FY 1998 Budget Address
Thursday, February 13, 1997, 4 pm
Two weeks ago, I stood before you and outlined my vision for a better, stronger Rhode Island. I challenged you to continue building our economy by lowering taxes, investing more in our children's education and giving Rhode Islanders the roads they deserve.
Today, I will present my plan to use our State budget as a tool to continue investing in Rhode Island.
In crafting my budget proposal, I owe much thanks to the Economic Policy Council. I created the Policy Council two years ago to develop an action agenda to help rebuild Rhode Island. Not a study - an action agenda.
That action agenda is now complete. It lays out a blue print to reach my long stated goal of making Rhode Island the most competitive state in the Northeast by the year 2000.
I made it clear in my State of the State that we have come a long way in the past two years. 21,000 more Rhode Islanders working. Unemployment down by 30%. Fidelity underway. Strong job growth elsewhere in our economy. CVS just became the country's largest drug store chain - a move that will add 150 workers to the company's Woonsocket headquarters.
We've got 875 fewer State workers than when I took office. And my budget will reduce this number by another 375. We've also eliminated four cabinet departments.
State revenues are significantly up from last year. Personal income is up. And Rhode Islander's confidence in our future is way up.
Clearly, our hard work has paid off.
Thanks to a growing economy, and smaller State government, we now have the greatest opportunity to invest in our future than we've had in many years.
As Governor, I intend to sieze that opportunity and I invite you to do the same.
My budget plan for FY 1998 reflects my long held view about the role of state government. We must invest adequately in the core functions of government so we can target limited resources to investing in our economy.
The budget I present for FY 98 calls for $1.783 billion in State funding, up only $22.6 million from last year's budget. That's only a 1.3% increase over last year - less than half the rate of inflation.
Despite increasing spending by only 1.3% over last year's budget, sound management and our improving economy has allowed me to propose a sweeping program to Rebuild Rhode Island. I shared much of this plan in my State of the State, but let's review again my action agenda:
* A reduction in the state income tax by nearly 10% over five years.
* The most aggressive Investment Tax Credit in the nation.
* A sharp increase in the Research and Development Tax Credit to 22.5%.
* The transfer of one penny each year of the gas tax for an additional $42 million for roads and bridges over the next five years.
* An additional $13.3 million in funding for Elementary and Secondary schools in FY 98.
* $4.3 million in new funding for Higher Education
* A capital improvement program that will devote $90 million in general revenue - not bonds - to much needed repairs in state buildings and assets over five years.
* $1.5 million for the Samuel Slater Technology Fund - a key recommendation of the Economic Policy Council.
* An $800,000 increase in the PILOT program.
* A $700,000 increase in the General Revenue Sharing for our cities and towns.
All of these proposals are critically important in our effort to Rebuild Rhode Island.
My budget proposal is sound. It's balanced.
It's also based on the December revenue estimates.
I know that Tony Pires and Senator Mike Lenihan are watching State revenues as closely as I am.
I've talked alot about lowering taxes and spending more in different areas.
But a budget proposal is not just about spending money -- it is also about ensuring that the money is well spent, and that the taxpayers of Rhode Island are receiving the best return on their investments.
We spend a lot of money on education in this State -- about $1.4 billion each year. A recent Education Week study gave Rhode Island high marks for how much we spend per student but it gave us low marks for how that money is distributed and what we get in return.
We must have standards, we must measure student progress, and we must have equity And there must be conditions attached to State education aid -- to receive State funds, school districts must detail how they intend to improve student achievement.
I have included additional money for all levels of education, and more charter schools in the budget -- for the sake of our families/children, let's make sure it is well spent.
That goes the same for our transportation needs. I am proposing additional funding:
* transferring one penny of the gas tax
* restoring $2 million of gas tax resources that have been diverted to the general fund,
* an additional $10 million from the Rhode Island Turnpike and Bridge Authority to fix our roads and bridges.
The citizens of Rhode Island have entrusted us to manage our limited resources wisely, and that is what the Department of Transportation must do.
Over the past two years, we have made great strides in reforming our Department of Transportation, but it is clear that there is still room for improvement.
One of the recommendations of the Economic Policy Council was to create a labor-management partnership to restructure -- from top to bottom -- one of our state departments.
This is a great idea, and I can't think of a better place to start than the Department of Transportation, starting with the maintenance division and working its way up.
DOT is not the only department that needs to be reorganized to serve the public more effectively. We have restructured the Department of Human Services, DEM, DCYF, and the Department of Business Regulation.
Our decision to privatize the Department of Economic Development has served us well, and we will look elsewhere. On the table for consideration is privatizing the Training School and some functions of DOT. Whatever direction we take, my goal is to make all functions of state government as efficient as possible.
As we create a leaner, more responsive government, we must continue to reach out to Rhode Islanders in need.
My budget includes a $250,000 increase to the Rhode Island Community Food Bank; and
$389,000 for a Citizenship Initiative Grant Program, which will assist legal aliens in becoming aliens.
Investing in our human infrastructure is just as important as investing in our economy and roads.
But, as always, we have to make some tough choices to develop a budget. A proper balance must be found between investing and saving; between taxing and spending; and between providing additional funds or cutting back.
We have to look at all of the State's revenues and resources, and determine what our priorities are.
Right now we have a choice between paying off the DEPCO debt more quickly, or paying off the debt according to the original schedule, and using the extra revenue to help our economy grow.
As I have said before, "You don't pay off the mortgage before you put food on the table."
In the new, global economy, we simply have no choice but to take a proactive approach to our economic future.
We must we willing to make the right investments today... to ensure our competitiveness in the years to come.
While we have recently seen positive signs in our economy, Rhode Island has clearly not enjoyed the strong economic recovery from the recession of the early '90s that we've seen in the rest of the nation.
Two years ago, I formed the Economic Policy Council, a non-profit corporation with representatives of business, labor, higher education, health care, and government --- to come up with recommendations to improve economic opportunity for Rhode Islanders.
Just last week, the Council released their first annual report. I was very impressed by their findings, and I have based much of my economic agenda, and a number of specific budget proposals, on the Council's recommendations.
Among the most important findings of the Council was that Rhode Island businesses simply are not investing enough in new equipment or technology to remain competitive in today's global economy.
The fact is that Rhode Island Manufacturers invest less than 50% of the national average in plant and equipment per worker.... And 60% less in research and development.
We must not let this continue.
That is why I am proposing that we increase the Investment Tax Credit and the Research and Development Tax Credit to 22.5 %.
I am also proposing $1.5 million for the Slater Technology Fund -- a Fund that will help existing firms move forward technologically and encourage new firms to develop in Rhode Island.
Just as with a business, the State must also increase it's investment. And as the voters stated emphatically last November, we need to invest in Quonset Point/ Davisville.
I have therefor proposed to include $18 million of general obligations bonds to be issued in FY 1998 to fund improvements at Quonset Point/Davisville, including funding for the Third Rail project.
Over the next four years, I recommend a total issuance of the full $72 million approved by the voters.
These are all investments we must make... if we hope to be competitive as we enter the 21st century.
It is also clear that we must make the proper investments in maintaining what we already have.
That's why I am recommending a "pay-as-you-go" capital improvement program, from the Delaware Plan Capital Fund totaling $10 million in FY 1998, and increasing by $4 million each year thereafter.
These funds will address Rhode Island's critical infrastructure protection needs.
At the same time, they also help lower our reliance on debt.
Chief among our infrastructure needs is transportation. Despite improvements, our roads and bridges are clearly not up to par.
That is why I am proposing to transfer one penny of the gas tax each year, from the General Fund, back to its intended purpose - fixing our roads and bridges.
This means that over the next five years, more than $42 million in additional funds can go directly into maintaining our highways.
Voters made it clear last November they are willing to invest in our roads when they approved an $81 million transportation bond. We must make a similar commitment.
I am also proposing that we restore $2 million of gas tax resources which were diverted to the general fund in the FY 1997 budget, and seek an additional $10 million of support for state transportation improvements from the Rhode Island Turnpike and Bridge Authority.
But like most other issues, improving our transportation system is about more than just dollars and cents.
Over the past two years we have made great strides in reforming our Department of Transportation, but it is clear that there is still room for improvement.
One of the recommendations of the Economic Policy Council was to create a labor-management partnership to "reinvent" one or more of our state departments.
We must also continue to downsize state government.
As you can see on the chart to my right, we have 875 fewer state employees than we did when I took office.
This is great news, but we still have a way to go.
And let me say this isn't about bashing state employees.
We simply must have a state government that concentrates on the core functions of government... and lives within its means.
Just because revenues go up... does not mean we need to expand government.
I am therefor proposing a further reduction of 344.9 FTE positions.
As I alluded to in my State of the State, and as President Clinton mentioned in his State of the Union, we must re-double our efforts to ensure that education is a top priority.
I believe it's government's greatest challenge to ensure that when students leave high school, they have the tools necessary to move on to higher education, technical training, or into the job market; and I believe the State has a great role to play in this effort.
We must demand better standards; we must measure student progress, and we must hold our schools accountable for student achievement.
In light of my strong commitment to this issue, I am proposing that we increase State aid to elementary and secondary education by $13.3 million over last years revised level.
My proposal ensures that every school district receives at least as much as they did last year, and increases funding to our districts in greatest need.
But let me say that this funding comes with some strings attached.
As we saw in the recent Education Week study, spending is not the sole determining factor when it comes to student achievement, and unfortunately, Rhode Island's achievement is not at the level it should be.
Along with the increased funding, we must make sure that we are getting enough bang for our buck.
We must promote new ideas such as charter schools.
We must make sure that the latest computer technology is available to our students; and we must expand our school to work programs to better prepare our students for life in the business world.
We must also commit the necessary resources for early childhood programs -- especially for at-risk children -- so that we properly focus on those critical years between the ages of 2 and 6..... Years that in the development of a child, we can never get back..
My Capitol Budget also includes $3 million in FY 1998 for the Met School; and $28.7 million over the next five years.
And let me also say, that the budget I am proposing today is balanced based on December revenue estimates.
If May revenues come in as expected, I will certainly be looking at the possibility of further increasing aid to education, as well as other initiatives, and a possible reduction in the sales tax.
I am also committed to investing in higher education.
URI, CCRI, RIC... our state institutions of higher learning are tremendously important to our future.
They're not only responsible for providing the talent-pool of our future workers, they are increasingly becoming crucial partners with our business community.
And this link will only grow stronger as the new, knowledge-based economy continues to emerge.
I am therefore providing an increase of $4.3 million in aid to higher education over the enacted FY 1997 budget; and in addition, my budget provides $11 million for telecommunications initiatives, and $4 million for infrastructure improvements for our institutions of higher learning.
I believe we must also continue to invest in our Centers of Excellence, and URI's Computer Science and Engineering Excellence Fund...
Over the next five years, I further recommend the issuance of $74.4 million of bonds which the voters approved in November for Higher Education.
And let me just say in reference to this and the other bonds I have discussed: As you can see on this chart??, these are bonds that we can afford spend.
It is very important that we continue to reduce our bonded indebtedness, and as we have for the past two years, under my proposed budget, it will continue to decline.
My proposed budget also reflects the welfare reform legislation we enacted last year.
I have also, however, included funding to help train and assist those individuals, who under the new reforms, must find a job.
In addition, my budget includes a $250,000 increase to the Rhode Island Community Food Bank; and
$389,000 for a Citizenship Initiative Grant Program, which will assist legal aliens in becoming citizens.
My Capital Budget also reflects the restructuring of State government we have achieved over the last year.
We have merged the Department of Employment and Training and the Department of Labor;
We merged the Department of Library Services into the Department of Administration.
And we have totally revamped the Department of Environmental Management.
Each of these changes is a giant step forward, and each represents a future savings that will benefit all Rhode Islanders.
We must also work to ensure Rhode Islanders that their government is doing a good job.
It is in this vein, that I am pleased to announce the beginning of the Performance Measurement Program, designed and passed by this Assembly... to develop a system of budgeting based on outcomes rather than activities.
This program will hopefully help us all in determining whether the results we achieve are worth the investment we make.
I believe Rhode Islanders deserve such information, and I am very pleased to see this initiative moving forward.
Given our improving economy, I believe it is appropriate that we also lesson the burden on our city's and town's; and am therefor proposing to increase General Revenue Sharing by $700,000, up to $13.9 million.
I am also proposing an $800,000 increase in PILOT Program funding.
I know that our local governments are working hard, and I am committed to providing a helping hand when we can.
In developing a budget, we have to make some tough choices.
We must strike the proper balance between investing and saving; between taxing and spending; and between making expenditures or cutting back.
I believe my proposed budget has that balance.
It is in this respect that I feel it is important to explain my feelings on DEPCO.
There's been some controversy over whether we should divert extra revenue towards paying off the DEPCO debt more quickly, or simply continue to pay off the debt according to the original schedule, and utilize the extra funds for something else.
I believe it comes down to is this... We have reduced the debt, and under my budget we will continue to reduce the debt right on schedule.
As I have said before... You don't pay off the mortgage before you put food on the table..
And let me tell you, Rhode Islanders are hungry for tax relief, and they're hungry for making the right kinds of investments in our schools... and in our economy.
We must continue to take the necessary steps to improve our business climate.
We must continue to make the hard choices today... to ensure a better tomorrow.
I believe that this budget is an important foundation for this future, and I look forward to working with all of you in the General Assembly... to ensure a we continue to build a stronger Rhode Island... to meet our needs of the future.