Projo 7 to 7 News Blog

The plan -- the result of weeks of closed-door negotiations with Senate leaders -- is being discussed in detail in the Finance Committee Wednesday afternoon, but House leaders held a separate briefing for the media earlier in the day.

To close the budget hole in the Assembly's budget plan for the fiscal year that begins July 1, lawmakers largely relied upon the federal stimulus package signed by President Obama earlier in the year. The spending plan, which is set to go to the full House chamber next Wednesday, uses $226.5 million in federal dollars that will dry up in the coming years.

Projections released Wednesday by the House fiscal office detail an estimated $422.7 million budget hole for fiscal 2012, the first year the federal stimulus funds aren't available.

The current proposal also saves almost $58 million through an across-the-board cut for all state departments for the coming year, including the Assembly's individual budget. Futher, the plan eliminates the Office of the Health Insurance Commissioner altogether.

Sweeping changes in pension rules for state workers are expected to save as much as $45 million.

None of the changes would apply to anyone eligible to retire on Sept. 30, a move aimed at averting the kind of mass exodus the state saw in the weeks before the last major retiree benefit change.

But for others, the new rules governing the minimum age for retirement, the benefit accrual rates and annual cost-of-living increases would begin on Oct. 1.

All but the newest state workers can now retire and start collecting a pension at any age after 28 years of work, or at age 60 after as little as 10 years of work, with guaranteed 3-percent compounded annual increases.

Under the new rules, the state would adopt age 62 as the new "target'' age for retirement. In actuality, however, the minimum age for retirement would vary widely depending on how long an employee had worked and how close he or she was to qualifying for retirement.

On taxes, Rhode Island's 31-cent gas tax would go up 2 cents as of July 1, generating an estimated $4.5 million for the troubled Rhode Island Public Transit Authority.

Other controversial components include the elimination of preferential treatment for taxpayers who profit from the sale of stocks, bonds and other such investments. The plan would generate an estimated $23.6 million for the state by treating all capital gains as ordinary income, according to House fiscal office projections.

The budget proposal also rejects Governor Carcieri's plans to cut the state's corporate income tax. The plan, while embraced by local businesses, would have cost the state $14.5 million in lost tax revenue next year.

But in a small victory for the governor, the Assembly agreed to increase the value of estates subject to Rhode Island's estate tax to $850,000, a number that would be adjusted in accordance with the consumer price index each year.

The plan includes something dubbed the "Amazon tax," which would force some people to pay taxes on Internet purchases, if the purchaser is referred by a local web site. Following New York's lead, the provision would sometimes force retailers such as Amazon to collect Rhode Island's 7-percent sales tax.

On human services, the budget completely restores funding for Rhode Island's Pharmaceutical Assistance to the Elderly program, which currently offers reduced prescriptions drugs to about 18,600 disabled and elderly residents.

It also maintains funding for dental services for 38,000 low-income parents enrolled in the RIte Care program and continues to pay for subsidized health insurance for 28 moderate-income pregnant women slated to lose coverage.

The developmentally-disabled community had feared it would be cut far deeper than what the governor had proposed in March. The governor's plan to reduce funding by $4.4 million for the coming year was accepted.

And nursing homes will lose significant state dollars. But the cut wasn't as bad as it could have been. The legislature restored about $1.9 million in funding for "nursing home acuity rates" that the governor planned to eliminate.

Cities and towns were roughly in the same situation. They lost $55 million in general revenue sharing, as expected, but no more.

The state budget released by the House Finance Committee Wednesday represents $7.76 billion in spending. Of that total, $2.98 billion represents state-only spending, known as "general revenue." The rest largely comes from the federal government.

Overall spending is up 12 percent from the $6.92-billion state budget approved by lawmakers for the current fiscal year. But the general revenue portion is down, roughly 10 percent, from the $3.28 billion originally approved for the current year.

The proposal, which is expected to be approved by the House Finance Committee Wednesday, is expected to be reviewed by the full House of Representatives next Wednesday, giving rank-and-file members and interest groups time to fight for changes.

Once approved by the House, the budget could go to the Senate the following day.

Governor Caricieri, who could veto the plan but doesn't have enough legislative support to sustain it, had no immediate comment on specific proposals.

"The governor is reviewing the budget," said spokeswoman Amy Kempe.