2011-03-10 / Editorial

A new funding plan for the state budget

On Tuesday evening, Governor Chafee presented his 2011-12 state budget to a packed House chamber at the state General Assembly.

As expected, the Governor proposed $157 million in new taxes to offset the anticipated $331 million budget deficit. With the mantra that we “have to make our state solvent if we are to rebuild,” his budget attempts to share the pain across many areas of the state fiscal agenda.

Chafee said he is planning to make a number of cuts in the state government departments, but has yet to define what will be trimmed.

Chafee promised in his campaign that he would roll back the state sales tax while taxing areas that were previously exempt. Indeed, he has proposed to reduce the state sales tax from 7 to 6 percent. He wants to tax previously untaxed items at 1 percent or 6 percent.

There is a long list of items that would be taxed under the new plan. He also wants to tax items purchased on the Internet in hopes the sales tax could be further reduced.

In his speech on Tuesday, the Governor hinted that he wants to make Rhode Island more attractive to businesses so that jobs will be created. He wants to reduce the corporate tax rate while at the same time expand those types of businesses that must pay the minimum tax. He also proposes to enact combined reporting for corporate state income tax, like other New England states, so large corporations can no longer play the shell game of shifting profits elsewhere to dodge the state income tax.

Under a new funding formula, Jamestown will see its state education aid reduced by 5.8 percent, dropping from $373,118 to $351,396. No surprise there.

On the plus side, the Governor is planning to spend $10 million for higher education. That means Rhode Island’s universities and community colleges will not need to increase tuition.

Chafee said he wants to put a stop to the borrowing to fund highway construction and maintenance. Instead, tolls would help to fund the Department of Transportation.

The Governor also proposes that public employees use their 3 percent pay increase to fund their pensions. That is sure to spur an argument.

It will be interesting to see how the General Assembly deals with the proposed budget. We agree with the Governor: We have to make our state solvent. His budget is a good start.

— Jeff McDonough

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