Though imperfect, the Rhode Island General Assembly takes a tentative step toward a budget that prioritizes people
“The proposed budget includes one of the most significant tax fairness victories in Rhode Island in decades," says EPI Executive Director Weayonnoh Nelson-Davies.
The Rhode Island House of Representatives will be taking up the finalized, balanced $15.2 billion FY2027 Budget (H7127A) later this week, after the House Finance Committee voted 11-2 on Friday to send it to the House floor for consideration.
“In putting together this budget, we were focused on the future, on children and families, on how Rhode Island looks, not just today, but going forward,” said Speaker Christopher Blazejewski. “We are aware of the challenges in our state and the changes in the federal government, and for some particular issues at the state level, we’ve tried to address them.”
Here’s a breakdown:
Health Care
Medicaid rates will be improved by funding a full Office of Health Insurance Commissioner (OHIC) rate review. Implementing the $115 million in increased support over one year will better position the state financially in future years.
We put significant investment in raising Medicaid rates,” said Speaker Blazejewski. “In particular, we did the full Office of the Health Insurance Commissioner (OHIC) rate review. There was a half-year in the governor’s proposed budget; we did the full OHIC rate review as part of this budget.”
The committee recommended an additional $15 million over what the governor proposed for uncompensated care to the state’s hospitals. The budget contains the proposal to provide $20 million in support for Rhode Islanders to access affordable health insurance through Health Source RI.
“We invested significant money, an additional $26 million, to support uncompensated care in support of the hospitals,” said Speaker Blazejewski. “This is something that we’ve seen in light of changes made to Medicaid at the federal level. To keep our hospitals functioning and provide the services our Rhode Island residents need, we need to continue supporting them.”
The committee allocated $1.6 million for the Newport Hospital Birthing Center to support continued operations.
“We’ve included the government’s proposed $1.6 million of general revenue. We have also, through uncompensated care, improved the financial standing of Brown Health, to which the Newport Birthing Center is connected. We’ve also added… language that we think will make it harder to close the Newport Birthing Center, based on all the testimony we received about how important that facility is to people down there.
As part of a continuing effort to address the state primary care provider shortage, the committee approved $5 million for startup costs for the proposed new medical school of the University Rhode Island.
“We worked closely with the Senate in putting together a proposal that we think will be helpful,” said Speaker Blazejewski. “We will work to create the process of creating a medical school at URI. That is an investment of $5 million this year, plus $7 or $8 million in future years to eventually establish a medical school at URI, which we think will help alleviate some of the primary care challenges we face in accessing healthcare.”
Education
The committee added more than $24 million to the governor’s proposal to fund direct state education aid fully.
“That was done in several ways, first of all, by increasing the student success rate to 43%,” said Speaker Blazejewski. “That will help the most vulnerable students have the resources their cities and towns need to support education.”
The City of Central Falls will also regain immediate control of its school district.
“It is important to our smallest city, so we are returning the schools to Central Falls,” said Speaker Blazejewski. “Providence had their schools returned this year, and the Central Fall delegation and Mayor Rivera expressed an interest in getting their schools back, and we’re acting to support that.”
“Question one will be a higher education bond that’ll be $275 million, including $165 million for the health building at URI,” said Speaker Blazejewski.
The bond aims to improve higher education facilities and strengthen workforce preparedness. It includes $50 million for renovations to the Adams Library at Rhode Island College to accommodate a student success and career readiness center, and $60 million for a career and technical Workforce Innovation Center at the Warwick campus of the Community College of Rhode Island.
Rhode Island College’s Hope Scholarship will also be extended an additional three years.
“We have also included the governor’s enhanced proposal on special education,” said Speaker Blazejewski.
Taxes
The committee included a proposal to institute a high-earner’s tax of 1% a year over three years for tax filers earning more than $1 million a year. The marginal tax rate takes effect gradually over three years as measures passed last year as part of President Trump’s H.R. 1 affect the state more acutely. This will also allow the state to collect information on its impacts.
“We have done a millionaire’s tax at 1% per year over three years,” said Speaker Blazejewski. “It’s a three-year phase in. In year one, 2027, it will go up 1%. In year two, 2028, it’ll go up another 1%. Finally, in year three, 2029, it’ll go up another 1%. We did this for a lot of reasons. If you look at the impacts of H.R.1 on our budget, the out years are concerning, and we want to be sure that revenue comes online at the same time we see decreases in federal support. It’s always a balance to find the right mix for tax proposals, but we think this is a prudent way to increase revenue over time, phasing it in so it has less of a shock, more time to be absorbed, and comes online exactly when we lose federal revenue.”
To support families, the committee included a new refundable child tax credit of $330 per child. This proposal will help families when combined with the current dependent exemption, which remains unchanged. Childcare eligibility will also be increased to 285% of the federal poverty level.
“I want to thank the governor for including a proposal on the child tax credit. And I want to thank the Senate President, Senate staff, and the Senate Finance Committee for working to make some changes to that tax credit that we believe will cost a little more but provide even greater benefits to families in Rhode Island,” said Speaker Blazejewski. “We kept the tax credit as it exists and created a new tax credit- this was a proposal the Senate worked on - this new tax credit is fully refundable. The total cost in a full year is $46 million. For almost everyone, this is a benefit over the proposal in the governor’s budget. For some, it’s about breakeven, but especially for middle-income households, it is an improvement over the governor’s proposal.
The committee also expanded eligibility for the Social Security income tax exemption by removing the age threshold, which is the same as the first year of the governor’s proposal.
“We included the first year of the social security tax reduction that was in the current budget,” said Speaker Blazejewski. “I think it’s about $3.5 million. This component eliminates the minimum age requirement to qualify for a Social Security tax reduction. That was age 60. If you’re under 60 and you otherwise qualify, you will now get the same reduction as everyone else. Hopefully, we have a better budget next year, or at least, given some of the ways we structured things, we’re in a better position to take another look, and maybe we go further on the social security tax reduction.”
Government reform
The budget includes Speaker Blazejewski’s proposal to create an independent Office of the Inspector General to investigate the state and quasi-public agencies, as well as municipal programs that use state funds, to prevent and detect fraud, waste, abuse, and mismanagement.
“The proposal of an Inspector General’s office is in the budget. We see this as necessary for a variety of reasons,” said Speaker Blazejewski. “The relationship with the federal government is changing. They are looking for any reason to cut or hold back resources that may be coming our way, and we need to make sure our programs are working. Also, in light of some high-profile state failures like the Washington Bridge, the Amtrak overpass, and the ERS payroll system, there have been major issues that have cost the state hundreds of millions of dollars. So we proposed establishing an Inspector General’s office to focus on that issue. I want to give credit to Chairman Shanley, Representative Lima, and Representative Nardone. I know that recently Republicans have worked on this issue, and I appreciate them continuing the conversation. It’s a bill I started working on in 2015, but they’ve really been driving the conversation lately, so I want to give them credit for their work on it.”
The budget will require an audit of the Rhode Island Department of Transportation (DOT) ’s efficiency and performance.
“We intend to include an audit of DOT and their maintenance work. We have had too many high-profile failures, and we need to audit their maintenance program,” said Speaker Blazejewski. “Regarding government reform, we have removed the DOT director as the chair of RIPTA (Rhode Island Public Transit Authority). Our DOT director will still be on the RIPTA board; we think it’s a conflict of interest. We need RIPTA to have its own chair, so they’ll elect a new chair who is not the DOT director.
Statement from RIPTA Chief Executive Officer Christopher Durand Regarding State Budget
“On behalf of the over 800 employees who provide service to hundreds of thousands of Rhode Islanders every day, we express our gratitude to Governor McKee, Speaker Blazejewski, Senate President Lawson, and all members of the General Assembly for ensuring RIPTA’s FY 2027 budget gap is addressed.
“RIPTA has long fought for adequate and sustainable funding to maintain and improve service. We know that when transit service meets the needs of Rhode Islanders in getting them to work, school, and medical appointments, they utilize RIPTA. Our partnerships with Miriam Hospital, Electric Boat, Naval Undersea Warfare Center, Amazon, and other employers support the state’s economy and help ensure prosperity for Rhode Island families. Our innovative services, such as Flex On Demand, will help increase ridership at a lower cost.
“When Rhode Island invests in public transit, it is investing in the success of students, residents, and businesses. We will continue to do everything in our power to improve service for our riders. We welcome a continued discussion with our elected leaders as we work together to move transit forward.”
Housing
The committee included a $120 million housing and community development bond question on November’s ballot to support affordable housing construction and redevelopment and homeownership programs.
Transportation and public transit
The proposal addresses the Rhode Island Public Transit Authority’s deficit by addressing the operating budget shortfall and providing additional funds for buses and bus shelter improvements.
“The governor’s proposal, as to the two-cent gas tax, was not included in this proposal,” said Speaker Blazejewski. “What we did was restructure things to give RIPTA more funding than the governor’s proposal. It was done in a way that ultimately resulted in RIPTA receiving more resources than it otherwise would have under the governor’s proposal.”
Steve Ahlquist: You mentioned that RIPTA has additional funding. Are they fully funded?
Speaker Blazejewski: They’re funded above the governor’s proposal. They’re better off than they were under the governor’s proposal. We have invested in RIPTA as a priority… I don’t know what the term “fully funded” means to you, but we hope to get there.
Steve Ahlquist: It means routes that have been cut are being fully restored.
Speaker Blazejewski: I don’t know if they can restore all of them. I don’t have those specific answers, Steve. My apologies.
The budget also prohibits the director of the Department of Transportation from serving as the chair of its board of directors, as is currently the case, to address potential conflicts, since RIPTA and RIDOT often compete for funding from the same sources.
“Regarding government reform, we have removed the DOT director as the chair of RIPTA (Rhode Island Public Transit Authority),” said Speaker Blazejewski. “Our DOT director will still be on the RIPTA board; we just think it’s a conflict of interest. We need RIPTA to have its own chair, so they’ll elect a new chair who is not the DOT director.”
Environment
The committee did not include the governor’s proposal to roll back energy efficiency programs or other measures that support the state’s efforts to reduce reliance on carbon-emitting fossil fuels. The state’s 2033 goal of fully utilizing renewable energy for electricity generation remains intact by expanding the state’s renewable energy standard to include nuclear and hydropower generation, which will bring down rates for consumers.
“I want to thank the governor for starting the conversation on energy affordability issues in his budget,” said Majority Leader Katherine Kazarian. “He started this conversation, and the General Assembly took his ideas and ran with them. In this budget, we’ve included two major parts from his budget. First is addressing the immediate cost savings for the ratepayer by expanding the renewable energy standard to include hydro and nuclear energy. Ratepayers will see immediate savings by adding that to the definition. Second is the long-term savings for ratepayers by continuing to invest in renewable energy projects here in Rhode Island and supporting those programs.”
“Because nuclear energy is not virtually pollution-free, inexhaustible, safe, nor efficient, nuclear power can not be considered truly clean, renewable energy. Nuclear energy carries many risks to human and environmental health by way of the pollution it generates, despite the fact that the pollutants resulting from nuclear energy are not of the planet-warming variety. Nuclear energy is not the best use of our resources when we have better, cleaner options available.” [See: Is Nuclear Energy Renewable? by Johanna Neumann and Caitlin Soch at EnvironmentAmerica]
The proposed green bond has become greener by increasing the total bond amount to $55 million and adding funds for open space and increased support for climate resiliency measures.
“Our caucus spoke over and over about making the green bond greener, and we’ve done that by moving things around to increase the resiliency,” said Speaker Blazejewski. “We took out an energy efficiency piece that received negative testimony and used those resources to go towards resiliency, and also open space, pharma acquisition land, and some facility improvements in the state. Additionally, we’ve included the creation of the state archives and state history center, as well as a preservation grant program, as an additional question.”
EPI Executive Director Weayonnoh Nelson-Davies’ statement on the Proposed Fiscal Year 2027 Budget from the Rhode Island House of Representatives:
“The Economic Progress Institute (EPI) applauds Speaker Blazejewski, Majority Leader Kazarian, House leadership, legislative champions, coalition partners, and advocates across Rhode Island for advancing a Fiscal Year 2027 budget proposal that makes meaningful investments in Rhode Islanders while taking an historic step toward a fairer tax system.
“The proposed budget includes one of the most significant tax fairness victories in Rhode Island in decades: a surtax on taxable income above $1 million. At a time when working families continue to struggle with the rising cost of housing, child care, healthcare, and other necessities, House leadership has recognized that those who have benefited the most from Rhode Island’s economy can afford to contribute a little more to support the state’s future and make us a more competitive state. This proposal represents a major milestone in the long-standing effort to build a tax system that is more equitable, sustainable, and better able to meet the needs of Rhode Islanders.
“Just as importantly, House leadership rejected numerous proposals that would have dramatically reduced state revenues, including:
The weakening or repeal of the estate tax;
The repeal of the corporate minimum tax;
The cutting of personal income tax rates;
The creation of a 30-year tax credit incentive for the construction of data centers; and,
An increase in the income threshold for exemption from taxation of social security income.
“Taken together, these proposals amounted to nearly half a billion dollars in annual revenue loss and would likely have resulted in severe cuts to many critical programs and services. We also applaud the inclusion, at a very modest cost, of the Governor’s proposal to remove the age restriction that has prevented low-income Rhode Islanders below full retirement age from using the tax exemption for Social Security income.
“This budget also makes important investments in children, families, and healthcare that help many more Rhode Islanders meet their basic needs and thrive. They include:
Establishing a permanent refundable Child Tax Credit (CTC) of $330 per child that would phase out at $88,500 for single-filers and $110,640 for joint-filers. The CTC will not replace the dependent exemption so that Rhode Island families can benefit from both tax credits;
Strengthening Rhode Island Works cash assistance by allowing more child support payments to go to children, an increase from $50 to $100 for one child or $200 for two or more children;
Strengthening the Child Care Assistance Program (CCAP) by increasing eligibility from 261 to 285 percent of the federal poverty level, and increasing the infant reimbursement rates for center-based child care providers by five percent;
Extending the successful Child Care Assistance for Child Care Educators pilot program by two years;
Bolstering healthcare by implementing the full Medicaid reimbursement rate increase recommended by the Office of the Health Insurance Commissioner;
Helping to stabilize the healthcare system by allocating $26 million to hospitals for uncompensated care, as people lose health insurance due to H.R.,– $15 million more than the governor proposed;
Providing $20 million to help Rhode Islanders purchase health insurance through HealthSourceRI by partially replacing federal Affordable Care Act subsidies that Congress allowed to expire;
Allocating $1.6 million for the Newport Hospital Birthing Center to support continued operations;
Allocating $377,000 from general revenue to secure the Maternal Infant & Early Childhood Home Visiting (MIECHV) matching federal funds, for a total of $10.9 million to sustain and strengthen family home visiting programs and other services;
Sustaining the funding for the Pediatric Psychiatric Resource Network (PediPRN) and Moms Psychiatric Resource Networks (MomsPRN);
Fully funding the Rhode Island Public Transit Authority (RIPTA) by allocating additional funding from the Highway Maintenance Fund and adding $15 million for bus and bus shelter improvements; and,
Decoupling Rhode Island state income taxation from the acceleration of R&D depreciation to save the state $22.6 million next year, as proposed by the Governor, and from two additional H.R.1 provisions that help high-income tax filers without benefiting the state economy – one of these, the Qualified Small Business Stock exclusion, applies only to C-Corps and mostly benefits millionaires. This will save an additional $1 million next year and more over the following years.
“While EPI does celebrate the budget’s inclusion of a millionaires surtax as a bold and valuable move, we have some concern that this proposal does not go far enough (falling short of the top one percent proposal) or quickly enough - phased in instead of the three percent surtax in Fiscal Year 2027 - to prepare the state for the impending loss of federal revenue. While much work remains, particularly as Rhode Island prepares for the possibility of devastating federal cuts to Medicaid, SNAP, and other essential programs, this budget demonstrates what is possible when policymakers choose investment over austerity and opportunity over scarcity.
“It is the result of years of advocacy, research, organizing, coalition-building, and leadership by Rhode Islanders and legislative champions who refused to accept that economic hardship and growing inequality were inevitable. We are especially grateful to the many legislative champions who demonstrated the courage and leadership necessary to advance bold solutions in the face of significant opposition.”
First time ever I’ve read a budget explanation and analysis written for the average, busy reader, and understood it completely! Many thanks to you, Steve.
Well done, Steve! Thank you!