Under The Dome

Last Week At the State House

 

Revenue Estimating Conference – Economic Forecast

 

Last week S&P Global Market Intelligence (the State’s Economic Consulting Firm) provided their fiscal predictions for the upcoming years.  From a United States perspective, the consultants expect growth to slow in 2024, GDP to slow to 1.8% per quarter and the unemployment rate to gradually increase over the next couple years.  They expect real corporate borrowing costs to remain up and mortgage rates to decline slowly.

 

Following the US overview, the consultants then take a closer look at Rhode Island.  The State’s employment market has remained strong, with growth in the first quarter of 1.9 % compared to the US average of 1.4%.  Maine and New Hampshire are starting to experience an employment slow down and Rhode Island is expected to see the same.  Our growth came from administrative support services, health services and “professional, scientific and technical” services. Rhode Island has regained all jobs lost during the pandemic, earlier than expected.  In the housing market, it came as no surprise that the state has experienced incredible price increases in housing.  Rhode Island home prices increased 61% from 2019-2023, 11th in the country.  While other states saw increases, the consultant stated those states experienced the change in prices due to domestic migration, but Rhode Island did not see that significant increase in migration.  Our price increase likely comes from housing inventory issues.

 

So what are the predictions?  Employment growth will decelerate, but remain positive through FY2025 then slip into a modest contraction in retail, profession, scientific and technical, and construction employment.  The unemployment rate will increase from 3.6% this fiscal year (FY2024) to 4.1%, then 4.3% and to 4.5% by FY2027.  The increase in unemployment will change the current increasing annual wage percentage growth from 7.2% in FY2024 to 3.7% in FY2025, 3.6% in FY2026 and 3.6% in FY2027; which will also cause consumer spending to flatten out.  The economists also expect the median cost of existing single-family homes to decrease in 2025, 2026 and 2027, then go back up slightly in 2028 and 2029.

 

This Week At the State House

 

Tuesday, May 7th 

 

The Senate Commerce Committee is scheduled to vote on S.2273, An Act Relating to Commercial Law – Unfair Sales Practices. The bill requires businesses that offer automatic subscription renewals or continuous offers to provide notice to the consumer prior to the automatic renewal of such subscription, provide clear and conspicuous cancellation information with such notice, and provide notice in the manner in which the consumer entered into the contract for automatic subscription renewal in the first instance.  Businesses that offer automatic subscription renewals or continuous service offers must provide contract terms to the consumer in a clear and conspicuous manner, prior to the consumer’s engagement in the contract for automatic subscription renewals.  If passed, the law would take effect on January 1, 2025.

Senate Judiciary has a vote scheduled for S.3041, An Act Relating to Courts and Civil Procedure – Decisions, Special Findings and Assessment of Damages.  S.3041 declares that an individual’s “assumption of the risk” when entering a location is not a bar to recovery for injuries or damages to property.  As an example, if a person goes to a baseball game and gets injured by a ball that was hit by a batter, the person is considered to assumed the risk of this type of injury when entering the ballfield.  If a golfer is standing on the green and gets hit by a stray golf ball, the person is usually considered to assume the risk by stepping on to the golf course.  S.3041 changes the legal landscape.

 

 

Wednesday, May 8th

 

The Governor has asked the House and Senate to consider an amendment to his proposed budget.  Amendments are forwarded to the Finance Committees each year as revenues and expenditures change over the months following the submission of the Governor’s Budget.  On Wednesday, the House Finance Committee will take testimony on Governor’s Amendment #12.  This amendment includes $24.0 million in State Fiscal Recovery Funds allocated to the Unemployment Trust Fund administered by the Department of Labor and Training.  The goal is to restore the Unemployment Trust Fund to the pre-pandemic levels, leaving the business community held harmless for the depletion of the fund as a result of the closure of businesses and the fraudulent claims submitted during the pandemic.  

 

Thursday, May 9th

 

You may have seen advertisements in the paper or heard commercials on the radio concerning an effort to pass legislation affecting the salaries of health care providers in Rhode Island.  South County Hospital has launched a campaign to pass H.8072, An Act Relating to State Affairs and Government – The Rhode Island Health Care Reform Act 2004 – Health Insurance Oversight.  The bill changes the 2004 Act by requiring health insurance contracts with hospitals and physicians (beginning in 2028) to pay at rates not less than the regional average rate for services which would include Connecticut and Massachusetts.  The rate would be recalculated every two years. Prior to 2028, the bill requires the rates to be set at a rate at least 33.3% of the Rhode Island payment shortfall plus the rate of healthcare inflation They believe this legislation is necessary to ensure adequate access for all Rhode Islanders to primary care and specialty doctors, and advanced practice providers; and to improve the sustainability and quality of Rhode Island’s hospitals. The proponents acknowledge this bill will result in increased costs and premiums; but they also believe that without these adjustments, Rhode Island health care insurance will be insurance that cannot be used, because there will not be enough providers to handle patients.  Providers get paid more in Rhode Island’s neighboring states, so it is harder to hire employees.  They predict the additional cost to insurance premiums will be $25 per month per employee.

 

The Rhode Island Office of Management and Budget completed a fiscal note on H.8072 and its companion senate bill S.2722.  The Office of Health Insurance Commissioner (OHIC) estimates it will need $750,000 to conduct the data study required under the bill.  That study must be completed every two years, so this expense must be budgeted in the appropriate years going forward.  OHIC also needs one FTE at an estimated total annual cost of $160,964.  The fiscal note focuses on state employees as attempting to determine state-wide impact is outside the scope.  The following information is taken verbatim from the RIOMB fiscal note:

 

“OHIC notes that the provider categories impacted by the bill are hospital inpatient, hospital outpatient, and professional physician.  The estimated costs of these claims in 2024 are $36.7 million for hospital inpatient, $49.5 million for hospital outpatient and $37.3 million professional physicians.  Currently, rate increases are adjusted by inflation which is assumed at 4 percent year over year.  The bill requires rates to be adjusted by 33.33 percent of the Rhode Island payment shortfall plus the rate of healthcare inflation.  Therefore, OHIC estimates the bill to increase hospital inpatient and professional physician claims by 11.6 percent and hospital outpatient by 12.9 percent year over year.”

 

FY2025: Current law (baseline increase of 4%):  

Hospital Inpatient $38.2 million

Hospital Outpatient: $51.5 million

Professional Physician $38.8 million

 

H.8072/S.2722 Costs: Hospital Inpatient $41.0 million

 

Assuming 30,000 members on state insurance, incremental impact to the state’s plan equates to approximately $27.92 per month per employee or $335.07 per year.

 

FY2026: Current law (baseline increase of 4%):

Hospital Outpatient: $53.6 million

Professional Physician $46.5 million

 

H.8072/S.2722 Costs:  Hospital Inpatient $45.8 million

 

In FY2026, the bill results in total increase of $21.7 million compared to current law.  Assuming 30,000 members on state insurance, incremental impact to the state’s plan equates to approximately $60.36 per month per employee or $7244.36 per year

 

In FY2027, the bill results in a total increase of $35.3 million compared to current law.  Assuming 30,000 members on state insurance, incremental impact to the state’s plan equates to approximately $97.92 per month per employee or $1,175.04 per year.

 

Though an analysis of these expenditure and corresponding impact on market wide insurance premiums is beyond the scope of this fiscal note, the Budget Office consulted with OHIC to gather additional information and context.  OHIC’s analysis finds that the annual cost to a family of four is project to be $3,768 to $4,057.  Over three years, a family of four is estimated to contribute $7,165 to $7,598 of future compensation toward achieving regional rate parity by 2028.  This does not include other factors, such as prescription drug trend, that will increase Rhode Islanders’ premiums and out of pocket health care costs in the future.

 

 

 

The following new bill was filed last week:

 

Senate Bill No. 3027   Ruggerio, McKenney, Felag, Sosnowski, LaMountain, Lawson, AN ACT RELATING TO TAXATION -- SALES AND USE TAXES -- LIABILITY AND COMPUTATION (Reduces the sales tax from seven percent (7%) to six and one-half percent (6 ½%).)

http://webserver.rilin.state.ri.us/BillText/BillText24/SenateText24/S3027.pdf

 

Senate Bill No. 3032  Picard, Pearson, AN ACT RELATING TO TAXATION -- PERSONAL INCOME TAX (Authorizes a retroactive tax credit for tax yr 2022/thereafter/allowing investment tax credits to be passed through to the personal income tax returns of eligible Sub-S corporation shareholders/limited liability company members who meet certain conditions)

http://webserver.rilin.state.ri.us/BillText/BillText24/SenateText24/S3032.pdf

 

Senate Bill No. 3041  F. Lombardi, AN ACT RELATING TO COURTS AND CIVIL PROCEDURE -- PROCEDURE GENERALLY -- DECISIONS, SPECIAL FINDINGS AND ASSESSMENT OF DAMAGES (Adds the doctrine of assumption of risk to the current comparative negligence statute.)

http://webserver.rilin.state.ri.us/BillText/BillText24/SenateText24/S3041.pdf