RI’s Failed Revenue Numbers Could Change the Governor’s Race for Raimondo

Friday, May 12, 2017
GoLocal News Team

Governor Gina Raimondo
The long anticipated state revenue numbers may have flipped the proverbial political table in Rhode Island. The $100 million shortfall announced this week undermines Governor Gina Raimondo’s claims as a strong manager who is restoring the Rhode Island economy.

Love her or hate her, the perception in 2014 was that Raimondo was competent, but the tourism gaffe, UHIP and DMV technology failures, coupled with the budget management issues, raise serious questions.

The budget shortfall is a major blow to Raimondo’s legislative agenda, and the economy’s underperformance sparked an immediate response from former Governor Lincoln Chafee.

Chafee Touts Track Record

Chafee not only questioned Raimondo’s management, he pointed to his own numbers. Chafee told GoLocal on Thursday that Raimondo was “clueless” in her management of the budget.

“The shock is that revenues are running $60.1 million behind expectations for the current budget year," said Chafee. "Here are the surpluses from my years:

FY 2011 $64.2M
FY 2012 $115.2M
FY 2013 $104.1M
FY 2014 $68.0M

"We ran a tight fiscal ship!" added Chafee. 

Former Governor Lincoln Chafee
Did Raimondo’s Legislative Agenda Just Evaporate?

For the past few months, Raimondo has been a whirling dervish, pitching the benefits of her college funding proposal.

She has engaged a spinoff group of the Democratic Governor’s Association, which has spent hundreds of thousands of dollars to promote her plan, and asked technology leaders in the state to take up the mantle to talk about the need for a job-ready, well-educated work force.

However, Raimondo’s proposed funding program received a lukewarm reception from legislative leaders including Speaker Nick Mattiello and House Majority Leader Joe Shekarchi.

On Wednesday night, after the new revenue number were reported, Mattiello issued a very tough statement pointed directly at the Raimondo administration:

“I can understand that certain economic projections have been revised to reflect lower growth, but it is frustrating to me that a lot of the budget problems are due to not achieving budget savings or revenue initiatives the Administration proposed last year.  State government must be managed better so that it works more cost effectively for the taxpayers.  My budget priorities have not changed.  We will continue our diligence and make sure we cover this gap. We will look at everything.”

Other projects under the Raimondo Administration now in jeopardy include a funding scheme for a new PawSox stadium — she said on GoLocal LIVE on Monday that she expected a rollout plan short

In addition, the vacant Superman building which has been seeking state subsidies to fund its redevelopment is also a much harder sell. Do Rhode Island legislators want to provide state dollars to another Boston developer? Massachusetts-based High Rock Development and owner David Sweetser have been seeking state, city and federal dollars to rehab the building for the past five years.

Will Financial Management Issues Embolden Chafee to Primary Raimondo

Chafee has been speaking out more and more about Raimondo’s economic strategies, her “poor” track record as Treasurer, and now her overall financial management.

In February, Chafee took Raimondo’s administration to task for promoting economic growth by funneling tax dollars to some of America’s richest corporations.

Appearing on GoLocal LIVE with GoLocal News Editor Kate Nagle, Chafee said that Raimondo’s transfer of taxpayer dollars to billion-dollar companies such as General Electric and Johnson & Johnson was flawed.

“I have never liked corporate welfare. It's unfair to existing businesses…some out-of-state business comes in and you give them the candy store. I just don’t like it," said Chafee.

Wexford project - receives over $40 million in subsidies
Chafee Questions Raimondo's Wexford Deal

On May 1, Chafee, in a letter sent to members of the Board of the Commerce Corporation, warned about the failed strategies of funneling millions of incentives to Wexford on the 195 land. Chafee pointed to a New York Times editorial that warns that such subsidy programs are "foolhardy."

Moreover, Chafee said that the money going to corporate subsidies could be better used for improving roads, funding college education and lowering the car tax.

Now, Thursday’s attack on Raimondo by Chafee only increased.

Chafee told GoLocal, "Why did Governor Raimondo waste the Democratic Governors Association valuable money on TV ads for the free tuition proposal with this looming iceberg about to sink the budget? The Governor was clueless on the magnitude of the UHIP problems and unbelievably clueless about what was happening to the revenue and expenditure columns in her administration.” 

  • Winner

    Criminal Justice Reform

    Per recommendations from the Justice Reinvestment Working Group, the Governor is proposing nearly $1 million in investments such as the public defender mental health program ($185,000), improved mental health services at the ACI ($410,000), recovery housing ($200,000) and domestic violence intervention, in her FY18 budget. 

     
  • Winner

    English Language Learners

    Under the heading of “promoting 3rd grade reading,” Raimondo proposed adding $2.5 million to make English Language Learning (ELL) K-12 funding permanent.  The Governor’s office points out that RI is one of four states that doesn’t have permanent funding.

    The suggestion was one made by the Funding Formula Working Group in January 2016, who said that “in the event that Rhode Island chooses to make an additional investment in ELLs, the funding should be calculated to be responsive to the number of ELLs in the system and based on reliable data, and include reasonable restrictions to ensure that the money is used to benefit ELLs — and promote the appropriate exiting of ELL students from services.”

     
  • Winner

    Car Owners - and Drivers

    Governor Raimondo wants to reduce assessed motor vehicle values by 30% - a change that would reduce total car tax bills by about $58 million in calendar year 2018. Speaker of the House Nicholas Mattiello, however, has indicated that he might want to go further in its repeal.  

    In her budget proposal, Raimondo also put forth adding 8 staffers to the the Department of Motor Vehicles to "address wait times."

     
  • Winner

    T.F. Green

    The “Air Services Development Fund” would get an influx of $500,000 to “provide incentives to airlines interested in launching new routes or increasing service to T.F. Green Airport.” The Commerce Corporation set the criteria at the end of 2016 for how to grant money through the new (at the time $1.5 million fund).

    Also getting a shot in the arm is the I-195 development fund, which would receive $10.1 million from debt-service savings to “resupply” the Fund to “catalyze development & attract anchor employers.”

     
  • Tie

    Minimum Wage Increase

    An increase in the state minimum wage is part of Raimondo’s proposal, which would see it go from $9.60 an hour to $10.50 an hour.  Raimondo was unsuccessful in her effort in 2016 to bring it up to $10.10 — it was June 2015 that she signed legislation into law that last raised Rhode Island’s minimum wage, from $9 to 9.60.  

    The state's minimum hourly wage has gone up from $6.75 in January 2004 to $7.75 in 2013, $8 in 2014, and $9 on Jan. 1, 2015.  Business groups such as the National Federation of Independent Business however have historically been against such measures, citing a hamper on job creation.  

     
  • Tie

    Cigarette Tax

    Like the minimum wage, Raimondo is looking for an increase - in this instance, the cigarette tax, and revenue to state coffers.  Raimondo was unsuccessful in her effort to go from a tax of $3.75 to $4 last year. Now she is looking for an increase to $4.25 per pack, which the administration says would equate to $8.7 million in general revenue — and go in part towards outdoor recreation and smoking cessation programs.  

    The National Federation of Independent Business and other trade groups have historically been against such an increase, saying it will hurt small businesses - i.e. convenience stores. And clearly, if you’re a smoker, you’re likely to place this squarely in the loser category instead. 

     
  • Loser

    Hospitals

    As often happens in the state budget, winner one year, loser the next. As GoLocal reported in 2016, “the Rhode Island Hospital Association immediately lauded the budget following its introduction, and addressed that while it is facing some reductions, that it "applauds" this years budget after landing on the "loser" list last year.”

    This year, it falls back on the loser list, with a Medicaid rate freeze to hospitals, nursing homes, providers, and payers — at FY 2017 levels, with a 1% rate cut come January 1, 2018. 

     
  • Loser

    Online Shoppers

    The taxman cometh — maybe.  Raimondo proposed an “Internet Sales Tax Initiative” — which would purportedly equate to $34.7 million in revenues.

    "Online sales and the fact that online sellers do not collect sales tax has created a structural problem for Rhode Island's budget — our sales taxes have been flat," said Director of Administration Michael DiBiase, of the tax that Amazon collects in 33 states, but not Rhode Island. "We think mostly due to online sales, we’re able to capture the growth. The revenue number is $35 million dollars — it improves our structural deficit problem. It’s an important fiscal development."

     
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