A bill to provide East Providence a $12.6 million advance on state education aid to prevent it from running out of cash Friday is headed for Rhode Island’s Senate.
The House on Thursday overwhelmingly approved a measure authorizing state-appointed budget oversight commissions, such as the new one in East Providence to certify to the state Department of Revenue the need for such advances.
The vote was 64 to 1 with 10 abstentions, despite some concerns about the move setting a dangerous precedent. The lone dissenter was Rep. Robert Watson, R-East Greenwich.
Deputy minority leader Laurence Ehrhardt, R-North Kingstown, offered an amendment calling for an application process to prove need, but the House shot it down 60 to 7.
East Providence has a $7.2 million budget shortfall.
The Senate will debate companion legislation on Tuesday. Sen. Daniel DaPonte is sponsoring the bill. Rep. Helio Melo sponsored on the House side. Both lawmakers — East Providence Democrats who chair their respective chamber’s finance committees — discussed the matter recently with Michael O’Keefe, chairman of the East Providence Budget Commission, and state revenue director Rosemary Booth Gallogly.
“This is not any new money coming forward and it is not a loan. It’s already money that has been budgeted and we’re just advancing it a little to help these cities and towns get through their tough times,” Melo said.
Lawmakers and state officials said advancing the money would be less expensive for East Providence than selling tax anticipation notes, because of the city’s plummeting ratings.
Standard & Poor’s and Moody’s Investors Service last year issued multi-notch downgrades to the 49,000-population city.
Standard & Poor’s in late December lowered the city’s general obligation bond rating to a non-investment grade BB-plus from BBB-plus, while Moody’s over the last 12 months has dropped it six notches, to Ba1 — also junk — from A1. That included a three-notch downgrade on Dec. 12.
Last month, East Providence issued $10 million of Tans, far short of the $30 million city officials had earmarked. The city traditionally issues the notes to ease cash-flow pressures that stem from the timing of property tax collections.
Under the legislation, the state would deduct any lost interest from the advancement. East Providence would have to pay the state $13,000.
Gov. Lincoln Chafee in December appointed the five-member budget commission as the second step in state intervention at the insistence of its overseer, state police Major Stephen Bannon. Receivership would be the next step.
