PROVIDENCE — Gov. Lincoln Chafee’s much-ballyhooed and extensively reviled sales tax proposal was largely discarded by legislative leaders in their $7.7 billion state budget plan for next year, which passed the House Finance Committee on a voice vote Friday evening.
The assembly’s long-awaited tax-and-spending plan was the subject of last-minute tinkering and fine-tuning as representatives of the Senate and the Chafee administration finally left House Finance Committee Chairman Helio Melo’s office at about 3:30 p.m. just a half hour before the scheduled 4 p.m. start of the committee’s meeting to vote on the budget, which in any event was pushed back to after 6:30 p.m.
The centerpiece of Chafee’s budget plan was to lower the sales tax from 7 percent to 6 percent, while broadening it to a wide array of goods and services that are currently exempt – everything from eyeglasses to haircuts to car repairs to laundry and dry cleaning. The governor also wanted to slap a 1 percent tax on items such as clothing, home heating oil, goods used in manufacturing and even air and water.
All of that is off the table in the budget that will go to the House and Senate for approval next Friday.
The legislative budget keeps the sales tax at 7 percent but it does add a select number of new items to the taxable column, including non-prescription drugs, computer software that is downloaded digitally, sightseeing package tours and other items.
They left open the possibility of reducing the sales tax to 6.5 percent if the federal government passes a law to allow states to collect taxes from Internet and catalog sales. Currently, such sales are not taxed if the seller does not have a store or other base of operations, called a “nexus,” in the state.
The lawmaker’s plan incorporates Chafee’s proposal to fully fund the new education aid formula for school districts and allocates an additional $4 million to higher education, less than half the $10 million hike Chafee wanted.
“This year our goal was not only to balance the budget,” Melo said Friday, “but to put the state on a sounder financial footing for the future. This budget is a giant step in that direction.” He said the proposal “differs from the governor’s approach, but we did take many of his recommendations.”
Numerous attempts to reach the governor’s office for comment were unsuccessful on Friday.
The House plan rejects Chafee’s idea of requiring state employees to use a 3 percent pay raise scheduled for July 1 to increase their contribution to their pension plan. Melo said the General Assembly is set to tackle a comprehensive pension reform effort later this year, and the subject of pension contributions will be taken up then. State employees received a 3 percent salary increase in January, but that had been postponed from last July in a deal with the Carcieri administration.
This budget would, however, spell the end of “longevity increases” given to state employees as they reach certain levels of years of service. Longevity raises already scheduled in labor contracts will be honored, but after those contracts expire, they will become a thing of the past, at least for the time being. The action was described as a “freeze” on longevity, not an elimination of it, although House Fiscal Advisor Sharon Reynolds Ferland told the committee, “you could call it a prospective end.”
Pawtucket Rep. William San Bento protested the cut-off of longevity, saying state employees are “good, honest, hard-working people” and said he would not vote for that part of the budget when it comes to the floor next week.
Ken DeLorenzo, executive director of Council 94 AFSCME, the largest state employees union, said the group is pleased that the assembly plans to allow the 3 percent pay raise, but said the longevity increases are part of collective bargaining agreements and any change in them should be negotiated.
There is bad news in the legislative budget for Central Falls.
Chafee had allocated $1.8 million in the current budget year to help alleviate Central Falls’ budget deficit, which has the city in the hands of a state-appointed receiver and teetering on the brink of bankruptcy, and another $4.9 million in the budget year that starts July 1. The House plan eliminates both of those appropriations.
Melo told The Times that “the committee obviously knows there is a problem in Central Falls, buit the committee would like to see an extensive, comprehensive plan put in place as to how to get Central Falls out of the position that they are in before we make any financial commitment. So once that plan is presented to the finance committee, we can make a decision on that and appropriate whatever resources might be needed, if any.”
Central Falls Rep. Agostinho Silva, a finance committee member, said, he is talking with legislative leaders to see if something can be done in the budget for the financially beleaguered city.
The budget passed by the committee spurns Chafee’s proposal to take 100 percent of the income of veterans who live at the state veterans’ home in Bristol, it also rejects the governor’s plan to create a new Department of Veterans Affairs, leaving veterans affairs as a division of the Department of Human Services.
The House budget places a three-year moratorium on state construction aid to communities and school districts for building libraries and schools.
The budget also eliminates funding for the Neighborhood Opportunities Program, which builds affordable housing for low-income families.
Jim Ryzcek, Executive Director of the Rhode Island Coalition for the Homeless, said after the budget vote, “We find it completely unacceptable that the House Finance Committee’s answer to the current homeless crisis our state is facing is to do nothing! We find it outrageous that our state is choosing to not invest in the one state program, the Neighborhood Opportunities Program (NOP) that can help those who are currently languishing in our shelter system.”
John Joyce, co-founder of The Rhode Island Homeless Advocacy Project, added, "By not funding NOP, the state of RI is depriving homeless advocates of the resources we need to serve our constituents. With the winter shelters closing, there are simply no options left to stop people from dying in our streets. The lives of these most vulnerable citizens are the state's responsibility. Now so are their deaths."