Moore: Revenue Shortfall Benefits Speaker Mattiello

Monday, May 15, 2017
Russell J. Moore GoLocal MINDSETTERâ„¢

House Speaker Nicholas Mattiello
At first blush, the May Revenue Estimating Conference’s finding of $99.6 million shortfall seems problematic for House Speaker Nicholas Mattiello.

After all, it’s largely up to the House of Representatives to write the budget since it originates there. And since Mattiello leads the body--some would say (me, for instance), with an iron fist--that the weight of the shortfall falls on him.

Delve deep beyond the surface of the issue, however, and it quickly becomes apparent that the declining revenues shouldn’t negatively impact Mattiello’s priorities, at least in the short term.

Let’s not forget, the budget is pushing $9 billion dollars. That means the shortfall is just a smidgen more than 1 percent of the total spending package. Yes, $100 million is a massive sum of money. But when we’re thinking in terms of the Rhode Island state budget, the shortfall is not a monstrosity.

Therefore, the decline in revenue should really just give the Speaker a reason not to fund things he didn’t want to prioritize in the first place. The obvious example would be Governor Gina Raimondo’s free college tuition plan.

DOA

That plan was probably dead on arrival anyways, despite Raimondo’s aggressive marketing of the plan and barnstorming the state trying to build up grassroots support. The shortfall just gives Mattiello an extra talking point to explain his reluctance to implement the plan.

The shortfall also gives Mattiello a nice out if he would like to avoid taking on any other controversial topics, such as a subsidy for a new Pawtucket Red Sox Stadium or renovations for the Superman Building.

What government observers should still expect to find in the state budget is the beginning of a car tax phase out plan. Mattiello cannot afford to leave this out of the state budget since he made it a hallmark of his hard fought reelection victory last autumn.

The clear loser, from a public relations standpoint, from this shortfall situation is Governor Gina Raimondo. Raimondo didn’t do herself any favors by trying to blame the revenue shortfall on the Trump administration, which has only been in office for 100 days and the stock market has skyrocketed since that point. Raimondo’s attempt to blame Trump was a far cry from “the buck stops here”.

Public Relations Battle

Mattiello, for his part, released a statement to the press pointing out that a portion of the shortfall is due to the administration not realizing cost savings from last year’s budget initiatives and state government not running as efficiently as possible.

But let’s be fair. Raimondo, however, shouldn’t shoulder all of the blame for the situation. Let’s keep in mind, neighboring Massachusetts and Connecticut also have their own shortfalls.

That didn’t stop former Governor (and US Senator and Warwick Mayor and City Councilman) Lincoln Chafee from thumping his chest and pointing out that under his administration the revenue estimations were always surpluses as opposed to deficits. (Republicans will argue that those surpluses were a result of the tough decisions made during the Carcieri years.)

Chafee certainly sounds like a candidate for governor. His criticisms of Raimondo are getting more vociferous with each passing day. Fair or not, the shortfall gives Chafee another arrow in his quiver to criticize the Governor.

Chafee in Mix

To his credit: Chafee has been quite prophetic on more than a few issues in the past, whether it’s been his prospects in statewide elections, revenue forecasting, and even who would win this year’s Kentucky Derby.

Does anyone know who Chafee likes in next Saturday’s Preakness Stakes?

Russell J. Moore has worked on both sides of the desk in Rhode Island media, both for newspapers and on political campaigns. Send him email at [email protected]. Follow him on twitter @russmoore713.

  • Budget Deficit

    The House Fiscal Office predicts a $112M budget deficit next year. How do you broach that? 

    We’ve got a standing structural deficit. That’s not a surprise. That was predicted, projected — and something unfortunately we’re forced to deal with every year, and we deal with it effectively.

    Our expenses increase faster than our revenues - and a lot are them are expenses that benefit needy folks, elderly folks, and people with disabilities, and those costs tend to rise faster than your revenues, and as a result we end up with a structural deficit every year.  But we’ll address it, and we’ll balance it, and we’ll put forth a budget the public can be very proud of, that serves their interests. 

     
  • Car Tax Elimination

    Can a car tax repeal be done -- or started --  in light of the above -- the projected budget deficit?

    It's a municipal tax, and the sum total of all the communities tax on that is about $215M. I’ve indicated we’ll phase it out over 5 years — that’s roughly $40 million dollars a year, some years it will be plus a little and some years minus a little — depending on our revenues and expenses. 

    We’ll be raising the exemption as we provide the revenue to the cities and towns so we can hold the harmless, until we’re able to finally phase it out and eradicate the car tax and prohibit them from imposing it in the future.

    And that will serve multiple interests — the interest of our citizens and taxpayers, and eliminating what I call the "stone in the shoe" - it’s just a tax that irritates people. It will be better for the economy and folks will be more prone to buy a new buy if they don’t have to pay a high municipal tax each year  - and our municipal taxes are generally too high compared to other states, so that makes us non competitive in national rankings, so the elimination of the car car tax will make us more competitive, and then we have to look at other taxes and see how we can continue to make our municipalities more competitive. But we have a constitutional mandate the we have to balance our budget — so you can’t do everything at once, we have to prioritize each year.

     
  • Priorities for Session

    You said there are a lot of things you "want to do" this session -- can you explain further?

    We have to see what we can do, but our number one priority is going to be the car tax. I’d like to give retirees a little more tax relief.

    I’d like to eliminate the tax on the tax for leased vehicles - when you pay your property tax through a lease you actually end up paying a sales tax on the property tax and that’s a tax that annoys folks and I’d like to eliminate that.

    I’d like to raise the exemption on the estate tax, so that we are better able to keep successful folks in the state of Rhode Island for their job creation, for their philanthropy, the general economic activity that they create.

    Right now we’re at $1.5 million. I’d like to go $2 million, $2.5 million — I don’t know what the financial impact will be. And that’s a tax we’re not competitive with comparative to a lot of states, so as I’ve indicated you can only do so much in any year but that’s a tax we have to look at long term, with the goal of increasing that, because what you don’t want to do is to have successful folks to leave the state — generally they stay in Rhode Island until they get older and more vulnerable.  The closer folks get to their morality, when they’re successful, the more likely they leave the state and that’s not something you want to occur because all of their job creation and spending leaves with them. 

    Over the last two and a half years, we’ve eliminated about $75M worth of taxes out of each year’s budget. As we’re cutting taxes, our revenues seem to be going up.  Rhode Island becoming more competitive is actually good for our budget and better for society, so we’ll continue moving in that direction and continue our slow march towards better economic competitiveness. 

     
  • Commerce Deals

    What are the checks on some of the deals that Commerce is doing? Wexford is $32 million plus and the Raimondo administration is refusing to answer the most basic questions, such as how much a non-profit is pay in rent.

    First, we have limits, caps on what any one project can receive in terms of tax credits and it's $15M per project, I believe. I was very mindful when the original request was made for that - quite frankly, the Administration wanted no cap so they could do bigger deals. I’m mindful of mistakes of the past. No one person should have ultimate authority to spend the taxpayers’ dollars - there always has to be checks and balances, so we put that cap on. 

    Relative the Wexford deal — I’ve not personally vetted that deal, I’ve asked the Commerce Secretary to come in. We’ll take a look at the deal, and I’ll personally look at it. I have an ongoing dialogue with Commerce, but ultimately they work for the administration, and the Governor’s ultimately responsible for the oversight. 

     
  • Line Item Veto

    How are you going to address the call for the line item veto?  How do you balance your tempered views on it, versus those advocates strongly calling for it? 

    The way you have to look at it — I just want to do what’s in the state’s best interest. It's easy to call for it, because the natural instinct of a citizen who has not spent a lot of time studying it or not familiar with the system and the process - and I would not expect the average person to be, I was not before I was involved in it. Your average inclination is your going to save money, and therefor we should do it. And I’m not sure that that’s the case. I think it could actually cost us additional spending. 

    So what I’ve indicated on the campaign trail — I want to put smart folks in a room, whether it’s a commission, or some other means of accomplishing that, getting academics, constitutional scholars together to get a more educated and more professional view of it, rather than political view, and let’s see where it goes. 

    The framers of our Constitution originally wanted to put a checks on the Governor. The Governor of the state walks around with one or two troopers by their side at any given point, you can’t generally speak to them — that’s not an indictment, that’s just the reality. I’m in the community each and every day talking to folks, getting the pulse of folks — you have different elected positions that serve different interests. Originally, we didn’t want to give so much power in the Governor, you wanted to withhold it in the people — and right now people are being told they’re should take the power away from themselves and give it back to the Executive Branch.

    I can tell you that the Governor proposed a lot of jobs in the last budget — almost 100 of them that didn’t pass our legislative process, we actually saved a lot of money. So I pose the question -- if the Governor had a line time veto, would the House have been as inclined to pull 70-100 jobs that she was creating out of the budget, if some of the House priorities could have been pulled out at the back end? I think the answer is maybe not — so although folks might think its would save money, it could actually cost more money because you put in different intersections where money could be spent. 

     
  • Marijuana

    Legalized marijuana just went online in Massachusetts -- how soon are you going to look at the example and make a decision for RI?

    I don’t know. I have traditionally been opposed to marijuana legalization for recreational use — and I start out from the policy position, "What value does it add to the state?" Having said that, there are strong advocates and strong opponents in the House, there are strongly advocates and strong opponents in society at large. I expect a bill to be introduced. I think the most important part is the public testimony and input and I look forward to that, so I don’t know what the ultimate conclusion of that hearing process the ultimate judgment will be.

    I’ve been speaking with folks from Colorado — I potentially may consider a trip there, the came here already. I forgot what the specific percentages were, of the revenues that come in from marijuana legalization, but a large percentage ends up going to treatment, let’s say 40%, and a large percentage — maybe 30% — goes to prevention programs.

    So out of all the resources you bring in, the overwhelming majority of the resources go to prevention or treatment of the policy initiative you put in place, and maybe 20-30% goes to your general revenues. There’s a legitimate debate as to whether that’s appropriate and productive to serve society’s needs. Having said that, you have to look to the north and the legalization in Massachusetts. My concern is that you’ll end up with a lot of the social problems. They’ll filter through into Rhode Island — and we’ll have more social problems without the revenues to address the problems. It’s a very complicated issue. We have to look at it. My opinion is not the controlling opinion  - in this case it’s a collective, collaborative opinion I’m looking for — and that will filter in from the general public.

     
  • Charter Schools

    What needs to be tackled at the state level this year regarding charter schools, as Providence is battling over Achievement First?

    I don’t know, we’ll see what spins off from that. I’ve always said its inefficient to create two parallel education systems — one that serves 4% and one that serves 96%. I’ve always believed that it’s inequitable to pull too much money out of the system that serves the 96% to create a better system for the four percent. Ultimately you’re going to leave the 96 percent in worse shape - our focus shouldn’t be on creating two parallel systems where they both suffer  — our focus should be on creating one good system that we can all be proud of, and most importantly serves the needs of our students, because you’re going to have to be better educated and better trained in the future -- and the kids that are growing up and graduating are going to have to reinvent themselves several times in the new economy over the course of their lifetime and you have to be well-educated well trained in order to do that.  I take that responsibility very seriously. We collaborate with RIDE and we have to see what the best way is to educate our children.

    The best example I can give you is if you have a leaky roof and it needs a little bit of work  — you don’t keep that house and get another house because now you have two house to maintain. And ultimately one of them is going to be as good as it should be. Either fix your first house so that you’re comfortable living in it and it serves your needs or sell it and get another house that meets your needs appropriately. Having two makes it both worse — that’s exactly what we’re doing— we’re creating two parallel systems. Nobody on day one would create that type of system, it’s  inefficient and I’m concerned about growing a natural inefficient system. I’m more concerned with creating one system that best serves the needs of all of our students

     
  • Licenses for Immigrants

    Driver licenses or identification for undocumented immigrants: Do you expect this to get much traction or momentum once again this year?

    I expect it to come up, it's come up in the past. I think statewide most people are not in favor of it, from what I hear informally from people. I believe that my community is not in support of that. So I would expect if the reps all come from different communities, and my suspicion is right - most communities don’t support that, it will face its natural challenges and that’s a reflection of what the opinion is of the citizens in  Rhode Island right now. 

     
  • "Trump Issues"

    What, if anything, do you have concerns about coming from the Trump administration?

    President-elect Trump is the President-elect — the citizens of the country have have elected him. The citizens have elected a Congress and a Senate — and I expect that they want the most successful US that they can achieve and whether we might agree or not with any given policy decision, their ultimate goal is improve the economic conditions and quality of life of all Americans and Rhode Islanders.

    So we’ll see what benefits are created and what challenge are created and we’ll address them then  — I’ve taken a position that I’m not going to speculate as to what might happen and consider addressing any of those speculative contingencies. And I don’t think it’s appropriate. So let’s see what happens and hope for the best. I'm rooting for the country and hoping for the best for the country and the state of Rhode Island and I expect we’ll probably be fine — I know there are a lot folks  who are nervous and speculating and so forth and there are probably better uses for our time. 

     
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