PROVIDENCE – A $14.34 billion budget for fiscal 2026 is now awaiting Gov. Daniel J. McKee's signature.
A 32-4 vote in the Senate on June 20 marked the General Assembly's full approval of the spending plan, which closes funding gaps, boosts Medicaid, raises provider reimbursements and allocates more resources to address the housing crisis.
The House passed the plan on June 17 by a 66-9 vote.
The approved proposal comes in roughly $500 million below the fiscal 2025 budget.
Legislative leaders said they faced significant challenges in finalizing the 2026 budget, including federal uncertainty, the end of emergency federal COVID-19 funding, a sizable budget gap, and having to identify solutions to numerous gaps in the governor’s proposal. As a result, lawmakers have largely declined to include most new spending programs the governor’s budget proposed.
“The budget as presented to us in January included some difficult gaps that we had to close before we could consider any new programs," said House Speaker K. Joseph Shekarchi,D-Warwick. "This budget reflects our commitment to our priorities despite the very significant challenges we face in this fiscal year."
House Finance Committee Chairman Marvin L. Abney, D-Newport, added: “without any doubt, this has been one of the most challenging budgets to craft in quite some time and the fiscal issues Rhode Island is facing are significant."
Senate Finance Committee Chairman Louis P. DiPalma, D-Middletown, said "this is not a flashy budget, but one that continues to support everyday Rhode Islanders who are struggling to get by in the current climate.”
Key highlights in the approved balanced budget include the following.
Health care:
- Lawmakers approved more than $40 million to boost Medicaid rates for primary care providers and added a 2026 rate review by the state’s health insurance office. They also preserved funding for a loan forgiveness program for providers in underserved areas.
- Meanwhile, hospitals will see $38 million more than proposed, restoring payments the governor had cut. Nursing homes get a $12 million bump to support higher staff pay under the revised safe staffing law.
Housing:
- Lawmakers boosted funding for homelessness programs by $4 million over the governor’s plan, bringing the total to $8.5 million. The increase is backed by a higher conveyance tax, hotel taxes on full-home rentals and general revenue.
- The budget also includes a proposal allowing the Superman building redevelopment to access more state tax incentives, while keeping the program’s overall cap unchanged. Additionally, it introduces a new tax on non-owner-occupied homes valued over $1 million, with revenue earmarked for low-income housing tax credit redemptions.
Support for cities and towns:
- The budget raises the real estate conveyance tax and expands the hotel tax to full-home short-term rentals, with new revenue shared among cities and towns, homelessness programs, and tourism agencies. Lawmakers also doubled the local hotel tax to 2%, further boosting municipal support.
- Distressed communities will get $2.5 million more than proposed, and the car tax reimbursement index was restored, capped at 2%.
- Lawmakers also fully funded library aid and the state education formula, adding $16.5 million for updated data and special education – bringing total education aid to $59 million more than last year.
Transportation:
- To help the Rhode Island Public Transit Authority with its budget shortfall, legislators have dedicated a 2-cent per-gallon increase to the gasoline tax to RIPTA.
- That move, along with an expanded share of other dedicated transportation funds, is expected to provide about $15 million to RIPTA in the 2026 fiscal year. While the additional funding is less than RIPTA’s initially projected budget shortfall, legislative leaders are pushing the agency to identify efficiencies to make up the rest and included a stipulation prohibiting RIPTA from cutting the RIde Anywhere program that provides door-to-door transportation for qualified passengers with disabilities.
- Lawmakers also expanded the governor’s proposal for a new registration fee for electric vehicles as a proxy for transportation support that drivers of other cars provide through the gasoline tax. The proposal includes a $200 annual registration fee for battery electric vehicles, $100 for plug-in hybrids and $50 for hybrids.
- Meanwhile, legislators have maintained the governor’s assumption that the state’s toll gantries for commercial trucks, shut down for several years over a lawsuit that the state ultimately won, would be reactivated by the final months of the year to generate $10 million in revenue.
- Lawmakers have added a new proposal to apply the state sales and use tax to short-term parking of up to one month starting Jan. 1, to generate $1.6 million during the half of the fiscal year it applies.
Child care:
- The budget extends a state program that subsidizes care for the children of child care providers. It also establishes separate rates for infants and toddlers receiving state-subsidized care and increased the infant rate to address the higher costs of those placements.
Initiatives not funded:
- For the second straight year, lawmakers have removed the governor’s proposal to purchase a large facility owned by Citizens Bank in East Providence to house several state departments. Legislative leaders cited the announcement of the increased price tag for the replacement of the westbound span of the Washington Bridge. Legislators added $22 million to cover the state share of the project costs from capital funds in 2027.
- They did not include the governor’s proposed 10% tax on digital advertising aimed at large online media providers. A similar program has been enacted in Maryland, resulting in litigation and failing to raise revenue for the state.
- They also did not include his proposal to raise the cigarette tax by another 50 cents to $5 per pack, although they did close a loophole that has resulted in nicotine pouches to escape the tax on tobacco products.
- Legislators did not increase marketing dollars given to Bally’s casinos. Bally’s sought a $17 million increase in the state’s marketing share in exchange for a possible smoking ban in the casinos.
- Also not included were the “baby bond” proposal from the governor and general treasurer, the governor’s workforce development program increases and a proposal to merge the minimum and medium security units at the Adult Correctional Facilities that was found not to achieve the intended savings.
- Lawmakers also did not incorporate a proposal to institute a “millionaire’s tax” on high earners, although given uncertainty at the federal level including major tax code changes, it remains an option should the state’s circumstances change later in the year.
- Matthew McNulty is a PBN staff writer. He can be reached at McNulty@PBN.com or on X at @MattMcNultyNYC.
