An $8.7 billion budget plan unveiled before a key Rhode Island legislative panel Thursday includes corporate and estate tax cuts and covers the next 38 Studios bond payment while preserving the Chafee administration's increased spending on public education.
The House Finance Committee approved the blueprint Thursday, 14-2, setting up a vote by the full House next week.
The plan preserves $38 million in increased education funding proposed by Gov. Lincoln Chafee in his January budget address. While the governor's budget kept tax rates flat, House leaders' version would lower the corporate tax from 9 percent to 7 percent.
The newly unveiled proposal also would raise the threshold at which the estate tax kicks in from about $922,000 to $1.5 million and eliminate the so-called "cliff," meaning only the amount above the threshold would be taxed.
The plan includes $12.3 million for the next bond payment stemming from the collapse of ex-Red Sox pitcher Curt Schilling's video game company, 38 Studios. It also includes a plan to eliminate the Sakonnet Bridge toll and hike the gas tax and some vehicle fees to raise money for a statewide transportation infrastructure fund.
House leaders had been facing a $67 million shortfall due largely to higher Medicaid costs and unbudgeted state employee pay increases negotiated by the Chafee administration. The House plan does not allocate the $25 million to cover those raises, instead asking departments and agencies to come up with cuts to absorb them. The rest of the budget hole was closed in a variety of ways, including "a lot of small" spending cuts and savings associated with the process of recertifying who is eligible for Medicaid, said Finance Chairman Raymond Gallison.
As expected, it includes no state funding for HealthSource RI, Rhode Island's health insurance marketplace, which is expected to rely on federal funds for now. Chafee's budget sought funding for 10 new full-time employees at HealthSource; the General Assembly budget includes no staffing increase.
Earlier in the day, Speaker Nicholas Mattiello, D-Cranston, called his first budget "bold" and said it would help the economy. He has emphasized the economy as his top priority in a state with a chronically high unemployment rate that now stands at 8.7 percent.
The House blueprint calls for bond referendums on a number of Chafee's priorities, including $125 million for the University of Rhode Island's engineering school and $35 million for arts and culture.
It does away with the governor's proposal for $52 million in new historic tax credits to encourage redevelopment projects. But it authorizes a lease agreement for a shared URI-Rhode Island College nursing education center at the vacant South Street Power Station that is ultimately expected to cost the state about $6 million a year, Gallison said.
Chafee, a Democrat who is not seeking re-election, said he would evaluate the proposal.
"I understand that the budgeting process is an exercise in compromise, collaboration and cooperation, and I hope that this budget will move Rhode Island forward," he said in a statement.
The plan also implements combined reporting, a different way of taxing corporations that incorporates their out-of-state sales.