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Mr. Speaker, Mr. President, members of the General Assembly, members of the judiciary, my fellow general officers, my family, distinguished guests, and my fellow Rhode Islanders
For the last three years we have spent a half billion dollars more than we collected in taxes. Let me repeatÉ.That's an average of $185M per year.
How did we do that? We spent our surplus ($130M), we sold our tobacco settlement ($300M), and last year the Federal government gave us a one-time, $102M gift.
We've drained the cupboard bare, and the problem still exists. We now face a deficit of $192M in fiscal year 2005, basically the same as we've had for the previous three years.
Eliminating this deficit has been extraordinarily difficult. It has necessitated cuts that we have not had to face for many years. We have worked very hard to find solutions, but the choices are few.
The budget I submit to you tonight is based on three principles:
This budget matches spending to our revenue growth. We have cut over $92M out of the requests from state departments.
Seventeen departments and agencies will spend less money next year than they will this year.
The Fiscal Fitness Team found more than $37M - both new revenues and expenditure savings.
The team identified overall savings of $180M per year for the state when fully implemented.
Achieving that amount will take time - probably two years - a great deal of work, and the cooperation of this body and many others. But, the rewards are huge, $550M over the next 5 years.
Still, after doing this, our total spending will increase 2.2% and require us to find new sources of revenue.
Many major budget increases are largely out of our control.
The Department of Human Services and the Department of Mental Health Retardation and Hospitals will see the largest increase in the budget: a combined $64M. These increases are driven almost exclusively by increased medical inflation, higher caseloads in entitlement programs, and reduced federal assistance.
The Department of Administration budget will increase by the next largest amount, $23M. Nearly all of it, $22M, due to increased debt service payments and additional costs to maintain our buildings. Local municipal aid is level-funded.
The third largest increase in the budget is education. The Elementary and Secondary Education budget will increase by $11M, most of that for mandatory teacher retirement contributions and school construction costs.
The rest of state government is essentially level-funded or funded with less money than this year.
To solve this deficit we cannot raise our broad-based taxes. The people of Rhode Island are already too heavily taxed. Rhode Island has the 4th highest state and local tax burden in the nation. That's right - according to the Tax Foundation, taxes in Rhode Island are higher than those in 46 other states. In 1970 we ranked 32nd highest.
We must stop raising our taxes, and learn to live within our means. That's what our taxpayers are doing!
Our citizens are under financial pressure themselves. We cannot ask them to pay more! We cannot and must not raise the taxes that weigh down working families and chase away good jobs.
Last year, the General Assembly raised the sales tax on meals and beverages by an additional 1% - from 7% to 8%.
I opposed that tax and I ask this General Assembly to repeal it beginning July 1, 2005. This will give us sufficient time to allow further Fiscal Fitness savings and provide assistance to local municipal governments.
These taxes hurt our economy and they hurt working families. And the meals tax - paid equally by everyone regardless of income - is a regressive tax. Rich or poor, everyone pays the same meals tax. Let's begin to lessen the load of our onerous tax system. Start this year with the meal and beverage tax.
There is one tax that I do support however. According to most experts, the number one public health risk in America today is tobacco smoke.
Every year, second-hand smoke leads to 3,000 lung cancer deaths in this country, while complicating the medical conditions of tens of thousands more. I propose to increase the cigarette tax by $0.75/pack.
By increasing the tax, we raise revenue, while decreasing smoking. It's a win - win!
Finally, we need to do more to collect unpaid taxes. Currently, we project that we can collect $10M owed to the state by instituting a simple computer check of taxes and court fines. We will aggressively pursue those taxes owed to our state.
The sobering reality is that we cannot close this deficit without cutting spending across all of state government.
The plan asks everyone to share the cuts: state employees, human service programs, local governments, capital projects, community organizations, businesses and yes, even the General Assembly and the Governor's Office.
Let's begin with the last two. I propose in my budget that the Governor's contingency fund be cut in half and that the General Assembly's legislative grant fund also be cut. This will save $1.75M.
We have also begun the process of addressing state employee health care costs.
As of July 1 of this year, all non-union employees will receive a 2% wage increase. At the same time, they will begin contributing 7% of the cost of their health insurance premiums. Massachusetts state employees pay 15% of the cost of their health insurance premiums. The average contribution for private sector workers is 16%. It's time, and it's fair. As we negotiate our labor contracts this year, I expect that our union employees will be on a similar plan.
Unfortunately, resolving this deficit has meant finding cost savings in our human services programs. They make up about 40% of the entire general revenue budget - over $1.1B next year. These programs are also growing faster than the rest of the budget.
The choices of program reductions here are extremely difficult, and I make them with a heavy heart.
The generosity of Rhode Islanders is evident in these programs. Our Rite Care program for children and mothers is a national model.
More children are covered by health insurance in Rhode Island than in any state in the nation. That is an important achievement, and I propose no programmatic changes to Rite Care.
Our welfare to work program is also one of the most generous in the nation. While many states allow welfare recipients only 24 months of cash assistance benefits, Rhode Island provides 60 months of benefits, the maximum allowed under Federal law.
Our child care subsidies are also generous and costly. Spending on child care subsidies has increased 162% in just five years.
This year, taxpayers will spend $82M on this program, an increase of $51M in just 5 years.
We will continue to support these programs. But, we also must find ways to slow their costs.
Every program can be made more efficient. And, we owe it to our taxpayers to continually review all our programs, compare them to other states, and ask ourselves if adjustments should be made.
One area we identified is to increase accountability in our welfare program. Employment is a key component of family independence.
To encourage employment, we will increase the penalties for people who refuse to follow job search rules.
Our childcare program costs are among the most rapidly increasing of all in our state budget. This budget proposes targeted changes to the co payments made by families and the income eligibility requirements.
These are not things that I do lightly. Even with these changes the cost of all human service programs will increase by $54M, an 8.5% increase.
Even with this difficult budget year, we must find ways to invest. Although we do not have the luxury of making ambitious commitments to large new programs, we can make a few targeted strategic investments in key areas. I'd like to focus on education, job growth, and capital improvements.
Elementary and Secondary Education spending will increase under my budget by $11M to a total of $774M next year. This increase is the third largest departmental increase in my budget plan.
The budget fully funds public charter schools and the Metropolitan School in Providence. It is important to remember that these public schools serve overwhelmingly urban communities - 80% of children in our ten charter schools live in Providence, Pawtucket, and Central Falls. 79% are minority students.
The achievement results from these schools are clear: children who attend charter schools that have been given time to develop perform very well. We are giving our parents a valuable choice.
I also propose continued investments in higher education. Last year, we doubled need-based scholarship support. I can report to you that the increase is a huge success. We have increased the average award from $600 to $1,100, and we have helped nearly 800 additional students. This budget maintains that investment.
I propose that we continue on the same path towards good jobs. This budget:
Let me briefly discuss a few additional investments that we must make:
In addition, I am putting forward a package of bonds to be submitted for voter approval this November.
I am proposing $60M in new bond money to protect open space and farmland; to preserve land vital to our drinking water supplies; and to continue the work of cleaning up Narragansett Bay. Last summer's fish kill was a wake-up call that we cannot ignore.
We must also invest in a long-ignored state asset: Quonset Point. This year I ask you to put before the voters a bond referendum for $50M to transform Quonset into a modern industrial site capable of producing thousands of good jobs.
My capital improvement strategy closely ties economic development to our higher educational institutions. That is why we are proposing a $50M investment at the University of Rhode Island to build a new Center for Biotechnology. It will be a world-class research facility that will provide both exciting new educational opportunities for students, as well as a stimulus for our growing biotech economy.
I know there are some difficult choices in this budget - some things we would all prefer not to do!
We have tried to spread the burden, and ask everyone to make sacrifices. If our May revenue estimates improve, I am prepared to revisit some of these cuts.
I pledge to work closely with the legislature on this budget. These are difficult times and it is more critical than ever for us to work together. I want the same things that you do - a state that is prospering, generating good paying jobs, giving our children a first-rate education, and assisting those that need our help.
I know many of you are asking, "Why is this necessary?" The truth is, as I've said earlier, we have been living beyond our means for several years. We can no longer!! We are at a critical juncture in our great state. If we face the difficult decisions now, we will chart a robust future.
These are not partisan issues, it's about doing the best job we can for all our citizens.
Let's join together and show the citizens of our state that they can be proud of their government!!
Ladies and gentlemen, an exciting future is within our grasp - but we must be willing to grasp it.
Thank you. God bless Rhode Island and God bless the United States of America.
Office of the Governor · 222 State House, Providence, RI 02903-1196
