- Associated Press - Friday, June 13, 2014

PROVIDENCE, R.I. (AP) - The Rhode Island House approved an $8.7 billion budget early Friday that cuts corporate and estate taxes, eliminates the Sakonnet Bridge toll and, over the objections of a vocal minority, covers the next bond payment for the state’s failed investment in 38 Studios.

The budget, approved comfortably by a 63-12 vote, lowers the corporate tax rate from 9 percent to 7 percent and raises the estate tax threshold from about $922,000 to $1.5 million. Those were top priorities of Speaker Nicholas Mattiello, who has pushed a “jobs and economy” agenda since taking over in March.

The plan for the fiscal year beginning July 1 eliminates the Sakonnet Bridge toll - the subject of heated debate during last year’s legislative session - and hikes the gas tax and some fees to raise revenue for a transportation infrastructure fund for statewide road and bridge maintenance and public transit.

Drawing the most debate was the inclusion of $12.3 million to cover losses after the bankruptcy of ex-Red Sox pitcher Curt Schilling’s start-up video game company. His 38 Studios got a $75 million state-backed loan, and Rhode Island remains responsible for $89 million related to the transaction.

Rep. Michael Chippendale, R-Foster, introduced an amendment to divert the $12.3 million for 38 Studios bond payment to lower the gas tax by 3 cents in the coming fiscal year, but it was defeated.

Another amendment to have an independent prosecutor probe 38 Studios, with $1.5 million from the bond payment funds, drew spirited debate.

“I want to know who lied to me and why,” Minority Whip Joe Trillo, R-Warwick, said in arguing for the measure.

But the effort was ultimately defeated, and soundly. Majority Leader John DeSimone, D-Providence, called it a “diversion” and “salacious” and said walking away from the debt would jeopardize the state’s bond rating, the lawsuit over 38 Studios’ collapse and have other damaging ripple effects.

During the budget session, some lawmakers tried unsuccessfully to block a provision preventing municipalities from setting their own minimum wage standards. Their attempt was a response to a Providence effort to raise the minimum wage to $15 for hotel workers. House leaders support a uniform statewide minimum, saying municipalities would be pitted against each other if they had different rates.

Some of the chamber’s more liberal Democrats argued against the corporate and estate tax provisions, saying that lowering the corporate rate would affect only a small percentage of businesses. An effort to delay the estate tax change and use $10 million in revenue from the tax for school repairs was unsuccessful.

Rep. Michael Marcello, D-Scituate, said the tax changes would lead Rhode Island in the wrong direction, given that legislative fiscal projections have deficits increasing, not decreasing, in future years.

“We are going the wrong way,” he said.

The budget includes a $34 million increase in school funding, as called for in the state education funding formula, and authorizes a lease agreement for a shared University of Rhode Island-Rhode Island College nursing education center that is a centerpiece of the South Street Power Station redevelopment plan.

It calls for voter referendums on $248 million in new debt for a number of Gov. Lincoln Chafee’s priorities, including $125 million for URI’s engineering school; $53 million for clean water, open space and healthy communities; and $35 million each for mass transit and arts and culture.

It also implements “combined reporting,” a different way of taxing corporations that incorporates their out-of-state sales.

The budget eliminates Chafee’s proposal for $52 million in new historic tax credits to encourage redevelopment projects and doesn’t include any funding for a private developer’s plan to turn Providence’s so-called Superman building into apartments.

It also allocates no money for public-employee raises negotiated by the Chafee administration that are expected to cost some $24 million in fiscal 2015. House Finance Chairman Raymond Gallison has said agencies and departments are being asked to absorb those costs.

Mattiello has said the budget sends a message that the state is moving in a different direction.

“This budget is a pro-business, pro-taxpayer, pro-consumer budget,” he said after the vote.

The budget now goes to the Senate, where a vote is expected next week. The General Assembly hopes to adjourn for the year no later than June 20.

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