Raimondo's Rhode Island budget includes call for marijuana

Rhode Island Gov. Gina Raimondo submitted a $9.9 billion fiscal 2020 budget to lawmakers, which anticipates $6.5 million from the legalization of recreational marijuana.

The legislature has until July 1, the start of the fiscal year, to ratify the plan.

Rhode Island Gov. Gina Raimondo in January 2018.

It would increase spending by $358 million, or 3.6%, from the approved FY19 budget. According to the governor, new revenues, savings and efficiency measures will cover a roughly $200 million deficit.

"Built into our investment strategy is a practical look at the policy and financial challenges Rhode Island faces," Raimondo said in her message. "Rhode Island is sandwiched between states that have either legalized adult-use marijuana or are seriously considering doing so this year."

Massachusetts, its northern neighbor, has opened recreational stores.

Raimondo, a Democrat beginning her second term and a former state general treasurer, said her proposal would establish "the strictest regulatory framework in the country."

It would generate a yield of $3.6 million for the state, she said. If passed, adult use would begin Jan. 1, 2020, midway through the fiscal year.

Her proposal would create a weight-based excise tax on marijuana cultivation, an additional retail excise tax of 10%, and also apply sales tax to marijuana transactions. The proposal allocates 25% of these revenues -- along with licensing fee revenue -- to related regulatory, public health and public safety costs.

An additional 15% of these revenues would be allocated to the cities and towns. In addition, the governor proposes to apply an 80% wholesale tax to cannabidiol products made from hemp, and to license dealers and distributors of hemp. The FY 2020 adult use market is expected to yield $3.6 million for state expenditures.

Should overall revenue come in higher than expected, said Raimondo, lawmakers could repeal proposed transfers from quasi-public agencies; increase education funding for high-cost special needs, career and technical education; and boost funding for hospitals.

Her plan increases education spending from pre-kindergarten to college. While it contains no increase in broad-based taxes, the budget would raise a variety of fees ranging from cigarettes to large companies with employees on Medicaid. It would also extend the 7% sales tax to digital video streaming and download services such as Netflix.

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S&P Global Ratings and Fitch Ratings rate Rhode Island's general obligation bonds AA. Moody's Investors Service rates them an equivalent Aa2. All three assign stable outlooks.

Raimondo recommended a $3 million reduction in debt service compared with the anticipated current level because of several items.

GO debt, she said, is lower in the Department of Administration due to a shift of funding to higher education for the most recent bond issuance. Second, additional funding of $1.1 million for a proposed new certificates of participation issuance for a redesigned high security facility at the Department of Corrections.

She also cited $1.4 million in savings for Economic Development Corp. job guaranty debt resulting from additional resources available from the 38 Studios receivership. Video-game company 38 Studios went bankrupt in 2012, leaving the state with moral obligation debt.

Rhode Island also expects to save $1.3 million on Interstate 195 land acquisition variable-rate debt due to lower projected interest rates.

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