DiBiase on RI’s budget, tax policy and what it will take to fix the schools

Political Roundtable

Now, with a possible recession looming, Governor Dan McKee proposed his latest budget this week. State lawmakers will spend months reviewing the governor’s plan before putting their own imprint on the budget. With storm clouds on the economic horizon, have Rhode Island officials done a good job of managing spending during rosy times for the budget? And how does the state’s approach to taxes affect economic development? These are some of the questions I’ll break down this week with my guest on Political Roundtable, Michael DiBiase, president and CEO of the Rhode Island Public Expenditure Council, or RIPEC.

Ian Donnis: Michael DiBiase Welcome back to The Public’s Radio.

Michael DiBiase: Great to be here. Thanks Ian.

Ian Donnis: Governor Dan McKee this week proposed lowering Rhode Island’s 7% sales tax to 6.85. Senate Republican Leader Jessica de la Cruz says that’s too timid and that the sales tax should be lowered to 5%. Where do you stand on this?

Michael DiBiase: So first of all, I, you know, my view is the governor should be applauded for making a priority of tax relief. We have high taxes in Rhode Island, we have extra revenues, we should try to give the money back to the taxpayers. Cutting the sales tax would not be our preference at RIPEC, we we have a relatively high tax rate sales tax rate, but we’re actually in the middle of the pack in terms of sales tax burden amongst states, other states have local sales taxes on top, we don’t tax food and clothing. Other states do so it’s — from a competitive point of view. We’re not actually that high compared to other states on the sales tax.

Ian Donnis: The property tax is often called the most onerous tax in Rhode Island, we don’t see much of an effort by public officials to go after that. Should that be more of a focus?

Michael DiBiase: Yes, that’s that’s what we’re pushing in terms of business competitiveness, at RIPEC we believe the state needs to act to give property tax relief. The Senate has some interest, I believe in going after property taxes. If you think about businesses, they often have higher tax rates than residential. And they’re even higher on what’s called their tangible property, which is things like computers and equipment, and furniture, which are items by the way, they often have already paid sales tax on. So we would like to see the state eliminate that tangible property tax for most taxpayers, similar to the car tax phase out and give, give the you know, pay for the loss revenue to cities and towns.

Ian Donnis: A recent analysis by your organization, the Rodon, public expenditure Council found that Rhode Island has fallen back into the bottom 10 of states for tax competitiveness. This is despite the general effort by lawmakers to hold the line against broad based tax increases and the phase out of the state car tax. So why has Rhode Island slipped in this category?

Michael DiBiase: Well, technically, we’ve slipped because some other states have been doing positive things. And we’ve stood still, we do have, you know, relatively high taxes overall. So we start from a position I think the highest we got was 35th in the last several years. So you know, other states don’t have an income tax or may not even have a sales tax. So we have relatively high taxes here.

Ian Donnis: We know there’s a possible economic downturn on the horizon. But right now, Rhode Island lawmakers have a $610 million surplus to work with, while formulating the budget for the fiscal year starting July 1. What kind of principles do you think should be used broadly speaking in using that surplus?

Michael DiBiase: Well, that that is one time money. And the governor and the legislature have done a good job in the last couple of years limiting that kind of money to one time uses that is not using it to pay for continuing expenses that you won’t be able to sustain once the money goes away. I was gratified to see that the governor is looking to propose or will be proposing an increase in the rainy day fund. Rhode Island’s rainy day fund is relatively small compared to other states as a proportion of the budget. I also think that you know, the focus should be on some bigger, larger high impact type of approaches we can do with this money, we have more flexibility to do multi year funds, investment type of funds, our tendency has been and it’s of no surprise, the political process kind of leads us to spreading that money, sort of over a wide variety of things. But I think if we could think of some big areas like job training, or I know life sciences was mentioned, or higher ed assistance or school improvement, and have you put something where we can have a more lasting impact and kind of change the trajectory of our economy.

Ian Donnis: Speaking of lasting impact, Rhode Island has received more than $1 billion dollars in federal American Rescue Plan Act money. The idea is to use some money to catalyze longer term growth. How would you assess the effectiveness of the state’s approach on that so far?

Michael DiBiase: So there was a recent hearing, I think that the the McKee administration is doing a reasonably good job, getting that money out the door, with the exception of housing, which has been I think, more of a struggle. I do think that and the governor mentioned in the State of the State a focus on making sure that money gets spent and I know the legislature is very focused on it. State government isn’t really set up to do a lot of new things at once. You know, it’s set up to make the trains run, it’s not really set up to build new trains or build new tracks. So we have to stay on top of it to make sure that this money actually gets spent and gets out the door.

Ian Donnis: During his State of the State address, Governor McKee called for immediate steps to address the crisis in public education in Rhode Island. At the same time, he said his plan for trying to make progress, it will be forthcoming. It’s not ready yet. So I wonder, you’ve been calling for immediate action to this. Did this make your head explode a little bit?

Michael DiBiase: Well, we’ve been we’ve been pretty vocal that this should be our number one priority that that our that our schools are in crisis. You’ve probably heard the statistics that we have two out of three statewide two or three students not proficient in English language arts, three out of four not proficient in math. 1/3 of our students last year were chronically absent. I mean, that’s like a shocking number. That means 18 or more days out, and parents are leaving the schools. We’re seeing enrollment go down. So there needs to be bold action. I was I was happy to see the governor talking about reforming the school funding formula, which the Senate is talking about. I’m actually happy that he’s committed to to have a plan. So he said he would do that in the first 100 days. But we really need bold action, money is necessary but not sufficient here. We need to change the way our schools operate. And we need our political leaders to step up and, and take action.

Ian Donnis: We’re talking here with President and CEO Michael DiBiase of the Rhode Island Public Expenditure Council. We’ve seen how the Rhode Island state budget has grown over the last 10 years from about $8 billion to most recently $13.6 billion. Most recently that was inflated by federal COVID aid and a lot of the budget is always federal dollars, but it’s this rate of growth alarming to you?

Michael DiBiase: I think the rate of growth we’ve seen recently, particularly in education, funding and Health and Human Services, spending is not sustainable. And I think we need to, we need to take a closer look at programs and which ones are efficient, which ones are effective. We’ve had the luxury over the last several years of having the budget be largely an additive exercise of enhancing programs that we have and adding some new programs and I think we need to now move toward as as money’s gonna get tighter and this particular budget actually is tight when you talk about continuing money. We got to start looking at you know, what should be consolidated what what should we cut back on and just have a more deliberate approach to how we’re spending our money.

Ian Donnis: A report prepared for the state found that the forthcoming soccer stadium in Pawtucket will not be a moneymaker at least as presently planned. Nonetheless, Governor McKee has championed that as an important investment in the community. Would you agree with the governor that there’s a case to be made that it’s important for Rhode Island to have these kind of amenities might be nice to have, even if they’re not moneymakers?

Michael DiBiase: I think we haven’t looked at RIPEC in detail at that particular project or proposal, I do think that we would rather see investments that are going to change the the economic competitiveness, the prosperity of the state. That’s why we often talk about investments in higher education in job training in, for example, the life sciences, if it’s in research and things that can can raise our foundation. So we would tend to talk talk more about things that have that we would hope would have more of a payback long term.

Ian Donnis: We’ve seen how the Republican Party in Rhode Island has really struggled for many years to increase it rank its ranks in the legislature and elsewhere. Business community here is not considered to be supportive of the Republican cause by and large. Do you think that explains why the Republicans have struggled so much or is it more the association with the National GOP?

Michael DiBiase: So Ian, we’re a nonpartisan organization, so I’ll try to answer this as best we can. I do think that the the Republican brand in the Northeast is is a difficulty and I also think the moderate the moderate brand of, of local Democrats probably gives less room for for Republicans here so it’s, it’s likely a complicated story.

Ian Donnis: Your organization, RIPEC, did a study analyzing spending by cities and towns on municipal services. Have you found that in many cases, the spending surpasses regional and national benchmarks, particularly for public safety, while under investing in some other areas? What is the effect of this? And do you see any hope for change?

Michael DiBiase: So I think, you know, there, there is hope for change that municipal leaders and budgets can, you know, change the trajectory of some of the spending, we do spend a lot on public safety, more on fire than on police when we compare it to benchmarks. And that leaves less money for things like not only schools, but also roads, and parks. And you saw the governor in state of the state was talking about potholes and actually a matching fund for municipalities. I think that’s directly the result of the fact that our cities and towns actually don’t have much money to spend on local roads.

Ian Donnis: Finally, the proposed Fane Tower is back in the news this week, some people object to this because of its architecture, its height, and also the high cost of the plan units. Others say it’s important that there be an upscale market for new residents in Rhode Island. How do you look at that question?

Michael DiBiase: Once again, we haven’t looked directly at that particular project, the Fane Tower at RIPEC, I do think we need more of an all you know, all of the above strategy on housing and looking at housing at all levels. I mean, we’ve — our housing policy, to the extent it’s existed at all has been really dominated by homelessness and very low income, which are the neediest people. And that’s where our attention should, should be. But we’ve ignored the fact that there’s a whole range of housing that needs to be developed and built and offered.

Ian Donnis: Michael DiBiase, President and CEO of the Rhode Island Public Expenditure Council, thank you for joining us.

Michael DiBiase: Thank you very much, Ian.

—————————————————-

Education has been a signature issue for Governor McKee. The former Cumberland mayor developed the concept known as mayoral academies. But McKee was also criticized last year for supporting a Providence Teachers Union contract seen as less than the transformational contract called necessary a few years by Johns Hopkins University. McKee’s approach on education bears watching now that he has a full four year term. The economic importance of improving public schools has been talked about for decades. Despite that, not much has changed. Better schools could help the state to attract more businesses and give young people better prospects for their future. But the state has struggled to address this issue for years, so the outlook for the future remains uncertain.

You can read about what McKee has to say about this — and a lot more– in my Friday TGIF column, posting around 4 this afternoon at thepublicsradio.org and on my Twitter @IanDon.

That’s Political Roundtable for this week. Our producer is James Baumgartner.

I’m Ian Donnis, and I’ll see you on the radio.

The post DiBiase on RI’s budget, tax policy and what it will take to fix the schools appeared first on TPR: The Public's Radio.