Laurie White isn’t exactly exuberant about Gov.-elect Lincoln D. Chafee’s proposal to tack a 1 percent sales tax onto currently exempt items, but the president of the Greater Providence Chamber of Commerce isn’t ready to reject it, either.
White and other business leaders long have been critical of the state’s tax climate and have spent recent years vigilantly lobbying for legislators to hold the line on major taxes, if not prune them.
Now that Chafee, an independent, will take over as the state’s chief executive in January, White said last week that the Chamber wants to be “part of the discussion” as Chafee’s sales-tax plan takes shape.
“It will be a complicated exercise,” White said. “And we’ll have to see the specifics of what he has in mind.”
Let the honeymoon begin.
Members of the business community and others last week were taking a wait-and-see attitude in the days after Chafee defeated Republican John Robitaille and Democrat Frank Caprio in the governor’s race, offering optimism that he’ll be an ally to the private sector despite his proposal to eliminate sales-tax exemptions and his campaign-trail criticism of the R.I. Economic Development Corporation.
With the unemployment rate at 11.5 percent, and the projected state budget deficit topping $360 million fiscal year 2012, the economy and taxes are sure to be issues that will remain front and center for state leaders.
“We’re confident [Chafee and the Chamber] are going to have a lot in common,” White said.
Indeed. During the campaign, Chafee backed the controversial plan to expand the main runway at T.F. Green Airport in Warwick to 8,700 feet, which advocates have argued will increase the number of travelers flying into the state.
Chafee also said he supported reinstating the state historic-preservation tax-credit program in some struggling communities, a program that business leaders insisted created construction jobs but was capped by the Carcieri administration.
But, along with the sales tax proposal, it was Chafee’s opposition to the state’s $75 million loan guarantee promised to Curt Schilling’s video game company and his criticism of the EDC board that garnered the most attention.
EDC board member Alfred Verrecchia told Providence Business News last week that he wasn’t sure what to expect when Chafee takes over as EDC chairman once he is sworn in as governor in January.
“In the heat of a campaign, people say a lot of crazy things,” said Verrecchia, chairman of Hasbro Inc. “At the end of the day, we’d have to sit down and say, ‘OK, governor, where’s your head at in terms of economic development?’ ”
Verrecchia, who was appointed to the EDC board by Carcieri earlier this year and previously led a review panel critical of the EDC, wondered whether he’d be asked to step down.
“You do this voluntarily, and you work hard. You don’t want to work with someone if they don’t want you,” said Verrecchia, who was a Caprio campaign contributor.
Other EDC board members either declined to comment or could not be reached immediately last week.
EDC Executive Director Keith W. Stokes downplayed Chafee’s criticism, saying he’s spoken to all board members and he didn’t expect any resignations. Stokes said he would invite Chafee to the next EDC meeting, on Nov. 22.
Chafee will get a chance to make his mark early on. The terms of three board members are set to expire in February – FM Global CEO Shivan Subramaniam, Gilbane Inc. Vice Chairman Paul Choquette Jr. and Verizon Communications’ New England President Donna Cupelo.
At least one of those seats must go to a small-business representative, Stokes said.
Likewise, Stokes’ future also is unclear since his one-year appointment as executive director and a member of the governor’s cabinet ends in early 2011.
He indicated he’d be willing to stay on.
The state’s largest public-employee union is holding out hope that the Chafee administration will offer a reprieve from the contentious relationship it had with Carcieri.
Although Council 94 – which represents about 4,200 state employees – didn’t endorse a gubernatorial candidate, Downey recalled how Chafee reversed the privatizing of trash pickup in Warwick when he was mayor.
“He found it would less expensive to use Council 94 members,” Downey said. “Given a chance, we want to prove we can save taxpayer money.”
That said, Chafee has proposed a hybrid state retirement system in which new public employees contribute to both a reduced pension plan and a 401(k) plan – a proposal that drew protests from labor.
White said she’s already garnered a pledge from Chafee that he won’t attempt to balance the budget by reversing the personal income tax overhaul approved earlier this year.
Local business groups say reducing the state’s top marginal rate from 9.9 to 5.99 percent is a key part of the state’s effort to improve its image in the business world.
White said he also seems to be on board with the Chamber’s priorities of developing Providence’s Knowledge District and redeveloping the Interstate 195 land, assembling a health-benefit exchange and reforming the public education system.
The Chamber will monitor closely Chafee’s proposal to institute a 1 percent tax on items that are exempt from the 7 percent sales tax, ranging from food to clothes, utilities to nursing home visits.
Chafee has said the plan could bring in additional tax revenue of $89.38 million.
Aside from a new governor, White pointed to another change at the Statehouse that could alter the way the state budget is drawn up in the coming legislative session.
White noted that eight of the 16 House Finance Committee members will no longer be lawmakers come January, including Finance Chairman Steven Costantino, who lost his bid for Providence mayor.
“There will be a lot of new sets of eyes looking the budget proposals during deliberations,” White said. •
