​At the State House
 
There are a few committee hearings of note scheduled for this week, however the state house remains closed to the public.  Both the House and Senate Committees are accepting written testimony from the public.  In addition, the House has created a process should a person feel it is necessary to testify verbally/remotely.  The instructions can be found below.
 
Tuesday, July 7th
 
The Senate Finance Committee will meet at 4:00 p.m. to accept testimony from the Governor’s staff concerning Article 8 section 2 and section 6 (Hotel tax), Article 8 section 3 (US Treasury Offset Program), Article 11 (Economic Development) and Article 12 (Housing).  Last week’s edition of Under the Dome reviewed these articles.  Article 8 section 6 was added to the agenda this week.  This is the section that calls for a 1% increase in the hotel tax.  The public may submit written testimony only by emailing it to SLegislation@rilegislature.gov . 
 
House Judiciary will meet at 4:30 p.m. and H.7947, An Act Relating to Labor and Labor Relations – Equal Opportunity and Affirmative Action – Licensing, is on the agenda.  The bill declares it unlawful to disqualify a person for an occupational license, permit or certification due to a prior criminal conviction, unless the crime is directly related to the occupation for which the license/permit/certification applies.  A license cannot be suspended for an unrelated crime as well.  Finally the bill establishes a process for considering the licensing of the individual even if the crime was directly related, such as passage of time since the crime, juvenile status, etc.  http://webserver.rilin.state.ri.us/BillText/BillText20/HouseText20/H7947.pdf  Anyone wishing to testify by writing can submit comments to rdimezza@rilegislature.gov or for those who would prefer the option to provide verbal testimony please send an email to rdimezza@rilegislature.gov with the following information: Bill # you are testifying on For/Against, Your Name and Phone number (to be reached for your testimony), Affiliation: (if any)  The Deadline to request verbal testimony is Tuesday, July 7, 2020 at 11am.
 
 
Wednesday July 8th
 
Both the House and Senate Labor Committees will be hearing testimony on the firefighter cancer bills.  H.7449, An Act Relating to Towns and Cities – Cancer Benefits for Firefighters will be heard in an amended form – H.7449 SubA.  The SubA states that firefighters diagnosed with cancer have a “conclusive presumption” that the cancer is an occupational related cancer if they were hired prior to the date H.7449 SubA passes.  Firefighters hired after the date of passage will also have a conclusive presumption UNLESS (1) that firefighter received a physical at the time of hiring and cancer was detected, (2) the firefighter is on the job for two years or less at the time of diagnosis, or (3) the firefighter “regularly or habitually used tobacco products during the 5 years prior to diagnosis.”  The bill is both retroactive and prospective.  Anyone wishing to testify in House Labor may submit comments to jdecastro@rilegislature.gov . For those who would prefer the option to provide verbal testimony please send an email to jdecastro@rilegislature.gov with the following information: Bill # you are testifying on For/Against, Your Name and Phone number (to be reached for your testimony), Affiliation: (if any)  Deadline to request verbal testimony is Wednesday, July 8, 2020 by 11:00 AM. 
 
The Senate bill will be heard by the Senate Labor Committee at 4:00 p.m. (S.2302 SubA, An Act Relating to Towns and Cities – Cancer Benefits for Firefighters).  Members of the public wishing to testify may submit written testimony to: SLegislation@rilegislature.gov
 
 
Thursday, July 9th
 
The Senate Finance Committee will hold a hearing on Article 19 (Workforce Development) of the Governor’s proposed budget.  The Committee will also receive a report on the financial status of the Unemployment Trust Fund and “potential employer tax schedule changes.”  Members of the public wishing to testify may submit written testimony to: SLegislation@rilegislature.gov
 
Article 19 is a 52 page Article that focuses on the construction industry and a few other areas of policy was outlined in last week’s edition of Under the Dome.  If you are a member of the construction industry, the Chamber strongly urges you to read the Article which can be found at http://webserver.rilin.state.ri.us/BillText20/HouseText20/Article-019.pdf
 
 
The House Finance Committee will meet at 4:00 p.m. to take testimony on Article 10 section 7 – the Governor’s RI Promise expansion proposal.  The scholarship program, for high school students entering CCRI to obtain an Associate’s Degree, is set to sunset at the end of this year.  The Governor’s proposal would remove the sunset, making the program permanent; and it extends the scholarship to individuals completing a “certificate program with labor market value as defined by the Postsecondary Commissioner.”
 
The Committee will also take testimony on a new budget request from Governor Raimondo submitted to the committee on July 2nd.  The request is for the passage of a joint resolution authorizing the State Properties Committee to enter into a 10 year lease agreement for a property on Main Street in Woonsocket for a northern RI and Woonsocket Education & Industry Center.  The rent in year 1 could be no more than $180,600 and no more than $247,000 by year 10. 
 
Anyone wishing to testify on either issue should submit written testimony to cobrien@rilegislature.gov . For those who would prefer the option to provide verbal testimony please send an email to cobrien@rilegislature.gov with the following information: Bill # (or specific topic) you are testifying on For/Against Your Name and Phone number (to be reached for your testimony) Affiliation: (if any)   Deadline to request verbal testimony is Thursday, July 9, 2020 at 11am.
 
 
New bills filed last week:
 
House Bill No. 8085  Williams, AN ACT RELATING TO LABOR AND LABOR AND LABOR RELATIONS -- WORKERS' COMPENSATION (This is the annual workers' compensation omnibus bill. It would slightly alter the process and type of benefits for which work-related injured employees of uninsured employers may seek compensation.)
 
Senate Bill No. 2915  Ciccone, AN ACT RELATING TO LABOR AND LABOR AND LABOR RELATIONS -- WORKERS' COMPENSATION (This is the annual workers' compensation omnibus bill. It would slightly alter the process and type of benefits for which work-related injured employees of uninsured employers may seek compensation.)
 
 

​At the State House
  
The General Assembly is currently in a semi-holding pattern awaiting word from Washington D.C.  There are reports that the federal House and Senate hope to come to a consensus on a state financial aid package by the end of July.  With that as a backdrop, the Rhode Island legislature has decided to wait to see how much assistance is coming to the state before preparing a budget for fiscal year 2021.  If no aid is provided, the state faces a revenue shortfall of over $500 million.  To close that gap would require a reorganization of state and local government and services. 
 
For these reasons, the state budget process will most likely pick up in August.  Keep watching Tuesdays for Under the Dome.  However, if the Chamber has nothing to report, then no edition will be sent to you.
 
Senate Finance Committee To Meet in July
 
On Tuesday, July 7th at 4:00 p.m., the Senate Finance Committee is scheduled to meet to accept testimony from the Governor’s staff concerning Article 8 section 2 (Hotel tax), Article 8 section 3 (US Treasury Offset Program), Article 11 (Economic Development) and Article 12 (Housing).  As the Governor stated in a press conference, this budget was put forward at a different economic climate, so it is hard to know which initiatives the Governor still believes are possible in FY2021.  The Senate Finance Committee may gain some insight through the testimony provided virtually at this hearing.  The public may submit written testimony only.  At this time there is no process listed for the public to testify verbally.
 
Article 8, section 2 proposes to change the way in which the hotel tax is distributed starting July 1, 2020.  The distribution percentage of the tax collected changes, but keep in mind the Governor also proposed a 1% increase in the hotel tax (the increase is not part of the hearing on the 7th).  Cities and Towns get 20.8% of the tax collected – down from the current 25%.  The Providence and Warwick Tourism districts see their percentage lower from 30% to 25%.  The Aquidneck Island Tourism District percentage lowers from 45% to 37.5%.  Regional Tourism Districts such as the Blackstone Valley see a decrease from 45% to 37.5%.  The amount of hotel tax going to the Commerce Corporation lowers in all regions about 3% to 3.5%.  And, for the first time, 16.7% of the hotel tax generated would go to the General Fund for State use.
 
Article 11 seeks to accomplish the following:

• Gives the Commerce Corporation the ability to establish a site readiness committee that could step in to assist municipalities in creating sites ready and available to companies wishing to move into the state, including permitting processes, regulations and parcel planning.  Municipalities can opt into the program, but once a municipality opts in, the rules cannot be changed.  In the event a hope community opts in and provides a tax stabilization program agreement in connection with a project, then that community can apply to the commerce corporation for a partial reimbursement of up to 25% of the forgone tax revenue.  The Commerce Corporation may only grant five certifications in any calendar year.
• Changes the Rebuild RI Tax Credit Act which is meant as a gap fund to help get projects over the success line.  Current law calls for a maximum credit of 20% of the project cost.  The Governor’s budget reduces the maximum credit to 15% unless the building involves a “recognized historic structure” or infrastructure costs that exceed 20% of the project costs, at which point the maximum would remain at 20%.
• Increases the maximum aggregate credits that can be issued from $210 million to $250 million
• Extends the sunset provision for the Rebuild RI Tax Credit, RI Tax Increment Financing, Tax Stabilization Incentive, Wave Closing Fund, I-195 Fund, Small Business Assistance Program, Main Street Program, Innovation Initiative, Industry Cluster Grant, High School Employer Partnership, RI Jobs Incentive and the Air Service Fund.  All of these programs will sunset as of December 31, 2020, unless legislative action is taken.  The Governor is asking for a 3-year extension. 

 
Article 12 adds two members to the RI Housing and Mortgage Finance Corporation, and creates an Executive Branch division of housing and community development (DHCD).  This division becomes responsible for creating a housing strategic plan and takes over responsibilities of the current Office of Housing and Community Development.  Article 12 establishes a “Housing Incentives for Municipalities” program.  Municipalities could designate areas as housing incentive districts.  The state agency would then be able to help cities and towns with technical assistance as well as providing school impact offset payments (“a payment to a city or town to help offset increased municipal costs of educating eligible students”).  In order to pay for the proposed programs, the Governor included in the budget an increase in the real estate conveyance tax.  The tax would remain at $2.30 per each $500 in sales price for the first $500,000; and would double to $4.60 per each $500 over $500,000.  The revenues collected from the portion of tax levied on the sales price over $500,000 (the new $4.60 per each $500) would distributed as follows:  $.30 to the distressed community relief program; $.30 to the Housing and Community Development Restricted Receipt Account; $2.30 to a new housing production fund; $.60 to general revenue; and the remaining $1.10 goes to the municipalities.  However, municipalities must pay a 2% administration fee to the division of taxation ($.022).
 
The meeting will be streamed live online via Capitol TV at http://www.rilegislature.gov/CapTV/Pages/default.aspx.  Members of the public wishing to testify may submit written testimony to: SLegislation@rilegislature.gov
 
 
On Thursday, July 9th, the Senate Finance Committee will hold a hearing on Article 19 (Workforce Development) of the Governor’s proposed budget.  The Committee will also receive a report on the financial status of the Unemployment Trust Fund and “potential employer tax schedule changes.”  Like the meeting to be held July 7th, this meeting will be streamed live online via Capitol TV at www.rilegislature.gov/CapTV/Pages/default.aspx . Members of the public wishing to testify may submit written testimony to: SLegislation@rilegislature.gov
 
Article 19 is a 52 page Article that focuses on the construction industry and a few other areas of policy.  If you are a member of the construction industry, the Chamber strongly urges you to read the Article which can be found at http://webserver.rilin.state.ri.us/BillText20/HouseText20/Article-019.pdf
Electrician (Class B) apprenticeship programs still require 8000 hours of on-the-job learning but it appears to eliminate the requirement to complete that training within 4 years.  Maintenance electrician (Class M) still have 6000 hours but no longer within 3 years; and Lightning Protection Installers still need 4000 hours but no longer within 2 years.  If an electrical apprentice obtained an associate degree in electrical technology, that person can get credit for 288 hours of academic instruction toward the apprenticeship requirement.  The Electrician’s Board can also grant 144 hours of credit to apprentices that completed a high school electrical technology program.
Changes to the apprenticeship requirements are also made for electrical sign installers, plumbers, telecommunications, refrigeration technicians, pipefitters, and oil burnerpersons.
Of interest to all Rhode Island taxpayers is a section in Article 19 that only allows construction companies with apprenticeship programs, in every trade needed to build a school, to bid on a school construction project valued at $5 million or more.  The Article states that 10% of the workers in each trade on the job must be apprentices, and that the company bidding must verify that it can meet this requirement at the time of bidding – not at the time the job begins.  What does this mean in the real world?  It means that only union construction companies will be able to bid on these projects, thus reducing the number of competitive bidders on school projects over $5 million.  The Article does provide an out for the winning bidder if they determine there is a lack of apprentices in a specific field as long as the company demonstrated a good faith effort to comply.  This allowance comes after the bid has been awarded, however.  In a merit shop construction company (non-union), apprentices are full time employees of the individual company.  The apprentice attends night classes and the individual company provides the on-the-job training requirement with approval by the Department of Labor.  If the merit shop company does not have enough work for that apprentice, then – like most businesses – that employee will likely be laid off or terminated.  A union construction company is different.  The company calls the union hall and relays how many apprentices the company needs for a job.  Joe Smith may work for one company one week and a different union company another week.  Union construction companies can claim all of the union hall members as potential employees when attempting to qualify for bids.  Merit shops can only claim their own full time employees.  For this reason, it is extremely unlikely that any merit shop company will be able to bid on school buildings valued at $5 million or more should Article 19 pass.
Article 19 adds a provision to include nonprofit organizations with more than 1000 employees in the Job Development Assessment fee.  In 2020, the taxable wage base for this fee is $24,000 per employee ($25,500 for those employers that have an unemployment experience rate of 9.19 or higher); and the tax rate is .21% (.0021).
Finally, this Article increases the earned-income tax credit.  The Rhode Island tax credit would remain at 15% of the federal earned-income tax credit until December 31, 2020.  The credit would increase to 16% from January 1, 2021 to December 31, 2021; 17% from January 1, 2022 to December 31, 2022; 18% from January 1, 2023 to December 31, 2023; 19% from January 1, 2024 to December 31, 2024; and to 20% effective January 1, 2025.

​At the State House
 
The State House will be open this week to legislators, staff and those with appointments, according to a notice by Department of Administration Director Brett Smiley.  Anyone else is welcome to remain outside the building as long as social distancing is maintained.
 
On Tuesday at 3:00 p.m., the House Finance Committee is scheduled to discuss and to likely vote on a bill to close the $240 million gap in the current year fiscal budget.  As this edition of Under the Dome is being written, the supplemental budget is still being discussed and the draft product has not been released.  The deficit solution could include use of the State’s rainy day fund, as well as scoops of various programs such as the Oil Spill Prevention Administration and Response fund, the Underground Storage Tank Fund, and Rhode Island Resource Recovery just to name a few.  The plan will also likely include use of the federal CARES Act funds.   The bill to be considered by the committee will be posted online June 15th at http://status.rilin.state.ri.us/documents/agenda-16911.pdf
 
The Chamber has submitted a letter asking the legislature NOT to include language in the supplemental budget to make permanent Governor Raimondo’s Executive Order requiring health insurance to cover telemedicine for all medical visits without co-pays, cost sharing or preauthorization from a primary care physician.  The Chamber made clear that the business community supports telemedicine as a useful tool to enhance healthcare; but permanently banning any requirement for co-pays, cost sharing or preauthorization protocols could lead to high utilization of the health care system with no way to curb costs or to dissuade unnecessary visits.  Additionally, without further defining what must be included in a “visit,” a provider could bill the same amount for a quick phone call, as is billed for an in-person visit that includes taking of vitals, etc.  These are details that should be a part of the telemedicine cost-effective discussion prior to passage of legislation.  The business community cannot shoulder the expected increase in premiums, especially at this difficult time.
 
The Senate Finance Committee is scheduled to discuss the supplemental budget Tuesday at 4:00 p.m. in anticipation of House passage.  This would allow the Senate Finance Committee to meet again to discuss only changes made by the House floor, if any, and move the bill to the Senate calendar more quickly.
 
The House and Senate are expected to vote on the supplemental budget this week.  Sessions are scheduled for Wednesday and Thursday.
 
 
 
 
Last Week
 
The House Finance Committee met last week.  On the agenda was H.7246, An Act Relating to Taxation-Historic Tax Credits 2013.  This bill calls for the repeal of the sunset of the Historic Tax Credit program.  The program was very successful in the past, but was also very costly.  The State has been unable to fund the program the last few years due to budget constraints.  If H.7246 fails to pass, the Historic Tax Credit program would be eliminated from statute and restarting a similar program would take action by the House, Senate and Governor.  If the bill passes or is amended to extend the sunset for another year or two (more likely), then the legislature could simply fund the program in a future budget without the need to pass legislation to re-create the details of the program.
 
The Small Business Committee reviewed a presentation given by the RI Hospitality Association outlining what has happened in the restaurant and hotel industries as a result of the COVID19 crisis.  Between March 1 and April 16, 60% of operators temporarily closed their businesses, 93% of restaurants laid off or furloughed employees (roughly 40,000 people).  One hundred ninety million dollars ($190 million) in restaurants sales were lost in April.  The March meals and beverage tax declined 35.6% compared to March 2019.  On average, RI restaurant operators reported an 83% decline in sales from May 1 – May 15.  On the hotel side, the March hotel tax declined 55.9% when compared to March 2019.   Hotel occupancy in April, 2020 was only 21.7%.  In April, 2019, the occupancy rate was 65%.  These are sobering statistics.  As the economy continues to re-open, please consider enjoying food from one of our state’s restaurant treasures.
 
The following new bills were filed last week:
 
House Bill No. 8015  Edwards, AN ACT RELATING TO TOWNS AND CITIES - GENERAL POWERS (Allows city/town/fire district to continue operations in state/local emergency when financial budget process is interrupted and to conduct virtual meetings during emergencies retroactive to March 9, 2020.)
 
Senate Bill No. 2857   Coyne, AN ACT RELATING TO FINANCIAL INSTITUTIONS -- THE ELDER ADULT FINANCIAL EXPLOITATION PREVENTION ACT (Requires employees of regulated financial institutions to report suspected financial exploitation of elder adults to the office of healthy aging and provide authority to the regulated financial institution to place a temporary hold on transactions.)
 
Senate Bill No. 2864  Conley, AN ACT RELATING TO TOWNS AND CITIES - GENERAL POWERS (Allows city/town/fire district to continue operations in state/local emergency when financial budget process is interrupted and to conduct virtual meetings during emergencies retroactive to March 9, 2020.)
 
Senate Resolution No. 2867  Metts, Ruggerio, McCaffrey, Goodwin, Coyne, SENATE RESOLUTION CREATING A SPECIAL LEGISLATIVE TASK FORCE TO REVIEW AND PROVIDE RECOMMENDATIONS ON POLICIES PERTAINING TO THE RHODE ISLAND LAW ENFORCEMENT OFFICERS’ BILL OF RIGHTS (LEOBOR) (Creates a 13 member task force to study and provide recommendations on policies pertaining to the RI Law Enforcement Officers’ Bill of Rights, and who would report back to the Senate by February 9, 2021, and expires on May 9, 2021.)
 
 

​At the State House
 
The State House remains closed to the public at this time.  Committees are holding meetings; however most meetings are related to budget briefings, COVID19 briefings, or advice and consent votes for government positions or commission appointments. 
 
The House Speaker and the Senate President have indicated that the legislature will return to address the current year budget shortfall as soon as next week; and plan to return again in July to pass a FY2021 budget.
 
The House Committee on Small Business is meeting Tuesday at 4:30 p.m.  Presentations will be given by Mark Hayward, RI District Director of the Small Business Administration and Ed Huttenhower, Executive Director of the RI Small Business Development Center.  They will be followed by a presentation by Dale Venturini, President & CEO of the RI Hospitality Association and Sarah Brakto Vice President of Advocacy and General Counsel for RIHA.  Finally, the committee will hear from David LaHousse, owner of Kay’s Restaurant (Woonsocket) and The Lodge Pub & Eatery (Lincoln), and Kristin Gennuso, co-owner of Chez Pascal (Providence).  The meeting can be livestreamed at:  http://ritv.devosvideo.com/show?video=cd679c40105a
 
 
The Joint Legislative COVID-19 Emergency Spending Task Force will meet Tuesday at 4:00 p.m.  This meeting will be televised.  The Task Force plans to receive an update on COVID-19 expenditures and encumbrances, nursing home support, and surge hospital data.
 
 
Last Week
 
The House Corporations Committee held a meeting last week to hear from the Department of Business Regulation relating to their efforts to phase in the re-opening of the State’s economy.  Director Liz Tanner told the committee 3500 inspections of businesses have taken place between April 18th and June 4th.  These inspections were conducted by 23 part-time DBR staff members and a pool of 18 lottery employees that shifted focus to DBR pending the opening of the casinos.  The Department plans to hire additional employees as the lottery folks return to their jobs this week.
 
DBR houses most of the compliance question response team as well as the complaint unit.   Five percent (5%) of customer complaints relate to the failure of other customers to wear masks.  Ten percent (10%) of customers are complaining about the failure of employees wearing masks.  Director Tanner stated that early on, DBR was also receiving calls about “rumors” of employees coming to work sick.  A process has now been created to refer the claim to the Department of Health who will follow up with the business when this occurs.
 
During the Phase I opening, inspections were conducted on outdoor dining sites and retail sites.  While the compliance with face mask wearing and cleaning was high, meeting signage requirements was low, as was compliance with having a written plan.  Every open business is required to post signs and to have a written plan.  If you have not completed your plan, please go to: https://www.reopeningri.com/resource_pdfs/COVID-19-Control_Plan_Fillable_Template-Final-5.13.20.pdf   If a business fails an inspection, DBR will provide information concerning how to comply, and an unannounced re-inspection will occur.  With the opening of Phase II now underway, more businesses will be visited by an inspector.  If you would like to pro-actively ask for an inspection, you can contact DBR at https://dbr.ri.gov/ .  Director Tanner expressed a willingness to go to businesses that wish to have a visit to ensure the operations are in compliance.
 
A message from Beth Dwyer, Banking Division - bank lobbies that were once closed are now reopening in Phase II.  She discussed the slight concern banks had with customers wearing masks in lobbies.  The concern is one of financial safety – the banks need to confirm proper identities of individuals withdrawing funds as well as to deter robberies.  If you go into a bank lobby, you may be asked to show your face and to then place the mask back in its proper placement.  The Division is still awaiting federal guidance relating to the ending of the crisis and the handling of mortgage delinquencies.  Currently borrowers have a 90 day grace period.  When the crisis comes to an end, it is unclear if individuals will be required to make a large payment to become current on a loan, and therefore not subject to foreclosure, or if the resuming of normal payments will be considered current (or somewhere in between).
 
A last item of interest was the increase use in telemedicine.  The northeast states, have experienced a 15,503% increase in the use of telemedicine.  While the fact that individuals are using telemedicine to address health issues instead of ignoring ailments is a positive, it is unclear what effect the use will have on insurance premiums next year.  Health insurance carriers look at income and losses and usually submit rate change requests in May for rates to be put in place for the following year.  A rate change request submitted for 2021 would not reflect accurate costs associated with a full 365 day a year implementation of telemedicine, because Rhode Island has experienced an increase of telemedicine at the same time it experienced a decrease in elective procedures, and other normal health provider visits (i.e. chiropractic visits).  The Chamber will continue research this issue and the potential premium impacts of the use of telemedicine.
 

​  At the State House
The State House remains closed to the public at this time.  Committees are holding meetings; however most meetings are related to budget briefings, COVID19 briefings, or advice and consent votes for government positions or commission appointments.  That said…
 
Last week, the Senate Health and Human Services Committee passed S.2525 SubA, An Act Relating to State Affairs and Government – the Rhode Island Health Care Reform Act of 2004.  The bill requires health insurance plans to cover telemedicine at the same rate it covers in-person patient visits.  Governor Raimondo signed an Executive order which calls for insurers to cover telemedicine while the coronavirus emergency continues.  S.2525 SubA would make the Executive Order permanent.  The bill also states that insurers would not be permitted to impose a deductible, co-payment or other cost-sharing requirement for telemedicine services.  Lastly, the bill prohibits health insurers from requiring prior authorization for telemedicine services, which would not only apply to primary care appointments but also to telemedicine services provided by specialty health providers.  According to written testimony submitted to the committee (the only type of testimony permitted at this time), this bill would raise the cost of health insurance.


This week, The Senate Committee on Rules, Government Ethics and Oversight will take up S.2846, which would allow Senators to vote by proxy during a declared state of emergency.  The presiding officer of the Senate would decide if attendance would cause a hardship for the requesting Senator or if the Senator falls within a high risk category during a contagion situation.  The Senator would then receive a “ballot” to vote yea or nay on the bill.  It’s not quite clear what would happen if a bill is amended on the floor of the Senate.  Presumably the proxy vote would be null and void under S.2846 as currently written.
 
The House Health, Education and Welfare Committee will meet Wednesday at 4:00 p.m. to discuss the State’s remote learning program for K-12.  The meeting can be watched at http://ritv.devosvideo.com/show?video=cd679c40105a  and testimony can be submitted by emailing:  LCataldi@rilegislature.gov  The Committee has stated that it will post all testimony submitted at http://www.rilegislature.gov/Special/comdoc/pages/hhew.aspx      
 
The House Corporations Committee will meet Thursday at 4:00 p.m. to hear a presentation from the Department of Business Regulation concerning the detailed plans for the Re-opening of the Rhode Island Economy.  The meeting can be viewed at http://ritv.devosvideo.com/show?video=cd679c40105a  and the presentation can also be viewed, once the hearing starts, at http://www.rilegislature.gov/Special/comdoc/pages/hcorp.aspx
 
RI Department of Revenue Releases April 2020 Cash Collections Report
Providence, R.I. -- The Rhode Island Department of Revenue today released its FY 2020 Cash Collections Report for April 2020. The Cash Collections Report, which is issued monthly, compares current fiscal year cash collections by revenue item on a fiscal year-to-date and monthly basis to prior fiscal year cash collections by revenue item. The cash collections report makes no adjustments for the timeliness of the receipt of deposits and provides readers with insight into the state's cash flow over the course of the fiscal year.
Rhode Island Department of Revenue Director Mark A. Furcolo noted: "FY 2020 total general revenue cash collections through April were 0.8% lower than cash collections received last fiscal year through April, a difference of $(27.6) million. The decline in fiscal year-to-date cash collections reflects the initial impacts of the COVID-19 pandemic on the state's economy. FY 2020 personal income tax cash collections through April were $116.7 million less than in FY 2019 through April, likely reflecting the delay in the tax filing and payment deadline from April 15, 2020 to July 15, 2020. FY 2020 year-to-date sales and use tax cash collections were $57.0 million above the same period last fiscal year. Year-to-date FY 2020 estate and transfer tax cash collections continue to be supported by the receipt of $25.8 million in large infrequently occurring estate and transfer tax payment(s) yielding a difference between FY 2020 and FY 2019 year-to-date collections of $16.8 million. General business taxes cash collections were $44.0 million more in FY 2020 through April than in the same period in FY 2019, but the spread between the current fiscal year-to-date and prior fiscal year to date has narrowed considerably since March."
Notable cash collections items on an April fiscal year-to-date basis included: • Total personal income tax cash collections of $1,035.5 million, down 10.1% year-to-date. COVID-19 appears to have reduced personal income tax cash collections by $146.9 million on a fiscal year-to-date basis through April. o Personal income tax withholding payments are up $34.7 million or 3.4% year-to-date, below the 3.3% fiscal 2019 year to date growth rate recorded in April 2019. o Personal income tax refunds and adjustments are $2.1 million, or 0.7%, less year-to-date, vs. the 5.4% increase recorded for the fiscal 2019 year-to-date period in April 2019. o Year-to-date estimated and final payments are a combined $153.5 million less in FY 2020 than in FY 2019, a decrease of 35.1% fiscal year-to-date over fiscal year-to-date. This substantive decline is likely a result of the postponement of the tax filing and payments deadline to July 15, 2020 vs. April 15, 2019 last year. • Year-to-date April 2020 sales and use tax cash collections were up 6.2% in comparison to FY 2019 through April with total non-motor vehicle receipts $59.5 million more, meal and beverage receipts 3.5% more and motor vehicle sales and use tax receipts (i.e., Registry Receipts) $2.7 million less than the prior year. • All other general revenue sources cash collections through April were up $73.4 million relative to last fiscal year. This increase reflects higher business corporation tax cash collections of $16.3 million, higher financial institutions tax receipts of $21.7 million, insurance company gross premiums tax cash collections of $12.0 million, and higher cash collections for estate and transfer taxes of $16.8 million vs. the same period last fiscal year. o The increase in business corporation tax cash collections is primarily attributable to a jump in estimated payments of $35.3 million in year-to-date FY 2020. This increase includes $37.3 million of income tax payments received from pass-through entities on behalf of their shareholders. In the FY 2020 enacted budget, a provision was included that allowed pass-through entities to make income tax payments on behalf of their shareholders at a rate of 5.99% with the shareholders receiving a credit on their personal income tax returns in the amount of the income taxes paid by the pass-through entity on their behalf. It is expected that any increase in estimated payments received from pass-through entities for this purpose will be offset by reduced final payments or increased refunds paid to the shareholders on their personal income tax returns. • Fiscal year-to-date through April 2020 departmental receipts cash collections are $11.9 million, or 3.3% more than in FY 2019 through April due to the transfer of settlement revenues to the general fund by the Office of the Attorney General and higher collections of interest and penalty on overdue taxes. • The lottery transfer in the new fiscal year reflects transfers of $266.8 million in FY 2020 through April vs. $320.0 million in FY 2019 through April. Both the FY 2020 year-to-date transfer and the FY 2019 year-to-date transfer consists of the traditional cash transfer for July through March gaming activity.
Notable month of April cash collections items included: • Decreased April 2020 personal income tax cash collections of $152.0 million, 66.4% below April 2019. o The sharp decrease in April 2020 personal income tax cash collections is due to a sizeable decrease in personal income tax estimated and final payments of $183.0 million, or 84.8%, due to the extension of the filing and payment due date to July 15, 2020 and a modest decrease in withholding payments of $5.2 million, or 5.2%. These declines were offset by decreased refunds and adjustments of $36.2 million, or 41.7%. • Lower April 2020 sales and use tax cash collections of $11.4 million or 12.2% from April 2019 with modestly lower net taxation receipts of $4.0 million and sharply lower meal and beverage sales tax receipts of $5.4 million and motor vehicle use tax receipts of $7.7 million. All these measures were reduced by the halting of dine-in service at restaurants and bars and the stay-at-home order that were in place in March 2020. • Total general business taxes for April are $42.9 million less than the same month last fiscal year, a decrease of 41.6%. This decrease was largely attributable to business corporation tax receipts, which were $22.1 million below April 2019, insurance company gross premiums tax cash collections, which were 28.0% below April 2019, financial institutions tax cash collections, which were $7.0 million lower in April 2020 than in April 2019, and public utilities gross earnings tax cash receipts, which fell $5.0 million below April 2019 cash collections. Each of these tax types were likely impacted by the postponement of the tax filing and payment deadline from April 15th to July 15th. • Decreased cigarette and other tobacco products tax cash collections of $2.1 million, a variance of 18.1% and lower departmental receipts cash collections in April 2020 of $3.2 million, a variance of 12.5%. • Lower receipts from the lottery transfer of $16.2 million, a decrease of 92.6 due to the indefinite closure of the state's two state operated casinos on March 14, 2020. • Higher estate and transfer tax cash collections in April 2020 of $2.8 million, a variance of 237.9%, versus cash collection in April of 2019. The increased estate and transfer tax cash collections are unrelated to the COVID-19 pandemic as they reflect the settling of the estates of decedents who died nine months or more earlier.
The full cash collections report can be found on the Department of Revenue's web site, www.dor.ri,gov, under the Revenue Analysis directory or at this link: http://www.dor.ri.gov/revenue-analysis/2020.php under the State Reports tab.
Questions or comments on the report should be directed to Paul Grimaldi, Chief of Information and Public Relations by e-mail at paul.grimaldi@revenue.ri.gov or by phone at (401) 574-8766

  General Assembly
The State House remains closed to the public at this time.  Three Senate Committees are meeting to hold advice and consent hearings for Acting Director Brett Smiley (Thursday, Senate Finance Committee) and Acting Director Kathryn Power (Wednesday, Senate Health and Human Services) as well as some board and commission appointments of the Governor. 
The Senate Health and Human Services Committee will also hold a hearing on Wednesday at 4:00 p.m.  The public will not be permitted to attend.  Testimony can be submitted by email. 
Senate Bill No. 2525

BY Miller, Goldin, Valverde, Satchell, Goodwin

ENTITLED, AN ACT RELATING TO STATE AFFAIRS AND GOVERNMENT -- THE RHODE ISLAND HEALTH CARE REFORM ACT OF 2004--HEALTH INSURANCE OVERSIGHT {LC4557/1} (This act would have the health insurance commissioner adopt a uniform set of medical criteria for prior authorization and create required form to be used by a health insurer.)

 
Testimony can be submitted at:  SLegislation@rilegislature.gov
 
Division of Taxation Extends Tax Filing Deadlines
The RI Division of Taxation announced an extension for certain tax filing deadlines and payments including estimated tax payments, corporate taxes, bank excise taxes and public service corporation taxes.  A complete list of filing deadline changes can be found at http://www.tax.ri.gov/Advisory/ADV_2020_11.pdf
 
 
House Finance Committee Receives 3rd Quarter Update
The House Finance Committee met May 20th.  Just like the previous week, there was no public testimony at the hearing.  The fiscal staff provided an overview of the May 3rd Quarter report.  In many ways, more questions were raised than answered.  A few new issues arose added roughly $50 million in unaccounted expenditures for the current fiscal year budget and the next budget, bringing the total budget gap to about $900 million for the two-year period.
What are the new issues?  The biggest one involves the Eleanor Slater Hospital. Between August of 2019, and February 11, 2020, The Hospital was unable to bill Medicare and Medicaid for its patients due to its non-compliance with federal law.  The law prohibits state hospitals from having more than 50% of its patients in psychiatric beds.  The noncompliance was discovered by the hospital administration and the decision was made to cease billing Medicare and Medicaid until the situation was resolved.  Additionally, the hospital had about 100 “forensic” patients which is the term used for individuals sent to the hospital by the courts to undergo psychiatric evaluations to determine ability to stand trial.  Medicaid does not pay for forensic patient services.  Together these items increased the current fiscal year expenditures by about $35 million.  The impact to FY2021 is difficult to estimate but is believed to be at least $30 million.  One question that BHDDH could not able to answer was how much the Department will need to spend in order to ensure the hospital does not run afoul of the federal law again.  The new Acting Director, Kathryn Power, suggested that the ongoing effort to comply would be handled in house, but then later stated that the agency was in the process of hiring a consultant firm to assist.
The Third Quarter Report did reveal some savings for the current fiscal year:  $7.9 million between the Department of Administration, Department of Revenue and Department of Business Regulations – mostly from turnover employment, but some in operating savings and debt service savings; DCYF saved $4.6 million through staffing efforts and some placement changes; and $600,000 was saved by not administering the Spring SAT test.  Other smaller savings were realized in other agencies.  Some expenses were also up.  For example, DEM spent $400,000 more than budgeted for mosquito spraying to combat eastern equine encephalitis (EEE).
 
 
Senate Finance Committee Asks NCSL for Insight
Last Thursday, the Senate Finance Committee met to discuss the Coronavirus Relief Funding Sources, and they received insight from Congressman Cicilline and the National Council on State Legislatures (NCSL). 
So far, the federal government has passed four spending bills to address coronavirus issues:

• March 6th $8.3 billion – Coronavirus Preparedness and Response Supplemental Appropriations Act.  Of this money, $1 billion when to local governments.
• March 18th – Families First Coronavirus Response Act (amount unknown, but tax credits are available to employers for providing sick leave or family and medical leave for COVID reasons)
• March 27th $2.2 trillion – Coronavirus Aid Relief, and Economic Security Act (CARES)
• April 24th $484 billion – Paycheck Protection Program and Health Care Enhancement Act

The NCSL presentation focused mostly on the CARES Act, as this is where Rhode Island received a bulk of its money and is where all government officials are trying to see what can be used to close budget holes at the state and local levels.  The one piece of very good news for the State is that the White House declared CARES Act money can be used by states to meet their 25% match requirement to access FEMA funds.  The money cannot be used for general budget shortfalls, however.  According to NCSL some allowable uses include: public safety and health care expenses related to COVID19, broadband, remote learning, summer learning, nutritional services, renter relief programs, temporary housing for homeless (not permanent), workers compensation, unemployment trust funds, animal depopulation programs (big in farm country where there are too many farm animals and not enough demand ex. Pigs), and loans or grants to small businesses.
As of May 18th, the Paycheck Protection Program has yielded 4,341,145 loans in the United States for a total amount of $513.27 billion.  In Rhode Island, 15,857 loans were made amounting to $1.86 billion in approved dollars.  Another type of loan – the Economic Injury Disaster Loan – is available to agricultural producers only.  This loan has a maximum of $2 million, but applicants receive $10,000 as an advance grant just for applying for the loan.  If the applicant is ultimately deemed ineligible for the loan, the $10,000 does not have to be repaid.  As of May 8th, 10,758 loans were approved in Rhode Island amounting to $36.23 million in approved dollars.
Following NCSL, Department of Administration Acting Director Brett Smiley provided a COVID19 update for the Committee.  The big takeaway remains the unknown track that the virus will take throughout the summer and into the fall.  But the Director did provide estimated expenditure ranges for past and ongoing COVID19 activity through December 30, 2020:

• Hospital Assistance Partnership Program - $130 - $150 million
• Congregate and Child Care - $28.5 million
• Potential Surge Activities - $83.4 – $189.8 million
• Supplies (PPE and potential vaccine) - $98.8 - $151.3 million
• Testing - $230.4 - $267.6 million
• Contact Tracing and Case Investigation - $27.2 - $27.9 million
• Quarantine and Isolation - $19.1 - $20.2 million
• Technical Enablement/Deployment - $17.2 - $19.1 million

These items account for potential COVID19 expenditures between $634.6 million and $854.4 million. 
 
State Agencies Hold Carbon Tax Stakeholder Meeting
As directed by the legislature last year, DEM, in conjunction with the RI Office of Energy Resources and the Department of Transportation held a virtual meeting to introduced the consultants hired to conduct a study of potential effects associated with a carbon tax or with a carbon cap and trade program (still a tax).  The agencies have hired two companies – Cadmus and Synapse – to perform the work which is slated to be completed by the end of September.
According to the consultants, 46 national and 31 subnational jurisdictions have implemented or scheduled carbon pricing initiatives.  In the United States, the state of California has a program.  2020 charges per metric ton of carbon range from a low in Japan at $3 to a high of $123 in Sweden.
California is currently at $18 per metric ton through its cap and trade program.  Started in 2013, it is the broadest cap and trade program in the world – covering transportation, industry, heating and electricity generation.  Roughly 85% of California’s greenhouse gas emissions are taxed.  The program raised $9.3 billion so far.  Emission have reduced 16%.  Cadmus reported a 33.2% growth in advanced energy jobs in that state, but the consultant was unable to say whether jobs were lost in other industries.
The two consultants asked for input on two models for the State of Rhode Island.  The low model would start at $6 per metric ton in 2021 and increase 5% annually above the rate of inflation, with all revenues going to decarbonization programs such as electric vehicles and heat pumps in residential and commercial buildings.  The high model would start at $25 per metric ton in 2021 and increase 5% annually above the rate of inflation.  Some of the revenue would go back to Rhode Island residents and the remainder would go to decarbonization programs.
The stakeholders participating in the meeting were asked to provide input about the specific items to be included in the models.  The Chamber requested the inclusion of a cost/benefit analysis for various industry sectors – not just emerging technology businesses – in order to obtain a more complete understanding of the economic impacts of the programs. 

​Open Businesses Required To Sign Checklist Form
 
Rhode Island Governor Raimondo has asked all currently opened businesses and newly opening businesses to print out and sign a checklist form that can be accessed at:
 
https://www.reopeningri.com/resource_pdfs/Business-organization-checklist-poster_05.15.20%20.pdf
 
While the state is not requiring proof of the signed document prior to opening, she did state during her May 15th press conference that inspectors could ask for this signed form at a business location.  It's not clear what penalty might be applicable if a business does not have the form executed on site.  
 
House Finance Committee Meets
The House Finance Committee met last Thursday.  There was no public testimony at the hearing, only a briefing from the House fiscal staff outlining the findings from the Revenue and Caseload Estimating Conference and the Federal Relief Programs and their impact on the State.  The 95 slide presentation provided by House Fiscal Advisor Sharon Reynolds and her team can be viewed at:  http://www.rilegislature.gov/housefiscalreport/Briefings%20and%20Presentations/2020%20Session/Federal%20Relief%20Programs%20and%20May%20%20REC%20CEC.pdf
 
Can Rhode Island End FY2020 With a Deficit
One of the questions raised was whether the State can roll over into FY2021, any deficit from the current fiscal year that ends June 30th.  The answer is not knowingly.  The State must do its best to end at zero or in the black (sometimes estimates are off a little when audits are completed following the end of the fiscal year, but the General Assembly must do its best to get to a zero balance or better). 
 
Federal CARES Fund Effects
When Governor Raimondo and then President Trump declared a state of emergency, those declarations allowed the federal Stafford Act to go into effect.  The Stafford Act provides funds to states, but comes with a 25% match requirement from states.  If Rhode Island received $100 million, it would have to put up $25 million.  Rhode Island has asked for a waiver of that match requirement – a response has not yet been received.  The federal government has since adopted the State Coronavirus Relief Fund from which Rhode Island received $1.25 billion.  As Ms. Reynolds stated at the hearing, if the federal government waives the 25% match requirement, that is the best budget situation for the State.  It could also allow states to use the Coronavirus Relief money to meet the match (2nd best option); or if both of those options are not permitted then the State’s expenses occurred will have to be switched over to the Relief Fund monies and the least amount of federal dollars will be available to help with budgetary problems that have arisen due to the crisis.  It is important Chamber members know that this budget is going to be tricky and cannot be solved properly until federal guidance is provided.  Cities and Towns face the same challenge.
The Coronavirus Relief Funds can be used for “necessary” expenditures related to COVID-19, incurred between March 1, 2020 and December 30, 2020.  Direct expenditures for medical as well as public safety are covered.  “Secondary” expenses are also covered such as employment or business interruptions, but it’s not completely clear what it allowable as a “secondary” expense.  It does include items related to health and safety – for example payroll for public safety; but it does not include increased Medicaid expenses.
The Fund also included $121.5 million for education, provided the State maintains a level of effort equal to an average over the last three previous fiscal years (FY17-FY19).  Of the $121.5 million, $46.4 million is for K-12 and is available through September 30, 2022.  This money can be used for items such as: cleaning, long-term closure planning, training, technology purchases, mental health support and summer learning.  Also available is $66.4 million for higher education through September 30, 2021 for things like: costs associated with facility shut-downs, emergency aid to students, and assistance for minority institutions.
The federal package included $197.8 million for healthcare providers, almost half of which goes to healthcare providers to assist with lost revenue due to the pandemic.  RI Hospital received an additional $19.8 million because it qualified as a “hot spot” area under the federal legislation.  Some of the other recipients include: community health centers ($11.5 million), community mental health centers ($6 million), community living programs ($6.4 million), child care ($8.2 million), community services for low-income families ($5.5 million), head start programs ($2.3 million), and LIHEAP – low income home energy assistance program – ($4.8 million).  Additionally, Rhode Island did receive an increase in the federal rate share of Medicaid.  Other items can be found in the slide presentation.
Unemployment Fund update – according to the presentation, Rhode Island’s unemployment insurance fund started 2020 with $537.9 million, more than it has had in the past twenty years.  As of May 12th, the Fund had $420 million. 
Lastly, it’s important to note that a number of federal programs for individuals and businesses, equates to a loss of revenue for the state, thus affecting the budget process.  For example, the federal CARES Act gives employers credit for net operating losses.  The House fiscal staff anticipates a relative loss in state revenue of $2 million in FY2021 and a loss of $700,000 in FY2022.  The federal government increased the interest deduction cap for businesses.  That change is expected to reduce state revenue by $1.6 million in FY2021 and $1 million in FY2022.  These programs are important to the business community.  At the same time, those changes have state budget implications that must be accounted for as the budget process moves forward.
The House Finance Committee plans to meet again to review the 3rd Quarter Report which will include spending updates, agency additional deficits and an update on COVID expenses.  The Committee will also receive updates on the current federal program as well as new program that might or might not be passed by Congress.
 
New Bills
The Rhode Island Senate did release new bills last week.  The Senate desk was left open when the legislature cancelled session in March, which is why the following bills are available now, but receive a technical “introduction date” of March 12th:
Senate Bill No. 2777  de la Cruz, DiPalma, Seveney, AN ACT RELATING TO STATE AFFAIRS AND GOVERNMENT -- RHODE ISLAND ECONOMIC GROWTH BLOCKCHAIN ACT (Establishes an economic growth blockchain act, set regulations for the sale of hemp, regulate virtual and digital assets and establish depository banks for these purposes.)
 
Senate Bill No. 2794  McCaffrey, Sosnowski, Miller, DiPalma, Euer, AN ACT RELATING TO FOOD AND DRUGS - SINGLE-USE PLASTIC STRAWS (Prohibits food service establishments providing single-use plastic straws unless requested or from self-service dispenser. First and second violation results in notice of violation and $25 fine thereafter up to $300 annually.)
 
Senate Bill No. 2795  Pearson, DiPalma, Conley, Cano, Seveney, AN ACT RELATING TO TAXATION -- STATE TAX OFFICIALS (Requires electronic filing of returns and remittance of payments for certain larger business registrants.)
 
Senate Bill No. 2798  Pearson, AN ACT RELATING TO TOWNS AND CITIES - MUNICIPAL INCENTIVE AID (Authorizes the general treasurer to withhold state aid to municipalities which do not meet certain requirements regarding locally-administered pension plans and, if applicable, funding improvement plans.)
 
Senate Bill No. 2800  Picard, AN ACT RELATING TO TAXATION -- STATE TAX OFFICIALS (Changes the rate of interest for underpayments of tax to prime rate plus six percent (6%). It would also limit the assessment of interest to four (4) calendar years.)
 
Senate Bill No. 2801  Conley, Satchell, Goodwin, Metts, Cano, AN ACT RELATING TO TAXATION -- PERSONAL INCOME TAX (Adds one new income tax bracket for purposes of state income taxation.)
Senate Bill No. 2803   Conley, DiPalma, Lynch Prata, Seveney, Pearson, AN ACT RELATING TO PUBLIC PROPERTY AND WORKS -- STATE PURCHASES (Increases the maximum small state purchase from $10,000 to $25,000 for construction projects and from $5,000 to $10,000 for all other small purchases.)
 
Senate Bill No. 2804  McCaffrey, Pearson, AN ACT RELATING TO TAXATION -- PROPERTY SUBJECT TO TAXATION (Amends the classification of manufacturing machinery that is eligible for a property tax exemption.)
 
Senate Bill No. 2816  Lynch Prata, AN ACT RELATING TO BUSINESSES AND PROFESSIONS -- HOTELS (Requires all hotels to make a good faith effort to post human trafficking awareness signage and provide all employees with human trafficking awareness training.)
 
Senate Bill No. 2831  Lynch Prata, AN ACT RELATING TO LABOR AND LABOR RELATIONS -- TEMPORARY DISABILITY INSURANCE BENEFITS (Increases temporary caregiver benefits to six weeks starting January 1, 2021 and then to eight weeks starting January 1, 2022.)
 
Senate Bill No. 2832  Lynch Prata, AN ACT RELATING TO LABOR AND LABOR RELATIONS -- PAYMENT OF WAGES -- VIOLATIONS (Increases penalties for violations of certain wage and hour laws.)
 
Senate Bill No. 2835  Valverde, Satchell, Cano, Murray, DiPalma, AN ACT RELATING TO HEALTH AND SAFETY - STATE BUILDING CODE (Requires that baby changing tables are provided in the ladies' and men's rooms of the Rhode Island State House and be included in new or substantially renovated construction of all publicly accessible buildings.)
 
 
 
 
 
 
 
 
 

​State House Activity
The House Finance Committee has said it will convene Thursday to begin to deliberate budget issues.  Logistically how the meeting will work is still not clear as social distancing is still required.  The meeting could be held in a larger room, with testimony provided via zoom or with individuals coming from other rooms to provide testimony.  The Finance Committee meeting will be viewable through livestream on CapitolTV found at:  http://www.rilegislature.gov/CapTV/Pages/default.aspx
 
Revenue Estimating Conference Completes Its Work
The Revenue Estimating Conference completed its analysis of revenue for the current fiscal year (FY2020) and for FY2021 which starts July 1, 2020.  As expected, the numbers do not paint a pretty picture and lawmakers will have their hands full crafting a budget for the State of Rhode Island.  Still unknown – whether the federal government will provide any stimulus money to states to assist in the recovery.  As we all know, federal money is still money that must be paid by taxpayers eventually. 
FY2020 Numbers
The gap that must be closed in less than two months is large.  Revenues are down.  Personal income tax collections are down $82.9 million from what was anticipated back in November.  Business Corporation taxes are down $10.8 million.  The sales tax revenue was debated amongst the group for about 45 minutes.  Trying to determine revenue collections as the economy slowly opens is extremely difficult.  The good news, from a revenue standpoint, is that there was an increase in remote online sales tax collection.  However the sales tax (which includes meals and beverage taxes, and hotel taxes in addition to retail sales tax) is down $63.1 million.  The biggest hit to the FY2020 revenues, as expected, is lottery revenues.  This revenue bucket includes lottery games, casino VLT and Table games, and sports betting, most of which came to a screeching halt when the conoravirus hit the State.  Lottery revenues are down $108.5 million.
Are there any bright spots in the FY2020 revenue numbers?  A few…revenues derived from bank deposits, cigarettes, alcohol and unclaimed property went up just a little.  And revenues from financial institutions and realty transfers stayed even with the November estimations.
Unfortunately, the overall bottom line for revenues in FY2020 is a loss of $280.9 million over the November estimate.
FY2021 Numbers
For FY2021, the numbers are bleak.  The following numbers are compared to our current fiscal year, which keep in mind, is already reeling from a $280.9 million decrease in revenues from where we expected to be had the virus not hit the economy.  Also, kudos to the members of the Revenue Estimating Council who agonized over trying to predict how the economy will react in a very unstable time.  The economic forecasters provided their insight, but in the end, the projections are a best guess at how the economy will react – when will people get back to work, when will people be able to sit in restaurants or enjoy an outside festival, etc. 
Personal income tax revenues are projected to go down another $63.1 million from the current fiscal year for a total personal income tax of $1,295,800,000.  For comparison, before the economy closed, the current fiscal year was expected to bring in $1,441,800,000 (FY2021 is projected to see $146 million less in personal income tax collections than the State had expected to see in FY2020 before the economy went south).  The Business Corporation tax revenue is expected to fall another $600,000 over the current fiscal year.  Sales and Use Tax is projected to fall another $19.9 million over the current fiscal year loss. And the lottery revenue is projected to fall another $3.4 million over the current fiscal year loss.  Again, the lottery revenue was difficult to predict as the opening dates for the casinos are unknown, and the start date for sports is unclear. One interesting trivia note:  if the year goes as planned, there will be two Kentucky Derby races in FY2021 which are big betting days (get your hats now!).
Again, a couple bright spots include an expected slight increase in the health care provider revenue as well as revenue from alcohol sales.  The members of the conference reduced the amount of revenue expected to be generated from the sale of cigarettes due to the federal law change moving the legal age of smoking to 21.  However, the members did not adjust the tax number for the potential for Rhode Island to see an increase in sales when Massachusetts eliminates the sale of menthol cigarettes June 1st.  Massachusetts passed a sale ban on menthol cigarettes which will go into effect unless a vote is taken to suspend the ban.  Should the law be allowed to go into effect, Massachusetts will send about $230 million in tax revenue to its neighboring states, including Rhode Island. 
At the close of the Revenue Estimating Conference, the overall revenue projection for the State of Rhode Island for FY2021 that begins July 1, 2020 and ends June 30, 2021 is $3,725,850,000.  That represents a $452.95 million loss in revenue (10.8%) from what the State had expected to receive in FY2020 before the pandemic.  This is the number lawmakers will use to craft a budget.
 
How Will the General Assembly Move Forward
Lawmakers must deal with the current fiscal year budget shortfall before June 30th.  They do have choices concerning how to handle the FY2021 budget, however.  They can push it off until the summer (a budget was passed in August one year); they can pass a budget before June 30th, based on current information and adjust it later should the federal government step in and provide assistance; or they can pass an interim budget to cover the next few months and then return in the fall to craft a FY2021 remainder budget based on the updated information at that time.

​State House Activity
The Joint Legislative COVID-19 Emergency Spending Task Force met last Thursday to provide an avenue to ensure that the public has trust in the government along with a verification process concerning expenditures.  Senate Finance Chairman William Conley and House Finance Chairman Marvin Abney both referred to this process as a collaborative one with the Governor.
The Governor is operating under a state of emergency until May 8th.  The Governor can extend that declaration of emergency for a period of 30 days; and there is no limit as to the number of times the Governor can extend the declaration.
As of April 28th, Rhode Island has encumbered $147 million in COVID-19 related goods and services and has expended $8.9 million.  Money “encumbered” does not necessarily mean that amount will be expended.  As an example, the state has encumbered $38.2 million for ventilators.  Director of Administration, Brett Smiley stated that due to the success of social distancing, the need for ventilators (barring a resurgence) has decreased.  His office expects the amount to be spent on ventilators to be closer to $11-15 million.  The encumbrance/expenditure amount does not include all of the monies needed for the hospital surge effort, testing, contact tracing and technical enablement and quarantine and isolation needs.  The Governor will be providing an updated report in May.
More than 2200 state Executive Branch employees are teleworking.  To accomplish this, the State purchased more than 1,100 laptops and expects to get 300 more.  Approximately $1.8 million was spent for an Amazon Web Service to host Pandemic Unemployment Assistance and to process the volume of recertification calls and web submissions.  Part of the $1.8 million was also used for unemployment security, audits, etc.
Senator Joshua Miller asked if at a future meeting the Department could report on how the federal monies could be used to assist businesses that were closed as a result of COVID-19.  Director Smiley stated that he would be willing to do that, and that the Governor’s office is still trying to determine how the federal guidance technically works for “secondary” expenses due to the pandemic.
The Encumbrance and Expenditure Report can be viewed at: http://www.rilegislature.gov/jlc19/2020-4-28%20Encumbrance%20Expenditure%20FINAL.pdf
 
Revenue Estimating Conference Looks at Economic Outlook
Last Wednesday, the REC listened to the best guess economic forecast from its consultant IHS Markit.  At the end of 2019, Rhode Island was doing fairly well from an economic standard.  Unemployment remained steady at 3.5%, and there was a slow growth in population of 0.1%.  The growth data showed that Rhode Island lost population through migration to other states (3,215 people) and gained population through migration to the State from other countries (3,645 people).  Births outnumbered deaths in the state by 679 people.  Even residential real estate was on “solid footing” according to the expert.
“After averaging gains of 3.5% per month in January and February, private-sector nonfarm payrolls contracted at a 13.2% annualized pace in March. [This] Translates to a monthly net loss of 5,200 jobs.”  This was the beginning of the COVID-19 effect on Rhode Island.
The forecast included the following prediction highlights:

• 4th Quarter of Fiscal Year 2020 (now through June) will be the worst
• 1st Quarter of Fiscal Year 2021 (July through September) the speed of the contraction of the economy should slow “drastically”
• Economic rebound in the forecast first materializes in the 2nd Quarter of FY2021(October-December, 2021)
• Nonfarm employment returns to pre-COVID peak in late FY2023/early FY2024 (about April, 2023 – September, 2023)
• Real gross state product returns to pre-COVID peak in second half of FY2022 (between January, 2022 – June, 2022)
• State unemployment rate remains above 5% until late FY2022 (about April, 2022 – June, 2022)

HIS Markit was very clear that all of the assumptions on which this forecast was based could change, thus changing the path of economic recovery.  For example, if a vaccine is released earlier than the anticipated 12-18 month timeframe, or a significant treatment is found, then the recovery could happen more quickly.
 
Lottery Revenue Challenges
Lottery Commission Director Gerry Aubin and his team provided an overview of revenue and expenditures derived from lottery games, casino gaming and sports wagering.  The detailed information provided in the testimony can be viewed at:  http://www.rilegislature.gov/April%2029%202020/RI%20Lottery%20May%202020%20REC%20Presentation%20for%20April%2029,%202020.pdf
Before the start of the COVID-19 crisis, PowerBall ticket sales were behind FY2019 by 34.19%.  As the Director explained, this decrease is primarily due to larger jackpots in the prior fiscal year.  The same situation occurred with the sale of MegaMillions tickets which saw a decrease of 47.51% from FY2019.  The sale of instant games is up, however, by 4.97% compared to the same period in FY2019.  As of April 30th, the State’s General Fund has received $44.8 million from all lottery games.  The State was planning to receive $57 million by the end of June, so it appears this revenue source will be down.   
The bigger challenge that concerns everyone is the closure of the State’s two casinos that took place at 12:00 a.m. on March 14, 2020 (seven weeks ago).  According to the written testimony provided, the VLT revenue through April 2020 is down 7.91%, and table games revenue is down 9.61%.  But these percentages were driven down by the recent closure, so expect those percentage numbers to rise.  This screeching halt at the two facilities could mean a loss in revenue of $100-$120 million for the state in the current fiscal year.  If the facilities are able to partially open, perhaps some of the loss could be mitigated.  The general rule of thumb is that the state loses about $1 million a day when the facilities are closed.  The closure (or partial opening) will also have potentially large impacts on next year’s budget as well.
 
Meetings Scheduled for Next Week
 
Revenue Estimating Conference Monday, May 4, 2020 - Testimony
2:30 P.M. Tax Collections – Department of Revenue, Division of Taxation   Neena Savage, State Tax Administrator   
Accruals – Accounts and Controls   Peter Keenan, State Controller
 
 Tuesday, May 5, 2020 – Caseload Estimate 
            9:00 A.M. Caseload Estimating Conference
 
Wednesday, May 6, 2020 – Follow-up Testimony (if needed)
11:00 A.M  Tax Collections – Department of Revenue, Division of Taxation   Neena Savage, State Tax Administrator 
 
 Friday, May 8, 2020 – Revenue Estimate 
9:00 A.M. Revenue Estimating Conference – this should be the final meeting where the final numbers will be adopted