Rhode Island Gov. Gina Raimondo submitted a $9.9 billion
The legislature has until July 1, the start of the fiscal year, to ratify the plan.
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.
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.
