One of Rhode Island's best budget conferences happens annually at Mt. Pleasant Library

Senator Samuel Bell and Representative David Morales do a deep dive on the budget as a community meeting, and it's becoming a must-attend event.

Jan 28, 2025

One of the best budget analyses happens yearly in the Mount Pleasant Library when Senator Samuel Bell (Democrat, District 5, Providence) and Representative David Morales (Democrat, District 7, Providence) hold their first of many community meetings. The following piece is based on their handout and quotes from their presentation.

The State Budget Process:

“The first thing that happens is State agencies submit their budget proposals to the Governor,” said Senator Bell. “That’s usually in October. The next step is for the governor to review the agency budgets and put together his budget. That’s where we are now. The budget is usually released in January. Between February and June, the House and Senate Finance Committees will hold hearings on parts of the budget.

Committee agendas get posted here.

“In June, the House and Senate leadership get together behind closed doors and negotiate their compromised budget,” continued Senator Bell. “About a week later, the House votes and always makes amendments on the floor. Usually, these amendments are controlled by House leadership. Still, it is technically possible that people on the House floor can force something over the leadership, and the threat of that can often push the leadership to make changes.

“The last time the leadership lost the budget floor vote was in 2013 over the practice of scooping out the surplus tax revenue from the pension fund, something that’s happening again in this budget. It’s too in the weeds for us to get into, but it was controversial back in 2013, and they voted it down.

After the House passes the budget, a few days later, the Senate passes it - usually without changes, although we have the right to amend it and send it back if we want to. For the budget to pass, it has to receive an affirmative two-thirds majority.”

In the House, that means 50 votes. In the Senate, that’s 26 votes.

“We’re having this meeting because about two weeks ago, the Governor delivered his State of the State, where he talked about how Rhode Island is doing,” said Representative Morales. “Whether or not he was fully honest about the picture of where we are right now is another story. But a few days after he delivered that State of the State, we had access to the budget proposal. Between the months of February through June, it is now that we, as legislators, and more importantly also the public, have an opportunity to engage as to what the final budget looks like.”

Taxes and Fees:

“Looking at taxes and fees, one thing to note is that there is no broad-scale tax shift,” said Representative Morales. “In other words, there’s no increase to the sales tax and no reduction to the sales tax. Most of the structured taxes that you pay daily will remain the same - from income to sales to gas. Some adjustments were made that will only apply to specific transactions or folks in specific areas, the first of which is the real estate conveyance tax.

“A few years ago, the General Assembly approved the real estate conveyance tax, which means that when a property worth over $800,000 sells, a 0.92% tax is applied. The purpose of that tax is to generate revenue for the housing production fund, which is designed to develop and subsidize housing.”

The Governor’s budget raises the real estate conveyance tax to 1.25%, and the additional money raised goes into a “restricted receipts” account.

“Most of the time, your taxes go to the general fund,” said Representative Morales. “When you pay sales tax, it goes into the general fund. However, for this real estate conveyance tax, 0.92% will go directly to the housing production fund. The other .33% is going to go to homelessness relief programs.”

A 5% Hotel Tax on “Whole-Home” Short-Term Rentals (Airbnb) adds the 5% State Hotel Tax to these rentals (similar to partial-home short-term rentals).

“Currently, there is a sales tax and a 1% hotel tax applied to Airbnbs,” said Representative Morales. “What has been proposed in this budget is an additional 5% State hotel tax. So, the proposed tax that one would pay when renting an Airbnb would now be 13%. That additional 5% will go into a restricted receipt account to fund homelessness relief.”

A proposed 50-cent increase in the cigarette tax, effective September 2025, would raise the cost of cigarettes to $5 a pack.
Digital Advertising Tax: A new 10% tax on digital advertising revenue derived in Rhode Island for companies with at least $1 billion in global revenues.

“The question is whether it will hold up in courts,” said Representative Morales. “The tax would be on companies with over a billion dollars in global revenue, like Facebook and Google.

“Maryland currently has this in place. Once they implemented it, Maryland immediately got sued by the big tech companies. That case is still being heard in the courts. No official decision or precedent has yet been set. I see the tax as a creative way of generating further revenue without imposing it on working people. We will likely know the outcome of the Maryland case over the next several months.”

Sales Tax Exemption on Firearm Safety Devices: Effective October 2025, the State arm safety devices and storage from its sales tax will be exempt.
DMV Technology Surcharge Fee: This bill increases the technology surcharge for online DMV transactions to $3.50 (currently $2.50) to fund DMV online operation services.
Electric Car Tax: $150/year on electric cars and $75/year on hybrids.

“From what I understand, this tax is designed to help alleviate declining gas taxes,” said Representative Morales. “Fewer people are driving cars powered by gas, so naturally, those revenues have shifted down, and that impacts public transportation because the gas tax predominantly funds RIPTA.

“There is some debate among environmental organizations as to whether or not people are now going not to feel as incentivized to get an electric vehicle.”

“Thanks for not crapping on the earth, here’s your tax bill,” said a man in the audience. “It’s shortsighted.”

“It’s also the case that the money from this proposed tax doesn’t go to RIPTA,” noted Senator Bell. “No percentage of this goes to RIPTA, unlike with the gas tax.”

Small Corporate Tax Break Changes: This bill repeals several rarely used corporate tax breaks but extends the carryforward on the research tax credit.

Health and Human Services

“Health and Human Services is where there was the biggest bloodbath, as we predicted,” said Senator Bell. “It’s not quite as bad as we had feared, but we have to change a lot of problematic stuff.”

Medicaid Cuts $82.1 Million in total.
- $52.5 million in lost Federal Funds;
- $29.6 million State Funds; and
- $4.7 million in lost tax funds;
- Detailed Breakdown: $59 million to hospitals, $13 million split between hospitals and nursing homes, and $10.1 Million to home care.

“It would cost us 24.9 million to undo the 82.1 million in cuts,” said Senator Bell.

“The reason for that, for those who might not be as familiar with the Medicaid program, is we get a lot of federal matches,” said Representative Morales. “So whenever we make a State investment, the feds usually kick in a dollar or more for every dollar we put in. So every time we’re not investing in Medicaid, we lose federal money we otherwise would receive.”

“We also tax these payments directly, so we lose tax revenue as well,” noted Senator Bell.

Homelessness Services Cuts:
- $17.8 Million cut from the Department of Housing’s October proposal (which was already a 7% cut)
- $1.4 Million in cuts to DCYF’s homeless families Hotel Voucher program.

“We’re eviscerating homelessness services,” said Senator Bell. “One of the reasons we can’t have a new youth shelter is that we don’t have the funding for it at this point... We need buildings that are not just throwing people all in one room - that gives them their room and sometimes some basic care."

“There are a lot of vacant facilities that can be used for housing homeless people,” continued Senator Bell. “That’s what this money is supposed to do, and that’s why it’s a problem getting cut. We need to fund it. We need to put it in the budget. This is something that will only happen if people agitate for it.”

“One of the major issues is that we don’t have dedicated funds for homelessness relief,” said Representative Morales. “We talked about real estate conveyance tax and the Airbnb tax. I want to be clear that those two taxes alone don’t generate sufficient revenue to fund these programs. It takes to look at the general fund and have a dedicated stream to address the issue seriously. While some progress is needed, those two tax proposals are bandaids because each one alone will generate less than $10 million. It won’t provide for the direct service providers doing the work.”

Major Rollback of Nursing Home Staffing and Wage Laws:
- Allows Medicaid funding meant for frontline caregivers to be redirected to bosses and administrative staff (Directors and other administrative managers), reducing funds for CNAs, RNs, LPNs, and other essential support staff who provide essential care and services to residents.
- They try to sidestep the General Assembly by not even submitting the new payment model for approval, even though the McKee Administration has previously said, in writing, that this would be illegal.

“Staffing mandates are laws that we had passed almost four years ago, basically saying that there had to be ratios in place for the number of caregivers and the number of patients they had to care for,” said Representative Morales. “At this point, nursing homes and the State are ignoring the law because they are supposed to be fined when they have excessive patients and not enough caregivers or when the caregivers are being overworked. This budget proposal is scary because they’re done just breaking the law. They want to reform the law so the ways they’ve broken it in the past are no longer considered illegal.”

“It’s also important to note that the federal regulations around this are likely to get gutted by the Trump administration,” noted Senator Bell. “When we have Medicaid rate increases, 80% are supposed to go to the workers. However, this budget seeks to redefine this so managers can get the money.

“Nursing homes have long been paid under a model called the Resource Utilization Group (RUG), which pays, partially, for the amount of therapy services provided. Nursing homes get more money if they provide more care. They want to switch to PDPM, meaning the State pays the same care per head, with no MA provided. Academic research suggests that this leads to less staff time.

“The General Assembly gave authorization to hire a consultant to start this process last year and develop the necessary waivers and regulations to move forward. However, they are trying to implement it entirely. We used a non-binding resolution, but the RUG is written into State law, and the McKee Administration said it would require a State law change. That’s what I was told when I raised questions about this last year.

“Now, they want to sidestep the General Assembly entirely and implement it,” continued Senator Bell. “That’s problematic because when you do this model, you’re supposed to have safeguards to prevent the loss of quality. The details of that matter. They especially matter if we’re losing staffing mandates because they are one of the most important quality metrics to control how that happens. How you’re paid incentivizes a lot of what healthcare providers do. The whole basis of this model is the quality controls.”

“They’re partially rolling in this budget, which has a huge effect on nursing homes because we had this huge financial crisis, and nursing homes were going out of business after years of Medicaid cuts. We fought hard to get those nursing home rate increases. That’s getting phased in, but when you get a whole bunch more money, and there are no requirements around how it will get used, there’s a real risk that it will go to a bunch of profits and bonuses.”

“Because directors now qualify as the frontline caregivers,” noted Representative Morales.

Gutting DHS Staffing

“The DHS call center line is broken,” said Senator Bell. “It’s impossible to deal with and has to do with a huge staffing crisis. The McKee Administration has dramatically understaffed it. The Department of Administration and the Governor refused to let them fill the staffing mandates, and now they’re proposing a $21.5 million cut. They don’t say how they will do it, but it’s probably happening by holding positions vacant. It will probably cost about 11 million to undo, though they don’t provide us with those numbers because the feds pay about half the time. It will cost $10 million to fill the 300 vacancies at DHS.

“If we don’t have a functioning Department of Human Services, people won’t be able to access their benefits,” continued Senator Bell. “It has major consequences for our economy. We’re losing out on enormous amounts of SNAP revenue. It’s crippling a lot of local small businesses, and it’s crippling families. It’s crippling human beings who can’t access the benefits they’re legally entitled to. A lot of people die because of this. It’s a truly brutal policy, and we must stop it.”

Repeal of “Preventative Services”: A law requires the State to provide expanded home care services to people who aren’t fully disabled. We got federal approval to do it, but the administration illegally failed to implement it, and now they want to repeal it.
Mass Prosecution of SNAP and Medicaid Applicants: Expands the Office of Internal Audit’s scope by giving it massive new powers to go after people who make a paperwork error when they sign up for complicated State programs like SNAP and Medicaid. Under Governor Gina Raimondo, the State would prosecute people who try to sign up. In 2019, they charged 88 people criminally; failing to disclose a bench warrant was the biggest reason.

“I am assuming the intent is a massive surge in prosecution,” said Senator Bell.

Pharmacy Cost Cutting: A vague pharmacy cost reduction initiative that talks about cracking down on insurance companies but also allows insurance companies to reduce “eligibility” for prescription drugs.
Blanket Authorization for changes to Medicaid: Expansive language that allows a wide scope of Medicaid changes without General Assembly approval.
Promise to raise Primary Care Rates in Future Budgets: Add primary care rates to the September 2027 rate review. It would not apply to this budget.

Local Aid:

Distressed Communities: An estimated investment of $12.4 million is distributed annually to Providence, Central Falls, Cranston, North Providence, Pawtucket, West Warwick, and Woonsocket. This aid is level-funded from previous years. With the rising costs of services and population growth, we need to advocate for more State funding for Providence.
State PILOT Program: The Payment in Lieu of Taxes (PILOT) program reimburses cities and towns for their property tax exemptions by 27%. However, the program falls short, with only 25.9% funding. Providence is the largest recipient of PILOT funding, so we must advocate for full reimbursements.
Car Tax Reimbursement for Cities/Towns: The budget funds the Car Tax Phase-Out Program at $234.9 million, $9.7 million less than the Growth Index Law requires. The budget proposes repealing the Growth Index Law.
Public Library Aid: Public libraries would be underfunded by 0.5%. Current law recommends that the State match 25% of what cities and towns contributed to their local library system in the last fiscal year. The Governor’s proposed budget funds libraries at 24.5%.

Public Education:

Cuts to Education Funding: Education funding is being cut by at least $10 million, which heavily affects Providence. The funding formula had been scheduled to increase when they fixed the immigration status discrimination issue, which we ordered them to do. RIDE’s proposal was $20 million, but the Governor only spent $10 million. We do not know if RIDE undercounted the fix so that it could be more.
Reduced Charter School Oversight: Mayors would no longer chair the boards of the controversial “mayoral academy” charter schools.
Forcing Cities and Towns to Pay More for Charter Schools: A 14% cap on the fixed costs deduction in local payments to charter schools.

Miscellaneous:

Baby Bonds Program: This new pilot program would provide a $3,000 trust to each child born to a family enrolled in the RI Works Program. When the child turns 18, they can withdraw the initial contribution and any investment earnings for eligible expenses, such as higher education, an in-state home, or investment in a business.
Cuts to RIPTA: RIPTA is underfunded and is left with a $32.6 Million deficit.

“One area of concern that has started gaining some attention is cuts to RIPTA,” said Representative Morales. “We faced a $20 million deficit last year, which meant that RIPTA was already projecting what it would look like to cut service routes, reduce provided services, and lay off drivers. As a result of a lot of community organizing, we got just enough funding to keep RIPTA running. Last year, we were able to make sure that there were no service cuts and that no drivers were laid off.

“This year, our backs are against the wall even further because the deficit has grown to $32 million. The deficit is a result of federal funding no longer being available. Most of RIPTA’s operational funding has come from federal funds. Those funds have not existed over the last two years. It is required that the State fund public transportation, which is a really ‘radical’ idea, but other states do it. The Governor’s last two budget proposals have not done that. Last year, they would not fund RIPTA, leaving it with a $15 million deficit. We were able to resolve the deficit by June.

“This year, the number is larger. We have yet to hear from RIPTA about projecting this deficit because they were ready to go with the service cuts last year. Last year, they were already hosting public meetings to tell people what routes would be discontinued or less frequent. I suspect something similar is going to happen this time around.

“The one hint of hope I have right now is that RIPTA will release its efficiency study in April. Last year, when we gave them the $15 million to remain stable, the Governor proposed to RIPTA. He didn’t propose to other agencies that they conduct an efficiency study and tell us where we can cut without impacting operations. We will see the results in April and see if that changes the deficit by $32 million.

“We’ve got a lot of folks in our neighborhood who rely on line 56 down here on Chalkstone or line 92 over on Mount Pleasant Avenue,” said Representative Morales. “That’s not even about paratransit services because operational funds also impact those with disabilities or seniors. Everything’s on the table when they start talking about operational funds and operational cuts.”

Ban on Assault Weapons

“There’s been a lot of push between gun safety advocates,” said Representative Morales. “There is a large appetite in the legislature to finally move on this bill, similar to many of our neighbors across New England. This has been an ongoing issue, given the number of school shootings we’ve seen in recent years. The issue has always been that the House has had the votes to pass it, but there is a lack of leadership on the Senate side to move it. I’ve made the argument that the House should pass the assault weapons ban and then leave it up to the Senate, and if they don’t want to do it, the public should see that. Unfortunately, that hasn’t happened over the last several years.

“The governor has now submitted this into the budget. Realistically, I don’t think this will stay in the budget because remember what we shared earlier about how many votes the budget needs to pass?

“I think the pathway will be to do it through traditional legislation.”

Work-from-Home Zoning Protections: Many zoning ordinances technically prevent people from working from home, and this modernizes zoning laws for the rise of remote work.
Closure of the Minimum Security Prison: Minimum Security inmates would be moved to the Medium Security prison.
Federal Threats: An illegal Executive Order from Donald Trump is holding back $220 million in funding to demolish and repair the Washington Bridge. We worry that Trump could do many more illegal things to harm this budget.

Solutions:

“We don’t just want to complain,” said Senator Bell. “We want to talk about how we would fix this.”

Realism with Budget Projections: The budget office has already admitted their $400 million deficit was off by $150 million. Senate Fiscal says it’s off by at least $50 million more, which uses very conservative assumptions. Moreover, we have learned that the budget we passed last year had a massive surplus because of flat-out errors in how the numbers were run. (Two examples: using the wrong CCBHC FMAP and losing the July tax payments.) We can do the math correctly this time.
The Medicaid Switch is a complex way of maximizing federal funds. One example is raising the privatized Medicaid insurance company tax and using it to fund a massive increase in Medicaid services like primary care.
Tax the Rich: It worked in Massachusetts. The 2006 Tax Cuts for the Rich were supposed to help grow our economy. We know now that that didn’t work.
Repeal Corporate Welfare Tax Breaks: We spend enormous amounts on programs that give State money to corporations, mostly luxury housing developers. We can scale back these programs.
Debt Refinancing: If interest rates fall, as predicted, we can refinance debt, possibly even with a re-amortization, as we did in 2015.
Reduce School Construction Waste: The wasteful “newer and fewer” policy of tearing down and consolidating schools has ballooned construction costs. Instead of tearing down consolidated schools, we can save State and local money by repairing and rebuilding some.
De-privatization: Countless State agencies waste money on privatized contractors because we don’t hire much cheaper State workers.
Raise Bank, Insurance Company, and Corporate Taxes: We can reverse years of these cuts, using some to raise revenue and some to cut taxes on small businesses.

“These are some of our ideas,” said Senator Bell. “If you want to discuss the budget, call the Governor’s office. You should also speak up and show up at the State House.”

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