PROVIDENCE, R.I. (AP) - Rhode Island Gov. Gina Raimondo released a $9.9 billion state budget plan Thursday that closes the deficit, invests more in education and expands the sales tax.
The legislature will review the proposals and present its plan before the 2020 fiscal year begins in July.
The Democratic governor recommended a plan that’s $357 million, or 3.7 percent, higher than the fiscal 2019 enacted budget. It would close an estimated $200 million deficit, in part due to revenue estimates in November being higher than expected.
Raimondo wants large companies to pay a portion of their employees’ Medicaid costs. She wants to apply the sales tax to a variety of services. And she’s proposing spending millions more on education from the time students begin pre-kindergarten.
The budget continues economic development incentives started under the Raimondo administration and supports a 60 cent increase in the minimum wage, to $11.10 per hour.
Here are some highlights:
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MEDICAID COSTS
To help close the deficit, Raimondo has proposed charging large companies based on their number of employees using Medicaid. It costs Rhode Island $4,000 to $5,000 annually per Medicaid recipient, according to state officials. The budget proposes an “assessment” of 10 percent of each employee’s wages, up to $1,500 per employee per year, for businesses with 300 or more employees. That’s projected to raise $15.6 million in fiscal year 2020 from roughly 140 employers. The administration wants to incentivize employers to provide health insurance and help the state mitigate Medicaid costs.
The enacted 2019 budget included nearly $2.5 billion for Medicaid, which Raimondo projects to increase by about 20 million in 2020. The administration is proposing to freeze the reimbursement rate for services that hospitals provide to Medicaid patients instead of increasing it and limit the rate increase for nursing homes.
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TAXES
Raimondo did not want to institute new broad-based taxes as part of the budget. But she is proposing to expand the sales tax to various services to collect $10.8 million in revenue. Among them, she wants to tax digital downloads and streaming services, including Netflix. She’s seeking to tax lobbying services, design services and services to commercial buildings, such as landscaping and janitorial work, too.
Rhode Island is going into the third year of phasing out its car tax. It’s expected to cost more than $90 million for the state to reimburse municipalities for what they otherwise would’ve collected in taxes. Raimondo is proposing to spend about $16 million less. Taxpayers would receive less of a break on their tax bill than they otherwise would have. They would still pay less than they did this year.
The budget includes a 25-cent increase on cigarettes and a 30-cent increase on cigars. It applies the tax on tobacco products to e-cigarettes.
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EDUCATION
Raimondo wants to spend an additional $30 million on K-12 education, which she says is the single largest increase of any part of the state budget. That would bring spending up to $972.6 million.
The state’s free tuition program is currently offered at the Community College of Rhode Island to recent high school graduates. Raimondo wants to offer it to adult students at CCRI and cover the last two years of a four-year degree at Rhode Island College. She’s proposing $13.2 million for free tuition, as well as another $10 million to maintain and expand the state’s pre-kindergarten program.
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NON-PROFITS
The administration estimates municipalities forgo about $150 million annually by not collecting taxes on properties owned by nonprofit hospitals and universities.
In some cases, for-profit establishments operate at these properties, such as a coffee shop at a university building. The budget proposes giving municipalities the option to tax properties that are being used for something that’s not connected to the nonprofit’s mission.
Assuming municipalities would take advantage of this, the proposal reduces state aid to municipalities through the payment in lieu of taxes program by $6 million.
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BEACH FEES
Raimondo wants to invest $1.5 million to hire additional staff to help maintain the parks and beaches. To raise that money, the state Department of Environmental Management is considering increasing beach parking and campground fees. The amount would be determined through a regulatory process.
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NEW REVENUE
The administration is counting on $30 million in revenue from sports betting, which includes $3 million in new revenue from mobile gambling. Rhode Island launched sports betting in November. The Senate president has introduced a bill to expand it by creating an app so people could place bets on professional sports from anywhere in the state.
Raimondo is proposing to legalize recreational marijuana for adult use. The budget includes about $6.5 million from taxing recreational and medical marijuana.
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HEALTH INSURANCE
The budget proposal includes an individual mandate that would penalize people who don’t have health insurance. The recommendation follows the expiration this month of the federal mandate that required people to obtain health insurance or face tax penalties. It was eliminated as part of the 2017 tax reform law.
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