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Cigarette tax hike put on hold in House

11:04 AM EST on Thursday, February 12, 2009

By Katherine Gregg

Journal State House Bureau

PROVIDENCE — A House vote to raise the state’s cigarette tax by $1 a pack — to what would be the highest level in the nation — was aborted at the last minute yesterday after Republican Governor Carcieri yanked his support from his own tax-raising proposal.

Carcieri’s eleventh-hour move was announced by a visibly annoyed House Finance Committee Chairman Steven Costantino on the House floor, the unexpected development punctuated by this uncharacteristic utterance by House Speaker William J. Murphy: “Get it out of here!”

Earlier in the day, Murphy had said raising the cigarette tax “doesn’t bother me” because people choose to smoke.

All told, the revenue package was expected to raise an additional $20 million during the remaining months of this budget year, and an extra $43.9 million next year. It included increases in the cost of obtaining an automobile title and reinstating a suspended driver’s license and registration, and a hike in the premiums tax paid by the HMO arms of the big insurance companies to match the 2 percent paid by other insurers.

A majority on the House Finance Committee had not only placed themselves on record in support of the Carcieri proposal last week, Costantino said, they also moved it to the top of their priority action list because the governor had said the new revenue — an estimated $3.6 million a month — was vital to his efforts to avert a threatened $357-million current-year deficit.

But Carcieri was unable to line up support for the measure from his own Republican lieutenants in the House.

After meeting with the GOP caucus yesterday afternoon, House Minority Leader Robert Watson, R-East Greenwich, said Carcieri acceded to their request that he withdraw his support for the passage of this part of his deficit-reduction plan, in isolation, without action on any of the accompanying cost-cutting proposals. “They started cherry-picking in the governor’s budget …The governor objected, as he should have … [and] telegraphed that he would veto this bill.”

Carcieri spokeswoman Amy Kempe said the governor also withdrew his support for the $1 cigarette tax increase he proposed — to $3.46 a pack — because the lawmakers had rejected his attempt to offset the increase somewhat by repealing a minimum-markup requirement in state law that adds about 8.9 percent to the over-the-counter price. But Costantino said: “We had an agreement … They were fine with that.”

At one point, Watson demanded “Let’s kill it now, kill it now!” — but the bill was shipped back to the House Finance Committee instead, sparing any other lawmakers from a vote on the package that had been enthusiastically embraced by the Rhode Island Heart and Lung associations as a possible way to prod more people to stop smoking, and panned by convenience store owners fretting the steep increase would send their customers across the state line in droves.

Costantino, D-Providence, said Carcieri’s budget-balancing plan is now a whopping $70 million out of whack, “and we have yet to receive an amendment to that budget on how he is going to make up the shortfall…”

He included in that number the lost $20 million in new revenue from the aborted bill up for a vote yesterday. He also included an actuary’s conclusion that Carcieri’s pension-cutting proposals would produce roughly half the $96 million in savings he anticipated this year from the adoption of a minimum retirement age — 59 — and elimination of guaranteed 3-percent annual cost-of-living increases for all future state retirees. All but the newest employees can retire with a pension, at any age, after 28 years service, which over the years has created armies of 40- and 50-something state pensioners.

The state Budget Office has asked the state’s pension consultants at Gabriel Roeder Smith & Co. to look at the numbers again in terms of how much more or less the state might save if it excluded those state employees and public school teachers already eligible to retire from the benefit cutbacks, thereby heading off an expensive mass exodus of public employees between now and the end of this year. As of yesterday, the answer had not yet come back.

In an interview after yesterday’s House session, Costantino said: “I am very, very upset that when you are working under a spirit of cooperation that something like this can happen. … I put my name — I put committee members’ names — on this bill, which was really a governor’s proposal. It came out of his budget, and it is very disappointing but it is not going to stall the House and the Senate in working out this budget.”

kgregg@projo.com

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