Economic challenges confront Rhode Island legislators

Economic challenges confront Rhode Island legislators


PROVIDENCE — Seven years ago the General Assembly awarded $384,000 for the Rhode Island Community Food Bank, but lawmakers lately have curtailed their contributions even as the number of Rhode Islanders relying on food pantries has doubled. The legislature gave the organization just under $173,000 in 2013.

Fallout from the state’s lagging economy will again present the most pressing challenge as lawmakers return to the Statehouse on Tuesday to begin their work for 2014. Look for another year of tight budgets and tough choices as pensions, bridge tolls and the hangover from 38 Studios dominate the debate.

The session will be littered with political land mines from previous years: an unpopular Sakonnet River Bridge toll that’s likely to increase, a $12.5 million payment on the debt the state owes for its failed investment in former Red Sox pitcher Curt Schilling’s video game company, a potential settlement in a pension lawsuit that could make a looming $100 million budget deficit a lot worse.

And lurking in the background are legislative elections and a gubernatorial race that will be decided in the fall.

Pensions remain the year’s biggest question mark, with a proposed settlement in the lawsuit over the state’s 2011 pension law expected any time.

Unions and public-sector retirees sued to block the overhaul, which raised retirement ages, suspended cost-of-living pension increases and created a new benefit that combines a traditional pension with a 401(k)-like account. The suit is now in closed-door mediation. A settlement — which would require legislative approval — could dramatically alter the state’s retirement system and rip a big hole in a state budget that’s already $100 million in the red.

The overhaul was designed to save the state and its municipalities billions of dollars in future decades — including $250 million this year alone, according to House Speaker Gordon Fox.

“Can you imagine that deficit ... and add another $250 million to that? Where would we be?” said Fox, D-Providence.

Local leaders and community organizations are hoping lawmakers can balance the budget without passing more cuts in funding to social service programs and cities and towns grappling with one of the nation’s worst economies.

“We’ll be asking lawmakers to restore what has been cut over the years,” said Andrew Schiff, chief executive at the Food Bank.

Look for another debate about how to best boost the state’s economy. Organized labor is asking for another hike to the minimum wage. The Greater Providence Chamber of Commerce is seeking a corporate income tax cut.

Last year, lawmakers took some modest steps designed to boost the economy: allowing more businesses to save on administrative costs by paying more workers biweekly rather than weekly; renaming and reshuffling the state’s Economic Development Corp.; and raising the minimum wage from $7.75 to $8.

Senate President Teresa Paiva Weed said lawmakers will stay the course this year. She said she’ll propose directing more money to workforce training.

“Everything we do should be seen through the lens” of the economy, said Paiva Weed, D-Newport. “We’re 49th in unemployment. We need to take a dramatic step.”

Lawmakers ended the 2013 session without fully resolving two of its thorniest issues: a toll on the Sakonnet River Bridge and the repayment of the state’s debt related to its failed $75 million investment in 38 Studios.

If lawmakers do nothing, it’s likely that the current 10-cent toll on the new bridge will go up this year. The state’s Turnpike and Bridge Authority had initially sought a toll starting at 75 cents. A task force is now examining possible alternatives to a toll — including new motor vehicle fees that would spread the cost of bridge maintenance.

“It’s the major issue in the East Bay,” said Rep. Raymond Gallison, D-Bristol, said of the toll. “We have to do what we can to stop it.”

A sizable minority of lawmakers opposes paying the debt related to 38 Studios. Last year, lawmakers approved a $2.5 million payment after a contentious debate. Expect the calls to default to grow louder now that the debt payment is set to increase to $12.5 million.

“It’s going to loom over everything, and it angers everybody for good reason,” said House Minority Leader Brian Newberry, R-North Smithfield. “You can do a lot of things with $12.5 million.”

Gov. Lincoln Chafee supports the toll and the debt repayment. He said tolls are needed for bridge maintenance and defaulting on the 38 Studios debt would hurt the state’s financial reputation and increase the cost of future borrowing.

“We know the big issues this year,” Chafee said. “38 Studios. The toll. We have to be consistent.”

Chafee, a Democrat, isn’t seeking a second term, but gubernatorial politics could still play a role in the session. In the Democratic primary, Treasurer Gina Raimondo — the architect of the pension overhaul — faces Providence Mayor Angel Taveras, who struck a deal with unions to reduce his city’s pension costs. Cranston Mayor Allan Fung and Moderate Party founder Ken Block are running as Republicans.

Expect debates on a variety of other topics: funding for all-day kindergarten, a bill to repeal the state’s voter identification law and a long-shot bid to legalize marijuana.

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