A debt restructuring to enhance economic development and jump-start Rhode Island's sagging economy is a linchpin of Gov. Gina Raimondo's $8.6 billion budget proposal for fiscal 2016.
"Our biggest problem is that our state's economic engine is out of gas. This budget is designed to spark Rhode Island's comeback," Raimondo, in her initial budget presentation, said at the State Capitol in Providence on Thursday night.
A restructuring could yield $64.5 million and $19.4 million in fiscal 2016 and 2017, respectively, according to Raimondo, who succeeded Lincoln Chafee in January after four years as general treasurer.
"These funds will be used exclusively to advance economic development priorities," she said.
Projects would include $20 million for a school construction capital fund, which a new school building authority would oversee; $25 million for an I-195 development fund to attract "new world-class institutions, employers and other assets" to downtown Providence land vacated by the relocation of Interstate 195; and a state infrastructure bank, for which Raimondo pushed as treasurer.
The latter, she said, would provide a sustainable funding source for energy efficiency and renewable energy improvements by leveraging federal, state and private-sector funds. She and new Treasurer Seth Magaziner are working out the details.
I-195 fund proceeds "will not be used for a stadium or sport-related complex," the governor said, in clear reference to the efforts by the new owners of the Pawtucket Red Sox to relocate the team to the vacant land.
Other target areas from the debt restructuring range from small business tax credits to affordable housing to grants to enhance stronger partnerships among companies in key industry clusters.
Raimondo referenced the 38 Studios debacle that left Rhode Island taxpayers on the hook for a $75 million loan the state backstopped for former baseball pitcher Curt Schilling's now-defunct video-game company.
"Now I know we've made mistakes from economic development in the past. We must learn from them and never repeat them," she said.
Rhode Island has stumbled near the bottom among the 50 states in unemployment and in job growth. The Ocean State's 6.8% unemployment rate was the fourth worst, according to the U.S. Bureau of Labor Statistics' seasonally adjusted data for December 2014.
Fitch Ratings and Standard & Poor's rate Rhode Island's general obligation bonds AA. Moody's Investors Service rates them Aa2.
"Rhode Island's economic performance continues to trail national trends but the gap narrowed somewhat in recent months. The state's economic decline was among the worst of the states during the downturn and the pace of recovery has lagged," Fitch said in a recent report.
The spending plan, down 2% from the previous fiscal year, covers a nearly $200 million gap, said Raimondo, who cited spending reductions. She called for about $90 million in Medicaid cuts, though half that amount hinges on recommendations from a special panel, the Medicaid Working Group, whose report is due next month.
Raimondo also proposed a statewide property tax for non-owner occupied residences such as vacation homes, second residences and vacant residential land valued in excess of $1 million. "This effort will provide $11.8 million to fund important priorities while limiting the impact to a relatively small number of wealthy taxpayers," she said.