EAST PROVIDENCE — Some six weeks since it became final, East Providence lawmaker Daniel DaPonte, the Committee on Finance chairman in the State Senate, recently reflected upon the process of putting together Rhode Island’s $8.2 billion Fiscal Year 2014 budget.
Sen. DaPonte (D-Dist. 14) guided the package through the upper chamber much in the same manner his fellow city pol and Finance chair counterpart Rep. Helio Melo (D-Dist. 64) did in the House — practically and pragmatically.
There were challenges for sure. The General Assembly faced an unexpected deficit, had to deal with the highly contentious issue of beginning to repay the bonds issued during the 38 Studios debacle and faced another political firestorm with the implementation of a toll on the just completed Sakonnet River Bridge.
Much like Rep. Melo, however, Sen. DaPonte was of the opinion the FY14 Budget was the best the Assembly could muster considering the state’s still lagging economy.
“I would say that what started out as an uneventful year was hit with a bit of a curveball when we found a $32 million deficit,” Sen. DaPonte said of the process. “But we made due with what we had. We were also able to prioritize a couple of things that should pay dividends in the out years, like accelerate depreciation for businesses. In the grander scheme of things it’s a tiny thing, but every little bit helps.
“At the end of the day we were able to put together a balanced budget that did not increase taxes. I thought the departments did a good job of running a tighter ship, some even showed a surplus. In the end, I think we came up with what I thought was a fair and balanced budget. You aren’t going to please everybody.”
The first $12.5 million installment to pay for 38 Studios made few people happy. It was likely the single most divisive of the policy issues either chamber faced this session.
“I think it was necessary,” the chairman said. “It was the right thing to do. No one wanted to pay. No one is happy about how things transpired. But I use the example of your house. You take out a home equity line of credit and you build this huge addition. The building inspector comes and tells you it’s not up to code and you have to tear it down. It was a big mistake, but you still owe the bank the money. You still have to pay back the loan.”
Sen. DaPonte, who owns a financial services company, was of the mind the payment needed to be made not only because of the obligation but also because of the consequences the state otherwise may have faced.
“I really believe (the banks) didn’t want us to pay it back so they could use Rhode Island as an example,” he explained. “If we didn’t pay it back, we would be paying significantly higher rates when we borrow in the future. And it’s not just the state. That would also filter down to the cities and towns. And that’s something no one can afford at this point.”
Like many of his peers, Sen. DaPonte is hoping the state ultimately can recoup some of the money it lost or at the very least see its debt cut in a substantial way.
“I’m of the opinion that we need to make the payments,” he added. “Remember, this is being litigated. There may be a settlement. We can also look to refinance the bonds. We still don’t know what our true net cost is going to be at the end of all this. Hopefully it will be better than what it is right now. I would much rather not have to pay $12.5 million. We could certainly find a much better use for it, but this is something we need to do at this point.”
The 38 Studios situation arose from a poor decision made by the Rhode Island Economic Development Corporation. Sen. DaPonte and Rep. Melo were at the forefront in initiating changes to the quasi-public entity in their respective chambers, getting most of what they were seeking to amend passed.
“The model we had clearly wasn’t working,” Sen. DaPonte said. “We needed to start thinking outside the box. What we passed certainly is an improvement over what we had. There needs to be a greater coordination of effort between the departments. We not only need to improve the business climate in the state, but we also have to be more positive about things we have to offer.”
The Finance chair said the state has a role to play in economic development, just not the one the EDC attempted to fill in 38 Studios.
“For the business climate to improve, and what we’re really talking about here is the job climate, we need some stability and certainty,” Sen. DaPonte said. “The feedback I’ve gotten from the business community is they want greater predictability. It’s not so much about cutting taxes or getting rid of taxes as much as it’s about what are the costs going to be to do business here. How much do I need to spend and for how long, so that they can plan. It’s much the same way we go about doing the budget. We need to have a grip on the five-year forecast.
“Businesses, business people do not like it when they get with hit with something out of left field or someone throws them a curveball. Through policy and laws we pass, we need to create a stable environment for them to plan and succeed.
“We also need to promote the positive parts of Rhode Island more than we’ve done in the past. We have ports. We have some of the best institutions of higher learning, some of the best healthcare facilities in the country. Logistically, we’re an hour from Boston and three hours from New York. We need to make businesses more aware of these things. We just need to be more positive about the state in general.”
Sen. DaPonte also sponsored significant legislation that would insert increased accountability into the state’s handling of tax credit programs.
“We need to do follow-ups to make sure what was intended is actually taking place,” he explained. “If not then it has to be modified or done away with completely. Too often in the past we’ve put it off to another day and we never get back to see whether it’s working or not. Hopefully, now we have better accountability.”
Sen. DaPonte was also part of the local delegation that spearheaded changes to the Fiscal Stability Act, the Budget Commission legislation, which better reflect and support East Providence’s manager-council form of governance.
“Locally we were able to make the statutory changes to the AFO,” Sen. DaPonte said. “The state is now paying its fair share. And we were also better able to define what role it has, which in my view is on the back end as a fiscal advisor. The position was never meant to micro-manage a city. The person will have full access to all the information so they can keep tabs on the process, make suggestions and make sure what was implemented by the Budget Commission is being followed.
“The appropriate measures are now in place. If this person sees the city is going off the rails, they can raise and flag and bring it to light. Hopefully this will prevent cities and towns going back into the mess that created the need for a Budget Commission in the first place.
“Fortunately for East Providence the downturn happened when it did because it could have been far worse to the taxpayers than how it turned out. In all honesty, I would much prefer to be East Providence than I would Woonsocket at this point.”
Sen. DaPonte did not get one bill of import passed, that being changes to how the Bradley Hospital’s Children’s Residential and Family Treatment (CRAFT) program is funded. Currently, the state picks up about two-thirds of the tuition with East Providence paying the rest regardless of where the child lives.
“I’m disappointed that we weren’t able to get the CRAFT changes passed, but it be back next year. If a child comes from outside of the city, then East Providence should be able to recoup the difference from whatever city or town he or she comes from,” he said.
The often heated discussion over proposed tolls on the Sakonnet Bridge brought the dismal condition of Rhode Island’s infrastructure to the fore and according to the senator hopefully sparks a discussion on how to rebuild the state’s deteriorating roads and bridges.
“As always we’re going to pay close attention to expenditures and any increases in levels of spending. We also have the toll study commission beginning in the fall. We need to take a look not only at the tolls but also on how we fund all of our infrastructure,” Sen. DaPonte said.
He continued, “It’s sad to say, but we’re to the point now that we’ve neglected our infrastructure for one or two generations if not longer, and now we have to pay the piper. We can’t afford to wait any longer because it’s not just the Sakonnet Bridge or the Mt. Hope Bridge, but it’s also our Red Bridge and the Route 99 Bridge that connects Cumberland Woonsocket and all of our other bridges. We need to come up with a comprehensive approach to solve our infrastructure needs.”
Looking ahead to the next budget process, the fiscal forecast for Rhode Island at this still very early point remains somewhat gloomy. It’s anticipated the state faces a large deficit on Day 1 of FY15.
“We have plenty of work to do. We’re looking at a deficit of probably closer to $100 million in the next fiscal year. It’s going to be a challenge, but every budget is a challenge,” Sen. DaPonte said. We’re trying to control costs, like with Health and Human Services, but it simply comes down to expenditures are rising faster than revenue. The speed of increases in costs, unfortunately, is rising faster than the rate of the economic recovery. And if it continues that way, we’re going to stay behind the eight ball.”
He concluded, “Our resources are limited, but doing everything I can to benefit East Providence is always the goal. At the end of the day we’re up there to do the best we can for the state. Not everyone is going to agree with everything we do, but we have a fiduciary agreement with the taxpayers to do what’s best for them.”