Stopping the state’s health care system from hemorrhaging is the primary focus of a revised fiscal 2026 spending budget given first passage by a panel of House lawmakers just before midnight Tuesday.
The $14.3 billion spending plan is roughly $500,000 less than the final fiscal 2025 budget, which after upward revisions hit the high water mark in state history. However, it’s more than the $14.2 billion proposal unveiled by Gov. Dan McKee in January.
The revised version centers largely on additional funding for health care systems and providers, along with new revenue for the cash-strapped Rhode Island Public Transit Agency and an extra $22 million to cover the recent price hike to rebuild the I-195 Washington Bridge.
“This budget was about making choices,” House Speaker K. Joseph Shekarchi said, speaking to reporters in a press briefing Tuesday night. “We weren’t going to let public transportation for the state collapse, or primary care. We had to make choices.”
On the chopping block: McKee’s workforce development and high education apprenticeship programs, alongside many of his long-term capital projects, like buying a former Citizens Bank building for state offices, closing the Department of Corrections’ minimum security facility and opening a new state-run, long-term care hospital in Burrillville.
The House Committee on Finance’s 11-3 vote Tuesday sends the updated spending proposal to the full House of Representatives for consideration on June 17. Three Republicans – House Minority Leader Mike Chippendale of Foster, George Nardone of Coventry and Sherry Roberts of West Greenwich voted against the revised budget.
Democratic Reps. Terri Cortvriend of Portsmouth and Ray Hull of Providence were absent.
Lawmakers must approve a final spending plan before the new fiscal year begins July 1.
Health care
Shekarchi repeatedly emphasized the need to address the shortage of primary care doctors, calling it both a “crisis” and a “fire” that required immediate attention.
“We can’t afford to just study it,” Shekarchi said, referring to McKee’s budget plan to study state Medicaid reimbursement rates for future increases.
To that end, lawmakers increased Medicaid reimbursement rates for primary care providers by another $45 million to match Medicare rates — following a proposal championed by Attorney General Peter Neronha. And hospitals will get another $38 million in direct state payments and rate hikes — far short of the $90 million that the Hospital Association of Rhode Island asked for, but more than McKee supplied.
Another $12 million will help struggling nursing homes, accompanied by some version of a staffing requirement.
Shekarchi emphasized that stabilizing the state’s health care landscape was a priority on both sides of the State House rotunda, referencing Senate President Valarie Lawson by name.
Lawson, in an emailed statement Thursday, touted the primary care investments, as well as those in the public transit agency.
Help for RIPTA
The cash-strapped bus agency will get a little less than half of the money needed to plug its $32 million deficit. But not from state coffers. Instead, the revised spending plan relies upon an increase in the state gas tax, which presently sits at 38 cents per gallon with a 1-cent per gallon increase every other year. Lawmakers are now adding another 2-cent increase, with $15 million from the expected extra revenue to help RIPTA.
Shekarchi stopped short of acknowledging that the agency may have to cut its fixed routes due to the remaining shortfall, pointing to a not-yet-complete efficiency study that could save costs on staff, operations and equipment. However, services for transit riders with disabilities through the RIPTA Ride paratransit program cannot be reduced or eliminated, as expressly stated in the revised spending plan.
“That is one area that is untouchable,” Shekarchi said of the paratransit program.
Taxes and fees
Despite the strain on state coffers and the rousing cries from advocates, there’s still no contemplation of a tax on top earners in the state spending plan.
Shekarchi pointed to uncertainty with the federal tax code as a reason why he and other lawmakers hesitated to begin a version of the “millionaire’s tax.” However, the revised budget increases the real estate conveyance tax on the sale of homes over $800,000 from $2.30 to $3.75 for every $500 increment above the $800,000 threshold. And, it adds a new property tax on non-owner occupied homes valued at $1 million or more, colloquially termed the “Taylor Swift tax.”
Other new taxes include the extension of the state’s 5% hotel tax to whole-home short-term rentals. Revenue from the tax on Airbnb and similar properties would be split between cities and towns, homelessness aid and local tourism districts.
Stricken from the budget: a tax on digital advertising by billion-dollar companies, and a 50-cent increase in cigarette taxes.
The budget preserves proposed registration fees for electric vehicles and an increase in the technology surcharge at the Department of Motor Vehicles.
Education
Unlike in recent years, lawmakers did not significantly upend the education funding formula, which is used to determine state aid to local school districts. The revised budget fills a $24 million shortfall in aid for low-income students, resulting from a correction to the count of students in poverty. And, it repurposes an increase in state aid to multilingual learners in schools, instead devoting more funding to aid for special education students.
The budget was revised in the eleventh hour — minutes before Shekarchi began addressing reporters at 9:15 p.m. — to account for a $2 million settlement cost with the state education department. Details were not immediately available.
Shekarchi’s voice showed signs of fatigue as he outlined the revised spending plan, which he called the “toughest budget” in his four years as Speaker of the House.
“There were a lot of holes,” Shekarchi said of McKee’s original spending plan.
McKee’s proposed fiscal 2026 budget failed to account for the extra $15 million cost for new contracts with state troopers and correctional officers, and a $3.2 million overspend on redeemable tax credits owed to production companies that filmed in Rhode Island.
“We had 27 budget amendments and none of those amendments proposed new revenue,” Shekarchi said.
Meanwhile, uncertainty in D.C. has left state lawmakers “flying blind” on major funding sources like Medicaid, Shekarchi said.
McKee’s office did not immediately respond to inquiries for comment Tuesday night
More pluses and minuses
- An $8 million increase in the state budget for homelessness services
- Preservation of the presumed fourth-quarter revenue (roughly $10 million) from resumption of the state truck toll program
- No money to reform the embattled Rhode Island Coastal Resources Management Council, including to abolish the appointed council
- Addition of the requested extension to the Rebuild Rhode Island tax credit program, which would allow developers of the Superman building to save another $4.6 million in sales taxes on construction materials
- No additional money for Bally’s Corp, which had asked for another $17 million for marketing efforts as a convoluted workaround to offset potential revenue losses from a ban on indoor smoking in its Rhode Island casinos
This story was originally published by the Rhode Island Current.
