PROVIDENCE – Gov. Gina M. Raimondo didn’t veto the state 2020 fiscal budget over the General Assembly’s insertion of a new tax credit program for small business, named the Small Business Development Fund. But on Monday, as the R.I. Commerce Corp. agreed to create rules to roll out the program, she said it wasn’t good for taxpayers.
She even compared it to 38 Studios, which failed after state legislators authorized a $75 million loan for the business. The Commerce RI board will, as a result, form regulations that will protect taxpayers, she said.
“The legislature set up a very generous tax incentive for out-of-state investors,” Raimondo told reporters, following the Commerce RI meeting, according to a recording provided by her office.
“The board and I felt we had to protect taxpayers. Regulations will be created over the next month or so. We’ve learned the hard way here in Rhode Island with 38 Studios and other failed attempts, you can’t just give money out and hope for the best. Which is what the program the legislature set up did.”
Commerce RI expects the prospective regulations of the SBDF to follow these guidelines:
- Commerce RI would have to approve applications to the program, as it does with other tax credit programs
- Require financial disclosure and performance requirements in the application and reporting stages of the program
- Create protections for taxpayers if an approved applicant fails to deliver promised outcomes
The SMDF was included in the House budget and then approved by the General Assembly.
Designed to encourage private investment in businesses with fewer than 250 employees – or those with net income of less than $15 million – the program would allow investors to receive tax credits. The plan could raise $65 million in private capital in investment funds, supported by up to $42 million in state tax credits.
State Sen. William J. Conley Jr., D-East Providence, chairman of the Senate’s Finance Committee, was one of the proposal authors. “This gives smaller businesses the access to capital that they need to grow,” he said, shortly after the program was approved.
This week, Raimondo said she considered the program flawed. Without line-item veto, she said, to jettison it would have required rejecting the budget.
“I didn’t think it was enough to veto an entire budget. But it’s not good for taxpayers.”
On Tuesday, a spokesman for House Speaker Nicholas A. Mattiello responded.
“The governor is off base in her criticism of the Small Business Development Fund,” said Larry Berman. “The General Assembly included it in the budget because the Administration’s economic development policies of the last four years have not done enough to help homegrown small businesses. This program was designed to fill in the gaps where the Commerce programs have not been adequate or accessible for these types of businesses.”
Mary MacDonald is a staff writer for the PBN. Contact her at firstname.lastname@example.org.
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