House passes $14.4B state budget with tax on vacation homes, money for doctors
A $14.3 billion Rhode Island budget for next year won House passage Tuesday, June 17 with a new tax on high end vacation homes and a financial boost for health care providers.
The budget passed 66 to 9 after almost three hours of debate. It now moves to the state Senate.
The tax and spending plan for the year starting July 1 is around $120 million more than Gov. Dan McKee proposed in January and $370 million more than the current year budget.
Republican Rep. Marie Hopkins of Warwick and independent Rep. Jon Brien of Woonsocket joined all House Democrats in support of the budget.
House leaders refused the pleas of progressives to raise income taxes on wealthy Rhode Islanders, but heading into the year facing a $250 million deficit sought revenue in other places, particularly high-end real estate.
With that money lawmakers propose a long-sought increase in Medicaid reimbursements rates, specifically $45 million for primary care practices, $38 million for hospitals and $12 million for nursing homes.
"These people and places touch us all. We must protect them," House Finance Committee Chairman Marvin Abney told colleagues about the rate increases while introducing the budget.
But the tax increases, including a tax on second homes worth more than $1 million and dubbed the "Taylor Swift tax," drew opposition from the real estate industry, Republicans and a small number of more conservative Democrats.
In response, House Democratic leaders agreed to index the "Taylor Swift tax" to inflation. The point at which home sales would be charged at a higher rate in real estate conveyance tax, now $800,000, was also amended to be indexed to inflation.
The inflation adjustment was requested by the House Republican caucus.
After the vote House Speaker K. Joseph Shekarchi told reporters that the intent of budget writers had always been to adjust the taxes to reflect the cost of living, but ran out of time when the budget was unveiled June 10.
However, those changes were not enough to convert all opposition to support.
Cranston Democratic Rep. Charlene Lima was the most vocal opponent of the "Taylor Swift tax," arguing that the owners of million-dollar second homes aren't all bona fide "millionaires," but average everyday folks whose family vacation home happened to appreciate past seven figures. She proposed an amendment that would have only started taxing properties worth more than $2 million.
"This is not a Taylor Swift tax. This is the mom and pop tax," Lima said. "The house has been in their family for decades. Now that house might be worth a million dollars, but that does not mean that these mom and pops are millionaires ... you're hurting real people."
Rep. Lauren Spears, D-Charlestown, said she was concerned that million-dollar short-term rentals would be exempt from the tax as long as they were occupied more than half the year.
Rep. Katherine Kazarian, D-East Providence, argued that no matter when they bought the property, the owners of million-dollar second homes are not struggling.
"I think for many of us, a million dollars is a lot of money to spend on a primary home, much less a second home," Kazarian said. "And I think as many people have stated, if you own a second home that is valued at a million dollars, you can pay a little bit more in taxes."
Lima's amendment was defeated 17 to 56.
Burrillville Republican Rep. Jason Place objected more to the budget's proposed extension of the state sales tax to parking and the tax on nicotine pouches.
"I think those are regressive to working people coming down to the city of Providence," Place said.
The budget also increases the local hotel tax from 1% to 2%.
House Republicans reserved their strongest words for Attorney General Peter Neronha and his decision to direct most of the proceeds of an $11 million settlement with 6-10 interchange contractor Barletta Heavy Division to children's dental care instead of letting lawmakers decide where it should go.
A section of state law added just two years ago says that settlement proceeds other than recovered attorneys fees need to go the state general fund for appropriation by the General Assembly.
Rep. Brian Newberry, R-North Smithfield, proposed an amendment that would claw back the settlement money as a way to reassert the legislature's authority and teach Neronha "a lesson."
"It is an insult to every member of this chamber... It's an insult to every member of the Senate," Newberry said in a floor speech. "We need to do something to stop this because there's nothing to stop him or a successor from doing the same thing down the road. And who knows, the next settlement... could be for $100 million. It could be for a million dollars under his watch."
In his argument to defeat the amendment, Majority Leader Chris Blazejewski said taking back the $11 million would only hurt state residents.
"Now some might say, well it's a good thing to punish the attorney general. What I think is that the attorney general's office serves the people of Rhode Island," Blazejewski said. "The people that lose from this amendment are the people who rely on the attorney general's office and the lawyers there for consumer protection, for environmental protection, for litigating in defense of civil rights and the rights of this state."
The amendment failed 13 to 60.
Asked after the vote if the attorney general is free to direct settlement proceeds however he sees fit, Shekarchi would say only that he supports the use of the funds in this case.
"I don't know," he said. "I don't know what particular restrictions were placed on this. I don't know what was agreed to by the parties. I do know that a judge signed off."
Other amendments proposed and shot down, most by similar margins would have:
Taken the $100,000 per year being spent on First Lady Susan McKee's anti-litter campaign and put it toward combatting invasive species in lakes.
Giving state retirees affected by the 2011 pension change law a $1,200 stipend
Move the Office of Internal Audit, which now reports to the governor, into an independent agency to function like an independent inspector general
Spending $500,000 to hire additional public defenders
The budget proposes increasing the gas tax, which was already slated to rise 1 cent per gallon July 1, an extra 2 cents to generate $8.7 million of the $15 million in new funds to the Rhode Island Public Transit Authority.
Lima tried to propose an amendment to rescind the gas tax increase after the article it was in had already been voted on and was not allowed.
Stepping back, Shekarchi told reporters the swift passage of the budget was a sign it put the state in good position, unless the federal budget passed by Republicans in Congress makes large cuts to Medicaid and supplemental nutrition assistance.
If that does happen, he said, the Assembly might have to return in the fall for a special session to make cuts or raise taxes.
"I think the fiscal direction of the state is heading in the right direction," he said. "There's certainly this uncertainty of what's happening in Washington. I heard today that the Senate version of the Big Beautiful Bill, as they call it, is even more severe in terms of cuts than the House version, but we'll have to wait and see what happens."
In the House's progressive bloc, Rep. David Morales, D-Providence, said the budget "meets the moment" for the state's schools and health care system.
"This budget is about progress and meeting the moment while still recognizing there is a lot more work to do, such as raising revenue by taxing the highest earners here in our state," Morales said.
This article originally appeared on The Providence Journal: $14.4B state budget moves to the Senate after House passes it 66 to 9
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