The Rhode Island House is expected to vote on a $7.8 billion fiscal 2011 budget today that would authorize a $350 million tax anticipation note issue and put two bond deals on the November ballot. It would also cut spending in the current fiscal year.
The budget, which the House Finance Committee approved last week, would raise certain fees and taxes but not sales or income taxes. It also counts on $108 million of additional Medicaid funding that may not materialize if Congress fails to approve it.
The budget includes two general obligation deals that will be put to oters. One would raise $78 million to finance the construction of a new chemistry building at the University of Rhode Island and renovation and expansion at the Rhode Island College Art Center, while the other would finance $84.7 million of capital transportation projects. Most of those funds would be used to match federal funds for highway, bridge and road projects. The remaining $4.7 million would be used to purchase or rehabilitate buses in the Rhode Island Public Transit Authority’s fleet.
The Rhode Island Turnpike and Bridge Authority would receive authorization under the budget proposal to sell $68.1 million of bonds secured by tolls and other revenues for capital projects primarily related to renovations of the Pell Bridge in Newport and the Mount Hope Bridge linking Portsmouth and Bristol.
One contentious issue has been an excise tax on automobiles. Municipalities tax car owners on the value of their cars, minus an exemption for the first $6,000.
The state has reimbursed localities for the exempted amount at a cost of $134 million in the current fiscal year. Gov. Donald Carcieri proposed eliminating the reimbursement in fiscal 2011 while the House bill would lower it to $10 million. The House measure would lower the exemption to cover just the first $3,000 of a vehicle’s value, allowing municipalities to increase tax revenue.
However, a cap on annual tax increases would make it difficult for local governments to fully make up for the lost state aid, according to Peder Schaefer, associate director for the Rhode Island League of Cities and Towns, which lobbies state government on behalf of municipalities.
State law caps annual property tax increases, which the vehicle tax falls under, to 4.5%. While municipalities would be able to collect more taxes due to the lower exemption, some would bump up against the annual tax cap. Local governments can override the cap but only with approval of 80% of their legislative bodies.
“It’s an unfair deal,” Schaefer said. “There’s limitations on the flexibility of municipalities to make that up both by still having to provide a $3,000 exemption and by the limitation imposed by property tax cap.”
If approved, the budget next goes to the Senate. Last year Carcieri criticized the General Assembly’s budget but still signed it. “We’re taking a wait-and-see approach to see what the House and then the Senate eventually ultimately do,” said Carcieri spokeswoman Amy Kempe.