Facing economic disaster, R.I. lawmakers have tough decisions as they return to work

Leaders say the car tax phase-out may need changes

Rhode Island Senate President Dominick J. Ruggerio, left, and House Speaker Nicholas A. Mattiello took part in a Boston Globe forum in Providence earlier this year.Edward Fitzpatrick/The Boston Globe

PROVIDENCE – Long before the deadly coronavirus left thousands of Rhode Island residents ill and completely paralyzed the state’s economy in the process, legislative leaders were already predicting a difficult budget year.

Back in January, the state was facing a $200 million shortfall for the fiscal year that begins July 1, and House Speaker Nicholas Mattiello and Senate President Dominick Ruggerio made it clear that they were unlikely to approve new spending. Yet they outright rebuffed one of Governor Gina Raimondo’s signature revenue-generating proposals: the legalization and taxing of marijuana.

As the two men prepare bring their colleagues back to the State House, likely next month, after a self-imposed hiatus since mid-March, the public health crisis has only exacerbated the existing challenges. Income taxes are delayed, sales tax dollars have dwindled from all the businesses that have been closed for the past five weeks, and lottery revenue has vanished as the casinos have shuttered.

Rhode Island’s best hope, Mattiello and Ruggerio say, is one shared by most state governments around the country: that Congress will approve another massive stimulus package that will allow states to close budget holes that have grown exponentially as a result of the coronavirus.

Aside from that, the two leaders said Tuesday that it’s safe to expect cuts to existing departments and any new jobs proposed by Raimondo to be dropped, but they showed little appetite for taxes or fees to be increased. They also expressed a willingness to consider something that appeared unfathomable two months ago: a slowdown of the plan to phase-out the widely despised motor vehicle excise tax.

“We're going to have to find a way to size the government with our economic realities,” Mattiello, a conservative Democrat from Cranston, said in a telephone interview.

Mattiello is the architect and leading supporter of a six-year plan to eliminate Rhode Island’s that was approved in 2017. Because cities and towns have relied heavily on car taxes -- known as excise taxes in some states -- for their local budgets, the phase-out approach allows the state to reimburse communities for the lost revenue, ultimately reaching $234 million a year beginning in 2024.

Raimondo’s proposed $10.2 billion budget would extend the phase-out until 2029, but both Mattiello and Ruggerio previously said they wanted to press forward under the existing plan.

“We’re in extraordinary times,” Mattiello said. "Normally I would say we’re going to do what the law already says and that would be my wish at this time. But the governor proposed a slower phase-in. We can consider it.”

Ruggerio was even more straightforward: “I don’t know if it’s doable to cut the car tax. I’m not sure we're going to have the revenue.”

“It’s a question of show me the money, and we'll see where it goes,” Ruggerio continued.

Both leaders said they remain hesitant to endorse Raimondo’s proposal to legalize recreational marijuana and have the state oversee sales, which her office projects could generate more than $21 million next fiscal year.

Ruggerio said he’s still not supportive of legal marijuana, but he acknowledged that he’d be willing to take a second look at it this year. Mattiello said there is no chance it will happen this year.

“I'd say the train has left the station on that issue,” Mattiello said.

The Disaster Emergency Funding Board, which includes Mattiello and Ruggerio, authorized Raimondo’s request to borrow up to $300 million to maintain cash flow during the crisis, but the size of the state’s budget hole remains murky. The state’s twice-annual revenue estimating conference begins Friday, and final projections will be released in May.

But the question is not whether the news will be bad. It’s how bad.

And then there’s the uncertainty from the federal government.

“We have to know what we’re getting from the feds,” Ruggerio said “God only knows what that's going to look like.”

The virus has also left more than 100,000 residents out of work, likely sending the state’s unemployment rate above 15 percent. While millions of unemployment claims have been filed across the country since last month, Mattiello and Ruggerio acknowledged that Rhode Island has been hit uniquely hard because so many people work in the hospitality business.

Ruggerio said he’s hopeful that small businesses will continue to take advantage of an array of federal loan programs that have been created in response to the virus. But the hit to the service industry and the social distancing regulations that will be required to allowed businesses to reopen could have a long-lasting impact.

“We have an economy that is more dependent on the service industry than the manufacturing industry than it probably should be,” Mattiello said.

The two leaders said they do expect lawmakers to return to work next month, and they announced Tuesday that they have formed a task force that will scrutinize all state spending related to the coronavirus. It’s unclear whether the panel will meet in person or remotely.

The legislature typically wraps up its session by the end of June, but this year’s timeline remains uncertain. Ruggerio said he doesn’t expect much action at the State House beyond the potential to bundle several bills together to allow cities and towns to place bond referendums on the ballot later this year.

That’s right, there’s still an election coming up.

Ruggerio, who represents parts of Providence and North Providence, has a Democratic primary opponent in Lenny Cioe, a registered nurse. Mattiello is facing a challenge from Republican Barbara Ann Fenton-Fung, a Rhode Island Hospital employee who is married to popular Cranston Mayor Allan Fung.

But before they shift their attention to the campaign trail this summer, whatever that will look like, the budget is their top priority.

“I don’t think we’ll be doing a lot of legislation,” Ruggerio said.