House passes $13.1B fiscal 2022 budget, includes amendment for PPP-taxed businesses

THE R.I. HOUSE OF REPRESENTATIVES passed its $13.1 billion fiscal year 2021-2022 budget on Thursday at the Statehouse. The budget will now go to the full Senate for a vote on the floor next week. / PBN PHOTO/CASSIUS SHUMAN

PROVIDENCE – After some spirited debate, the House on Thursday approved a $13.1 billion fiscal 2022 budget by a vote of 64-10 that was amended to allow businesses taxed on Paycheck Protection Program loans to make interest-free payment by March 31, 2022.

The budget, which moves to the full Senate next week for a vote, is nearly $2 billion more than was proposed by Gov. Daniel J. McKee in March. The House Committee on Finance passed the budget on June 17.

It does not include allocation of any of the $1.1 billion in federal stimulus aid the state will receive from the American Rescue Plan Act.

House Republicans offered several amendments during the session that were rejected, including redirecting Rebuild R.I. grants to small businesses, while reserving 50% of $30 million in motion picture tax credits for local hires, and an article that sought to examine government waste in state departments with a zero-based budgeting process.

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House Speaker K. Joseph Shekarchi said during his budget briefing on June 17 that the House’s budget is focused on supporting the push to address affordable housing issues, social services and educational needs.

The budget includes taxation of businesses that received forgivable PPP loans above $250,000, but does not include proposals that were aimed at increasing taxes on high-wage earners.

The House Fiscal Office said the taxation of PPP loans will generate about $47 million in revenue for fiscal 2021 and 2022. The bulk of the revenue will come from the fiscal 2022 tax year.

The PPP budget amendment addresses amended tax filings for businesses that would be taxed on PPP loans, giving them until March 31, 2022 to provide interest-free payment of the loans.

Shekarchi, McKee and Senate President Dominick Ruggerio proposed the amendment for inclusion in the budget on Thursday prior to the floor vote.

“I thank the speaker and Senate president for their continued partnership in identifying ways to support businesses as we emerge from the pandemic,” said McKee in a statement. “Giving businesses the additional time to pay the state tax on PPP loans without penalty or interest will provide them with added flexibility as our economy restarts and they plan for the future.”

Chairman Marvin L. Abney, D-Middletown, said the tax administrator will provide businesses with instructions for making their payments and filing their amended returns.

Legalization of adult-use recreational marijuana, which was passed in the Senate, was not included in the House’s budget. Nor was a proposal that would impose a 1.5-cent-per-ounce tax on sugary beverages, which McKee has said is a tax that he opposes.

Shekarchi said most of the spending increase in the 2022 budget will be derived from the federal stimulus funding and an increase of $180 million in general revenue. An allocation of $300 million will go toward funding unemployment insurance, while $600 million would fund schools.

A top priority for legislature leaders is the affordable housing issue facing the state. The House budget includes a new surcharge on real estate sales over $800,000, with creation of the position of state housing czar.

The budget includes more than $250,000 to support a deputy secretary position within the Executive Office of Commerce, which will serve as the state’s lead official to coordinate and facilitate housing production. This position will serve as executive director of the state’s Housing Resources Commission and will be required to provide extensive annual reporting on housing units, affordability, healthy housing stock and housing formation trends for each community, including recommendations to facilitate future development.

The budget increases spending for programs for the state’s vulnerable population, including $40 million to aid the developmentally disabled, $10 million for the Department of Children, Youth and Families, with authorization to hire a new director at a $200,000 salary, the Rhode Island Works cash-benefit program will see benefits increase by 30%, while expanding eligibility, and $6 million to fund a new Pay for Success program, for providing services to the homeless.

As for tax credits, the House’s budget allocates $20 million to the Historic Preservation Tax Credit program and an additional $10 million for the R.I. Film Commission’s tax credit program.

The budget includes legislation to equip about 1,700 police officers in the state with body-worn cameras over the next 12 to 18 months at an implementation cost of $3 million, with an annual maintenance cost of $3 million for a five-year implementation period.

Other notable items in the budget include:

  • Funding the R.I. Promise program at $7.7 million, hereby making the higher education program permanent. The program provides two years of free tuition at the Community College of Rhode Island to qualifying high school students in the state.
  • Budgeting $22.5 million from general revenue to finance the Rebuild RI Tax Credit program, while raising the program cap from $210 million to $240 million to ensure it continues to stimulate business development, retention, and attraction, and create well-paying jobs in fiscal year 2022.
  • Funding the Motor Vehicle Excise Tax phase-out in fiscal 2022, to be financed with $139.7 million in general revenue. Under current law, the Motor Vehicle Excise Tax would be eliminated in fiscal 2024.
  • Eliminating the annual $10 sales tax permit fee paid by businesses who conduct retail sales, saving businesses across the state an estimated $331,585 in fiscal 2022.
  • Providing $3 million for the Real Jobs RI workforce development program.
  • Funding the K-12 school system at the funding formula level, increasing the state’s aid to school districts by $34.9 million without raising taxes; while committing approximately $6 million to incentivize childcare providers to offer quality care; and appropriating $200,000 to create a Child Care Assistance Program pilot to assist working parents who are pursuing higher education.
  • Allocating an additional $847,000 to the Medication-Assisted Treatment program to offer it on the night of commitment to people whose stays in the Adult Correctional Institutions may not be long enough to support traditional induction into the program.
  • And financing the Distressed Communities Relief Program at $12.4 million in general revenue in fiscal 2022.

The House’s budget does not fund the R.I. Department of Health’s request for a new laboratory space at $82 million. Legislative leaders said they intend to research and hold public hearings to vet such a project.

The budget does not include funding the Eleanor Slater Hospital, although the governor will be providing a plan for addressing issues at the hospital to the legislature by month’s end.

Legislative leaders said some pieces of proposed legislation not included in the budget could be revisited as part of unfinished business in the summer or fall after the June 30 deadline, when the legislative session ends.

Lawmakers said that legalization of adult-use marijuana could be one of those pieces of legislation.

Correction: The House budget includes a new surcharge on real estate sales over $800,000.

Cassius Shuman is a PBN staff writer. Contact him at Shuman@PBN.com.

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