Legislative Updates
The House Finance Committee passed the $14.3 billion budget last night on an 11-3 vote. The budget will be debated by the full House of Representatives on June 17. Here is a preliminary summary of some of the items in the budget that was passed by the House Finance Committee last night.
The Committee passed budget exempts the Workers’ Compensation Administrative Fund from the state’s indirect cost recovery charge. The Coalition testified in support of Senate bill 442 introduced by Senator McKenney that would exempt this fund from the indirect cost recovery. Exempting the Administrative Fund from being diverted to the general fund means that approximately $2 million in workers’ compensation insurance premiums or assessments will go directly to the workers’ compensation system. Rhode Island employers, through this assessment, fund the Rhode Island workers’ compensation system in its entirety. No tax dollars are involved.
A proposal to tax digital advertising was not included in the budget. The Governor’s budget proposed creating ten percent tax on business gross revenue derived in Rhode Island from digital advertising for companies with at least $1.0 billion in global revenues. The Coalition submitted testimony in opposition to this proposal based on the potential impact on small businesses and the uncertainty regarding the constitutionality of the proposal which is being litigated in the one state to pass such a proposal, Maryland.
An increase in the Real Estate Conveyance Tax is included in the committee passed budget. Currently, the Real Estate Conveyance Tax includes a first-tier rate of 0.46 percent charged on all transfers and a second-tier rate of 0.46 percent charged on the portion of residential transfers above $800,000. The budget passed by the Committee increases both rates to 0.75 percent, for a top-tier effective rate of 1.5 percent. These changes would be effective October 1, 2025. Revenue would be allocated to municipalities, the Housing Production fund, and the Housing Resources and Homelessness restricted account.
The five percent hotel tax is extended to whole unit short-term rentals with the revenue being split among the Housing Resources and Homelessness Restricted Receipt account, as well as the municipality and tourism district where the rental home is located. In addition, the budget includes an increase in the local hotel tax rate from 1 percent to 2 percent.
Sales Tax on Parking. The Committee recommends expanding the application of the current seven percent sales and use tax to short-term parking of up to one month.
The Committee passed budget includes a Health Services Funding Assessment that would take effect January 1, 2026. As stated in the budget summary, the assessment would support primary care and other critical healthcare programs. The assessment would apply to all covered lives including the self-insured which is estimated to be approximately $4 per month per covered life.
The Committee approved $2 million in federal funds recently awarded to the Executive Office of Health and Human Services (EOHHS) for the state's participation in the Centers for Medicare & Medicaid Services (CMS) States Advancing All-Payer Health Equity Approaches and Development (AHEAD) program. This initiative aims to curb health care cost growth, improve population health, and reduce disparities in health outcomes. The model supports participating states with funding and resources to enhance primary care investment, stabilize hospital finances, and connect beneficiaries to community resources.
The Committee did not include the Governor’s proposal to extend the Job Development Assessment of 0.21 percent to non-profit, non-governmental employers of 500 or more employees. The expanded assessment would have been used to provide additional funds to Real Jobs Rhode Island and core unemployment services.
A 2-cent increase in the gas tax was also included. The funds raised by the increase will be dedicated to the Rhode Island Public Transit Authority (RIPTA).
Jason C. Martiesian
Director of Government Relations
Capitol City Group
39 Pike Street, Suite 2
Providence, RI 02903
401.339.9750