RI Legislature Battles Over Budget
Kate Nagle, GoLocal Contributor
RI Legislature Battles Over Budget
"Going into the budget, I had every expectation it would pass [with 38 Studios]," said Representative Mike Chippendale, Secretary of the House Oversight Committee, who introduced two amendments to the budget that would have stripped the $12.3 million payment due this year on the 38 bonds.
"Those amendments were to offer an opportunity to frankly show and demonstrate to taxpayers that not only is this body willing to not stop the payments, but they were also at the expense to screw them on the gas tax," said Chippendale, of his attempt to remove three cents from the proposed tax, which would have been offset by removing the 38 bond repayment.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe budget was approved at 12:22 AM Friday morning -- after a technical glitch with the recording screen on the House floor delayed proceedings for approximately 45 minutes.
Speaker Nicholas Mattiello said following the final vote he was pleased with the budget that was approved, and he was optimistic the current investigation into 38 Studios by authorities was more than sufficient, despite calls for closer looks, including a special prosecutor.
"I'm very pleased, it was pro-business, pro-economy, pro-job creation, and I'm very pleased that my colleagues overwhelmingly supported it," said Mattiello of the measure that includes a reduction in the corporate income tax from 9% to 7%.
Regarding 38 Studios, Mattiello said, "Right now we have a civil lawsuit, depositions have been taken, we just don't have access to them, they'll be unsealed at some point during the state police investigation."
"We won't get a report unless charges are filed," Mattiello added. "And if that doesn't disclose enough information, we'll assess it at that time."
38 Studios Topped Debate
"I knew going in that the Speaker had enough votes, and that's OK," said MacBeth. "I feel that today I represented the people from district the way they way they wanted me to. It's an election year, we'll know in a few weeks how these votes impact voters. I still believe it's the people's house."
Included in the budget approved was “combined reporting,” which would require corporations that have businesses in other states to combine all their subsidiaries as a single entity and then pay taxes to Rhode Island based on the percentage of net sales profit or loss generated by its operations in this state, and raising the credit on the estate tax from $921,655 to $1.5 million, and eliminating the “cliff” provision that currently requires heirs to pay taxes on the entire estate if it exceeds that amount.
Once adopted, the provision would limit the taxable amount to only the amount above $1.5 million. The $1.5 million credit would be adjusted annually for inflation.
MacBeth remained steadfast in her desire to continue to look into 38 Studios.
"I think enough is enough, said MacBeth. "I wanted subpoena power immediately. What I was told was that we were going to court, and we'd have lots of depositions to go through -- that all was supposed to be done by now, but as we know, it hasn't."
"Session's supposed end in a week. Oversight can meet throughout the year. I'm going to continue to meet with everyone who wants to talk," said MacBeth.
Who Wants to Pay and Who Wants to Default on the 38 Studios' Bonds
CON
Allan Fung
Republican candidate for Governor
“I am repeating my opposition to the 38 Studios loan guaranty and to the use of taxpayer dollars to repay those moral obligation bonds.”
CON
Ken Block
Republican candidate for Governor
“38 Studios was a bad deal and a bad investment from the very beginning and now Rhode Island taxpayers are being asked to take the hit for bondholders who should have known better...As long as there are serious legal questions still to be decided, we need to stop the repayment process."
PRO
RIPEC
John Simmons, executive director of the Rhode Island Public Expenditure Council
“We’re not going to punish anybody but ourselves if we don’t pay."
PRO
Greater Providence Chamber of Commerce
Laurie White, President of Chamber of Commerce
“I think it’s important that action occur quickly. Our view is that economic development in Rhode Island has to be the main event. … We need a very dramatic, aggressive effort to change the path that we’re on.”
PRO
Gina Raimondo
Democratic candidate for Governor
“Despite my frustration with everything surrounding this transaction, I believe it is in the best long-term interest of the state and all taxpayers to repay these bonds."
PRO
Clay Pell
Democratic candidate for Governor
“Clay does not believe Rhode Island should default on its moral obligation bonds when they come due. 38 Studios was a terrible mistake — and another example of why we need to change the culture of politics in Rhode Island"-Devin Driscol.
PRO
Angel Taveras
Democratic candidate for Governor
“While I share the frustration of many Rhode Islanders, I believe that not paying back 38 Studios bondholders would have a detrimental impact on the state’s bond rating that would far outweigh any short-term benefit we might gain. We cannot afford to default on our obligations.”
PRO
Lincoln Chafee
Governor of Rhode Island
“The candidates who can’t understand these two obvious truths are unfit to be Governor. The consequences of default would place Rhode Island as one of the lowest state bond ratings in the nation, and the industry would reduce Rhode Island to ‘junk bond’ status. We have been told in no uncertain terms that the reaction to not paying our debt obligations will be severe and have an adverse impact on Rhode Island. In addition, failure to honor our obligations could have harmful effects on the pending lawsuit.”
CON
Mike Stenhouse, CEO of RI Center for Freedom and Prosperity
"It's not just about not paying off bondholders. Bondholders are adults, they knew the risk. It's not just a question of the credit agencies. It's a question of what would payment crowd out, what reforms could we achieve with that money, such as sales tax reform, which would enable us to create jobs."
CON
Mike Riley
2012 Republican candidate for the 2nd Congressional District of Rhode Island.
"If we had a real Governor, he would stand up for the Taxpayers and the State of Rhode Island and stand up against threats by rating agencies."
PRO
Professor Ed Mazze
Professor of business at University of Rhode Island
"Even though this is a moral obligation in terms of the way the financial deal is set up I still feel the state has an obligation to the bondholders, to make good on their payments."
