McKee’s nearly $15 billion budget plan includes more spending, millionaire’s tax

PROIDENCE, R.I. (WLNE) — A nearly $15 billion budget plan unveiled by Rhode Island Gov. Dan McKee’s team Thursday includes more spending, a millionaire’s tax, another cigarette tax hike, a phase out of taxes on Social Security income, and a cut to the gas tax.

And budget officials revealed the state’s controversial truck tolls will be turned back on later than expected.

The details come after McKee outlined some of his spending priorities during his State of the State address Tuesday night.

At $14.86 billion, the proposal for annual state spending starting July 1 is an increase of more than $500 million from last year’s plan.

“The $15 billion headline, I realize, gets attention,” state Budget Officer Joseph Codega said. “I also hope it’s a more nuanced conversation than simply the headline of 15 billion.”

Codega said the spending plan still includes large piles of federal funding, including transportation money and the last of the pandemic aid.

He also said revenues are growing and the budget increase is “within our means.”

The actual spending during the current fiscal year that ends June 30, however, is now expected to be more than $15.1 billion, more than $830 million over the budget that was enacted last June.

That spending is expected to produce a roughly $100 million deficit.

State Republican lawmakers have long criticized the growth of Rhode Island’s budget.

House Minority Leader Michael Chippendale, in his response to McKee’s speech Tuesday, pointed out the state budget was $4.5 billion at the turn of the century.

So how does the governor plan on paying for some of the increases?

McKee, after previously resisting a millionaire’s tax, is now proposing joining neighboring Massachusetts in enacting one.

The plan would raise Rhode Island’s top tax bracket to 9% for single and joint tax filers with income more than $1 million.

The current top income tax rate is 6%.

The change is expected to haul in an extra $67 million for the state in the first year, and $135 million in the second.

Rhode Island has 2,300 resident filers who would fall under the millionaire tax.

The budget relies on $20 million from Rhode Island’s truck tolls, which are not currently on and will now not be turned on until later than previously planned.

A judge ordered the tolls turned off in 2022.

Then a court ruling in December 2024 allowed for them to be turned back on.

But a plan for turning them back on has not yet been unveiled.

The budget for the current year planned on the tolls being back on by this coming spring and producing $10 million over a few months.

McKee’s budget team said Thursday that Rhode Island Department of Transportation needs more time to replace toll infrastructure.

They did not give a new timeline for the tolls to be turned back on, but based on the revenue projection, it would appear to be around a year from now.

McKee is also looking to increase the tax on cigarettes again, by 75 cents per pack to $5.25.

But, as he mentioned in his State of the State, the governor wants to roll back the 2 cent per gallon increase on the gas tax that came in last year’s budget.

The increase last year was to help fill the budget hole at RIPTA, the state’s public transit agency.

McKee’s budget team says 2 cents per gallon of the tax would still go to fund RIPTA under their new plan, but the state has paid off a bond that helps ease the cost.

McKee, however, is also proposing $9 million be added to a highway maintenance fund, to be steered to RIPTA to close its current $14 million budget gap.

The governor is proposing a three-year phase out of taxes on Social Security income, first by eliminating age restrictions for exemptions then by eliminating income limits.

McKee is also proposing a standard $325 child tax credit.

Current child tax credits max out around that amount for higher earners based on a sliding scale, while lower earners do not see as much of a benefit.

McKee, as he said in his State of the State, is proposing adding at least more than $40 million in state spending to aid in health insurance and food assistance benefits for the vulnerable as the federal government cut funding to programs last year.

The cuts from the feds came to Medicaid coverage and Obamacare.

“We want to do everything possible to make sure that people stay on Medicaid and don’t lose that coverage,” Rhode Island Office of Management and Budget Director Brian Daniels said.

He said the state would end up footing the bill for other costs for the uninsured if they lose insurance coverage.

“We’re going to be paying for it one way or another,” Daniels said.

The federal government is also now penalizing states based on their payment error rate on SNAP food aid, which could be tens of millions for Rhode Island with a payment error rate of 12%.

“There’s always a tension between getting benefits out quickly and getting them out accurately,” Daniels said of the payment error rate and the federal push to get them lower.

“The focus in the Biden administration was very much on getting payments out quickly. And in some cases that can come at the expense of accuracy,” Daniels said. “How do we balance that, if we want to make sure we’re as accurate as possible, how do we also make sure we’re not slowing down benefits.”

Daniels claimed the changes from the so-called Big, Beautiful Bill passed by Congress last summer and the unpredictability of changes from Trump administration have made budget planning difficult.

“It has been basically non-stop from the federal government, where we are hearing threats, we are hearing changes,” Daniels said.

McKee is proposing a 3% increase per pupil in K-12 education spending, at a cost of more than $17 million, and boosting high-cost special education funding by $2.5 million (nearly 15%).

Another initiative announced by McKee Tuesday is to cut customers’ energy bills.

He’s proposing changes to slow implementation of renewable and energy efficiency programs, changes he claims will save $1 billion in energy costs over five years, or about $180 per year for the average customer.

Asked if the previous plan to go green was too aggressive, Rhode Island’s Acting Commissioner of Energy Resources Chris Kearns responded, “We’re making modifications to both our state renewable energy programs and our energy efficiency programs.”

And McKee is pitching the highest dollar total of bond questions in state history for voters to decide on the November ballot.

The governor is proposing a total of $600 million in bond authorization, including $215 for new and upgraded facilities at the University of Rhode Island, Rhode Island College and the Community College of Rhode Island, $120 million for affordable housing programs, and $45 million for a new State History Center proposed by the Secretary of State. (The project has a total projected cost of $60 million).

The budget heads to legislators to comb over for the next five months.

Last year, McKee allowed the budget passed by the General Assembly to become law without his signature, after lawmakers made changes.

McKee is now seeking a line-item veto.