Inspector General, which “would save Rhode Island taxpayers countless millions of dollars in waste, fraud and abuse,” Chippendale said.
A tall order, he acknowledges.
“It would require General Assembly leadership to let go of some of their power,” Chippendale said.
As for cutting fat, Chippendale has more confidence than in previous years that given the fiscal realities, the leadership across the aisle has the courage to make some tough decisions.
“The radical progressives will continue to clamor for more and more social policies that have little tangible impact on the daily lives of everyday Rhode Islanders but come with large price tags,” he said. “But I am hopeful the speaker has the fortitude to say ‘no’ to this approach.”
What initiatives are likely to draw attention in the business community over the next six months? Here are a few candidates:
[caption id="attachment_484571" align="aligncenter" width="1200"]
UNFINISHED BUSINESS: R.I. Housing Resources Commission member David Caldwell says creating a permit “czar” within the R.I. Department of Housing could help expedite projects, such as the Echo Village pallet shelter initiative in Providence seen behind him, which remains unfinished after years of planning.
PBN PHOTO/MICHAEL SALERNO[/caption]
HOUSING
The state had already devoted hundreds of millions of dollars toward the construction of affordable housing over the past three years before a $120 million housing bond issue was approved last November.
There has been talk of using $10 million of that bond to create a “public developer” of housing, a state entity to develop mixed-income housing by using a revolving fund to lend to or invest in projects.
The progressive group Reclaim Rhode Island has been pushing for the General Assembly to enact such a model, which would be a first in the nation at the state level, and both Shekarchi and the McKee administration have signaled their openness to the idea.
David Caldwell, who represents the Rhode Island Builders Association on the state Housing Resources Commission, has seen firsthand how the state needs more than money to address the long-running shortage of homes.
This was on display during its December meeting, where leaders of the nonprofit House of Hope Community Development Corp. and the R.I. Department of Housing struggled to explain how Echo Village – an initiative to build 45 pallet shelters in Providence for $4 million – was unfinished after years of planning.
The latest hurdle was complying with state fire and building codes. Newly installed Secretary of Housing Deborah J. Goddard, only days on the job, said the shelter would not be open until January, and she declined to provide an exact date.
Caldwell says more targeted reforms will need to be prioritized this legislative session now that budget money is tight.
“There is no production without permits,” he said. “We must provide consistency of code interpretation throughout the state.”
Caldwell believes the state should create a permit “czar” within the Department of Housing.
“In Rhode Island, we still measure these permits in months and years, while in other states it’s months and weeks,” he said. “I think the government can become more efficient easily with a little direction. The money is already there.”
In the Senate, Lawson plans to introduce legislation creating a tax-free savings account for down payments and closing costs for first-time homebuyers, much like a 529 college savings plan that offers tax advantages.
Lawson says it was a constituent who suggested the idea.
While the details are in the works, the average cap in the 14 other states that have similar programs is $50,000, she says.
Shekarchi is choosing to wait on the recommendations from the three housing commissions before going public with any new proposals.
While there have been pockets of local opposition, he believes most residents support the investments and reforms.
Chippendale, a staunch proponent of local control over zoning ordinances and land use, says the Republican caucus would like to see the issue handled in a less-heavy-handed manner.
“It’s primarily because the cost of doing business … is so high that we simply cannot produce housing that is inherently affordable,” he said.
And more housing in Rhode Island doesn’t always translate to more housing for Rhode Islanders, he says.
“Massachusetts residents earning much higher salaries than can be earned in Rhode Island outbid residents in our own cities and towns, driving housing costs through the roof,” Chippendale said. “Throwing money at this problem will continue to be a failure unless we acknowledge these facts and reinvent our approach.”
[caption id="attachment_484572" align="aligncenter" width="1200"]
NOT ENOUGH: Dr. Michael Fine, a family physician, says simply raising Medicaid reimbursement rates may not be enough to keep physicians from leaving Rhode Island.
PBN PHOTO/MICHAEL SALERNO[/caption]
HEALTH CARE
There seems to be little consensus on how to solve the shortage of primary care doctors in Rhode Island. Dr. Michael Fine, a family physician and former R.I. Department of Health director, estimates that as many as 400,000 residents are without a doctor.
A special commission is still a year away from completing its study on the feasibility of launching a medical school at the University of Rhode Island. It is expected to report its findings to state legislators in January 2026.
Meanwhile, complaints continue that Medicaid reimbursement rates are too low compared with neighboring states, causing many doctors to leave Rhode Island.
Senate leaders say they are reintroducing legislation to add primary care to the annual rate review by the R.I. Office of the Health Insurance Commissioner.
But Shekarchi says he’s not ready to support increasing reimbursement rates or the use of other financial incentives to attract and retain doctors, particularly with a government deficit on the horizon. Instead, he wants to look at targeted reforms such as making it easier for foreign doctors to practice in Rhode Island.
That would be a drop in the bucket, Fine says.
A more effective approach would be to incentivize an overhaul of the system, Fine suggests, shifting from a fee-for-service model to one where primary care practices are paid per patient per month. This “subscription model” typically charges between $60 and $125 per patient each month – less than half the cost of the fee-for-service model, where providers spend 40% of their income on billing.
“People often naively say we should just pay primary care providers better. It wouldn’t hurt. But I am not sure it will help,” Fine said. “We must make [Rhode Island] what the business sector calls ‘sticky.’ Just raising rates doesn’t make it sticky at all.”
ECONOMIC DEVELOPMENT
Neither Ruggerio nor Shekarchi have proposed any tax cuts or fee reductions.
But the new session will bring renewed efforts among the pro-business lobby and its allies to retain the companies that have become synonymous with the state, namely Pawtucket-based Hasbro Inc., which wants a new headquarters and is considering relocating to Boston by 2026.
“We are on defense now,” Ruggerio said. “These situations are going to hurt the economy. It is the same with CVS [Health Corp.]; we can’t take these hits.”
Last year, the General Assembly changed the way that banks are taxed to align with Massachusetts tax laws after Citizens Financial Group Inc. made a thinly veiled threat to move its headquarters across state lines. In this session, the focus will be persuading Hasbro to stay, although the company’s top executives are already considering taking advantage of a larger talent pool in Boston.
“We are going to continue to work with Hasbro. It’s about the talent they are looking for,” Shekarchi said. “I am proud we kept Citizens here. That sent a good signal to the business community that we can act and act quickly in a pro-business manner.”
He also wouldn’t rule out additional assistance for unfinished projects such as the $225 million development of the Industrial Trust Co. tower – known as the “Superman” building – in downtown Providence. Shekarchi has heard the developer, High Rock Westminster LLC, has a financing gap of millions of dollars, although he hasn’t received any requests for financial assistance as of late December.
The project calls for 300 residential apartments, along with office, retail and event space, and the state has already agreed to $26 million in incentives and contributions.
“You deal with it as it comes,” Shekarchi said. “We must act in a fair and responsible way and will address it on a case-by-case basis.”
TRUCK TOLLS
A federal appeals court ruled in favor of Rhode Island’s truck tolling program RhodeWorks, but the 14 gantries along the state’s highways and bridges have yet to be reactivated.
That’s because the ruling also concluded that the daily caps on local truckers – restricting the amount of times they can be charged – are unconstitutional. So legislative leaders and McKee have been in discussions about how to resume the program, which is intended to raise money for bridge and road reconstruction.
The tolls have been turned off since 2022, when a lower federal court ruled them to be in violation of the dormant commerce clause, prohibiting states from passing laws that discriminate against interstate commerce.
To resume tolls, the General Assembly will need to pass new legislation that removes the daily caps on local truckers.
“We don’t want to cause another constitutional issue,” said House Majority Leader Christopher R. Blazejewski. “But we want to support our roads and bridges.”
Of course, not everybody wants the tolls to return.
The Rhode Island Trucking Association has opposed resuming tolling without the local caps. And Chippendale says he worries it could give Rhode Island companies yet another reason to relocate out of state, and he plans to introduce legislation to repeal the tolls outright.
WASHINGTON BRIDGE
Both Shekarchi and Ruggerio say they support oversight hearings in January on what led to the failure of the Washington Bridge and to pin down a realistic price tag for its replacement.
Shekarchi says the most important goal is to determine a timeline for the bridge to be replaced and understand how much it will cost.
“But don’t think we are going to get away with taxpayers not putting money into this bridge,” he said. “We are going to have to.”
Lawson says many of her East Providence constituents are still reeling from the bridge’s partial shutdown, which has lasted more than a year. After the McKee administration’s stumbles in handling the bridge failure and replacement, Lawson is hopeful that convening a legislative panel to examine what happened will restore faith in government.
ENVIRONMENT
Senate leaders say calls to change or outright abolish the R.I. Coastal Resources Management Council could reemerge as environmental and political transparency advocates gear up for another legislative battle.
Critics have long said that while the regulatory agency – charged with reviewing everything from coastal development and aquaculture leases to offshore wind energy proposals – may have a competent staff of professional biologists, engineers and geologists, final decisions are left to political appointees.
Two bills introduced last session supported by R.I. Attorney General Peter F. Neronha and organizations such as Save The Bay Inc. would have replaced the CRMC with a new Department of Coastal Resources.
The proposals were held for further study.
Shekarchi said he is receptive to proposals such as the possibility of folding the CRMC into the R.I. Department of Environmental Management, but he expressed concerns that changes may only hand the perceived “rubber stamp” from the appointed council to a new department.
The Senate is also looking to fully fund the Executive Climate Change Coordinating Council, which hasn’t happened since it was created in 2014 as part of the Resilient Rhode Island Act, by tapping the contingency fund used to address oil spills.
Senate spokesperson Greg Pare said the account has now accumulated enough money to provide full funding to the council in fiscal 2026 “while continuing to explore long-term sustainable funding options.”
