Rhode Island Gets Its Overdue Budget, With Questions On Sustaining The Car Tax Phaseout

Aug 3, 2017

Senator Josh Miller (D-Cranston) makes a point as the Senate discussed the car tax and the budget on Thursday.
Credit Ian Donnis / RIPR

Amid ongoing questions about the sustainability of phasing out Rhode Island's car tax, the state Senate on Thursday approved a $9.2 billion budget for the fiscal year that began July 1, and Governor Gina Raimondo quickly signed the spending plan into law.

The rapid sequence of events brought a formal end to a stalemate that left the state operating on last year's budget for slightly over a month.

In addition to passing the budget, the Senate approved a bill requiring the state to file reports, beginning in 2021, on the sustainability of eliminating the car tax. The House plans to take up that measure -- intended as an early warning system -- in a special legislative session beginning September 19.

The new budget reduces the amount that Rhode Islanders will pay in car tax over the next fiscal year by about $26 million -- and the state will reimburse that amount to cities and towns. Totally eliminating the car tax over six years will cost the state more than $225 million each year.

So is killing the car tax and keeping it dead realistic in a state where lawmakers face a fresh budget deficit nearly every year?

"Only time will tell," said Senate President Dominick Ruggerio. "That's why we moved to have the Department of Revenue involved [with reports starting in 2021]. We'd like to get some ideas of what's happening on a constant basis. We're going to monitor that very closely as far as the revenues ... Time will tell, but I am hopeful and I would love to see [the phaseout succeed]. And all I know right now is that the taxpayers of Rhode Island are going to get a tax break on their vehicles."

House Speaker Nicholas Mattiello seized on the idea of eliminating the car tax in the midst of a tough re-election challenge in his rep district last year by Cranston Republican Steven Frias. Mattiello said the car tax was a leading concern for his constituents and that gradually eliminating it will remove a regressive tax that disincentives purchases of new cars.

But Rhode Island tried eliminating the car tax in the 1990s and then backtracked when the economy soured years later.

Ruggerio insisted the Senate's dispute with the House -- which led Mattiello to tell state reps to leave the Statehouse on June 30, rather than voting on a budget amended by the Senate -- was solely based on that experience.

"This is purely policy," the Senate president told reporters after the budget vote. "We said this right along. We had gone through this particular exercise before. It didn't work out. It wreaked havoc with a lot of the cities and towns as far as their budgets were concerned. We try to learn from our mistakes up here; we don't always. But that was a concern of mine, that was a concern of mine from day one."

Other senators were concerned, too. Sen. Lou DiPalma (D-Middletown) said various forces, ranging from a bear market on Wall Street to a conflict with North Korea, could depress state revenue in Rhode Island. Sen. Ryan Pearson (D-Cumberland) said it will be challenging for the state to come up with the money to pay for the full phaseout. And some senators, including Elizabeth Crowley (D-Central Falls), expressed concern that the phaseout could take money from other important uses, like programs to care for the needy.

Yet after the month-long stalemate on the budget, and an agreement announced earlier this week, Rhode Island's fiscal 2018 budget was at long last ticketed for passage.

With about an hour of discussion, the Senate approved the spending plan on a party-line vote, 30-5, with the chamber's five Republicans voting in opposition.

Sen. Daniel DaPonte (D-East Providence), who was ousted earlier this year as Senate Finance chairman, and Ana Quezada (D-Providence) did not take part in the vote. One Senate seat is vacant due to the resignation earlier this session of former Senate President Teresa Paiva Weed, now the head of the Hospital Association of RI.

Speaker Mattiello expressed hope that public pressure on lawmakers will sustain the car tax phaseout once he's no longer in office.

"It's important to me only because it's important to the citizens," he said during an interview in his office following the Senate's budget vote. "It's not that important to me personally .... In Rhode Island and nationally, they [citizens] want their elected officials to acquiesce to their requests, to listen to their requests, to respect their requests and to get their requests accomplished. That's what I'm trying to do."

Mattiello said he hopes to be around long enough to get the car tax phaseout done, "but I would say that a future speaker, hopefully, will listen to the voices of the folks the way I do and listen and acknowledge to what they want and get the will of the people done. That's what we're here for."

But Mattiello said he doesn't think the stand-alone bill requiring future updates on the car tax phaseout's sustainability improved on the General Assembly's performance for year.

"This is information we would have had," he said, due to the analysis prepared each year by the fiscal staff for the House, Senate, and governor's office. But if the measure is important to the Senate, Mattiello added, "We respect that."

On the root cause of the dispute with the other chamber, the speaker said, "You'd have to direct that question to the Senate." Informed of Ruggerio's description of the matter as a policy dispute, Mattiello said, "I'd probably vary a little in my little interpretation."

In a statement after signing the budget, Raimondo said, "This is a Jobs Budget, with a lot in it to help Rhode Islanders," Raimondo said. "It makes Rhode Island the first state on the East Coast to make community college tuition-free for every high school graduate. It continues our record investments in classrooms across the state, increases the minimum wage and gives homecare and direct care workers a raise. And, it gives every Rhode Islander car tax relief. I will continue to do everything in my power to protect our progress, create more jobs, and give more Rhode Islanders the training and education they need to get the good jobs we're creating."

When the General Assembly returns on September 19, the legislature is expected to pass bills providing paid sick leave for some of the workers who don't currently get that benefit; separating domestic abusers from guns; and a package of criminal justice reform bills championed by the Senate for the last two sessions.

The Senate Finance Committee plans to stage Finance Committee hearings starting in September, at the Statehouse and elsewhere, on the PawSox' proposal for a new stadium in Pawtucket. The House has not yet made plans for any hearings.