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Questions abound as state budget deadline nears

01:00 AM EDT on Friday, June 6, 2008

By Steve Peoples

Journal State House Bureau

PROVIDENCE — The hallway outside State House Room 35 — the heart of Rhode Island’s budget battle — has been quiet this week.

The hearings before the House Finance Committee are over. The parents of the disabled children, the business leaders, the labor unions, the mayors and the social-service lobbyists have come and gone.

They have already pleaded for their programs, their cities and their interests.

And now, a few key lawmakers are deciding behind closed doors how to fill a $425-million budget hole for the fiscal year that begins in 25 days.

Those discussions are taking place even as state departments struggle to finish the current year in the black. The deficit-avoidance plan approved last month included saving $15 million by forcing all state workers to take several unpaid days before July 1. The governor has abandoned those plans and is clamping down on state spending to make up the difference.

And things only get more challenging.

Everything is on the table for the coming year: taxes, money for cities and towns, state worker salaries and benefits, and the future of the state’s health-care system.

“We’re all kind of holding our breath,” said Donna Martin, the executive director of the Community Provider Network of Rhode Island, which serves around 3,500 people with developmental disabilities. Programs for the disabled are facing a combined cut of $36 million for the fiscal year that begins July 1.

“Fiscally, and systemically, there’s a lot at stake here,” Martin said. “We’re really concerned that decisions … are being made in response to a budgetary crisis and not because they make more sense.”

The Assembly is expected to release its tax-and-spend plan next week. It’s unclear if it will include any unexpected one-time funding sources, such as the controversial use of tobacco-settlement money in recent years.

House Finance Committee Chairman Steven M. Costantino said he has “major issues” with using bonds or selling the state’s bridges or lottery to help close the gap, but left the door open for limited “one-time fixes.”

“One-shot deals for one-time expenditures aren’t necessarily a bad thing,” he said, while refusing to explain what one-time revenue sources he would support.

He cited the possibility of raising one-time revenues for a health-care plan set to expire after 10 years for those who would otherwise lose coverage altogether next year. He acknowledged working recently with insurers on a compromise health care plan, but would not say whether such a plan would be in the budget.

“These are negotiations. I can’t let you know at this point. I haven’t finalized it,” he said.

’TIS THE SEASON for Smith Hill secrets.

Representatives from the governor’s office, both chambers of the Assembly, and key interest groups, such as organized labor, are meeting privately every day this week to iron out budget details.

Very few are talking publicly about the negotiations.

AFL-CIO secretary-treasurer George Nee is among the labor leaders negotiating salary and benefit concessions that the governor hopes will save $60 million for the coming year.

“It’s safe to say that we’re involved in what would be called concession bargaining. Obviously there’s going to be some pain felt by the work force, in addition to what’s already happened,” Nee said, referring to Carcieri’s plan to cut the state’s work force by 1,000 employees.

The governor has already laid off 137 state employees, but has abandoned plans “at this time” to cut another 426 state workers — originally dubbed the “B List,” according to Carcieri spokesman Jeff Neal.

In addition, at least 92 non-union contract employees have left state service so far and another 291 workers have either retired or left for other reasons, according to Neal.

Nee said labor is negotiating unpaid days off — known as furlough days — and an increased share of health-insurance premiums for the coming year, although it was not willing to make concessions that meet the governor’s $60-million target.

How much are they willing to give?

“It would be premature to give any figure [of total savings], because again, some of this stuff changes, and I don’t want to get tied into a number,” he said.

MEANWHILE, other labor leaders are pressuring rank-and-file lawmakers to support their agenda.

Marcia Reback, president of the Rhode Island Federation of Teachers and Health Professionals, issued a letter to legislators late last month asking for “a commitment not to vote for a bill or budget article that reduces pension benefits, increases pension contributions or limits the bargaining rights of teachers, state and municipal employees.”

“I plan to communicate all commitments, or lack thereof, to our members,” she wrote of her organization’s nearly 10,000 members.

When contacted this week, Reback said she has received several responses, but would not reveal which lawmakers or specifically how many had committed.

Senate Finance Committee Chairman Stephen D. Alves said his priority this year was not to preserve union benefits. Instead, he’s working to maintain the “safety net” for low-income Rhode Islanders.

The governor has proposed cutting welfare eligibility from five to two years and eliminating subsidized health-care benefits for 7,400 low-income adults. Alves wouldn’t detail what compromises might appear when the Assembly’s budget is released in the coming days.

But, in a warning to municipalities, he said he wouldn’t rule out additional cuts to cities and towns, which have already lost $12.5 million this year.

“Just trying to maintain level funding for education … I think is going to be a stretch,” Alves said. “Our intent, obviously, is not to cut it from where they were this year. However, that can’t be off the table either.”

It remains to be seen whether the legislature’s plan will include any changes to the state’s tax code. The House and Senate leadership have consistently opposed “broad-based” tax increases, but Senate Majority Leader M. Teresa Paiva Weed has suggested delaying changes to the capital-gains and flat taxes that largely benefit high earners.

Of the more creative budget fixes being discussed, organized labor is pushing a plan to use equity in the state’s lottery — worth an estimated $4.4 billion — to finance part of the state’s pension system.

That move would free up $223 million to apply to the operating budget, according Robert A. Walsh Jr., executive director of the National Education Association of Rhode Island, who sent a detailed plan to every lawmaker this week.

Costantino said he hadn’t been briefed on the plan, but did not dismiss it completely. Alves also left the door open to “one-time fixes.”

“You’ll always see some one-time fixes to get through this. That is inevitable,” Alves said. “We’re all grappling with the budget. For the most part, there’s not too much to disagree on because revenues are leading the budget debate.”

speoples@projo.com

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