COVID-19 CRISIS

Top lawmakers approve governor’s $300M borrowing request

Raimondo: ‘We have to keep the lights on to keep Rhode Islanders alive’

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The General Assembly’s four-member Disaster Emergency Funding Board on Thursday approved Gov. Gina Raimondo’s request for authority to borrow up to $300 million – a move the administration says is needed to maintain Rhode Island’s cash flow amid the effects of the COVID-19 crisis.

“Our revenues have really taken a plunge … It’s my top goal to reopen the economy, but at the moment, we are facing a liquidity problem. We don’t have the liquidity we need,” Raimondo told the panel.

General Treasurer Seth Magaziner said as standard practice, a balance of approximately $40 is consistently maintained in state’s general fund.

As a result of the current crisis – which has seen revenues drop sharply as expenses grow – he said officials are “anticipating falling below that $40 million level as soon as Monday, and the balance could fall to zero soon after that.”

Magaziner said March and early April are typically the most fallow in terms of the state general fund’s cash balance, or so-called “rainy day fund, which is traditionally maintained at approximately $200 million – or roughly 5 percent of the previous year’s revenues – at the start and end of each fiscal year and varies throughout that 12-month period. This time of year is the tightest from a fiscal standpoint, he said, because of the revenue that usually arrives with tax day in mid-April.

“Fiscally, this crisis really could not have come at a worse time,” he said.

Securing a $300 million line of credit, Magaziner added, will “ensure that in this time of crisis, the state can continue to serve the public.”

Raimondo more bluntly echoed that sentiment: “We have to keep the lights on to keep Rhode Islanders alive.”

She also said the federal government’s decision to delay the tax filing and payment deadline from April 15 to July 15 – a move the state followed – created new urgency from a cash flow perspective.

“Once that happened, it absolutely necessitated a measure of this kind,” she said.

Jonathan Womer, director of the state’s Office of Management and Budget, also spoke of “liquidity and timing of revenue” as the primary issue facing the state at this point. While the $2 trillion stimulus package on the federal level will provide relief for Rhode Island – including $1.25 billion in aid for the state – he said it will take time to fully sift through and receive that funding.

Magaziner said the state remains in negotiations over the precise terms of the borrowing, although he expects an agreement within days.

While he declined to discuss specifics related to potential lenders, he said the general contours of the talks involve a roughly 3-percent annualized interest rate and a repayment term of four to 12 months.

“This is a line of credit, not a tax anticipation note … We will have the option of only drawing as much as we need, when we need it,” he added.

The request received the unanimous backing of the rarely convened Disaster Emergency Funding Board, which includes House Speaker Nicholas Mattiello of Cranston, Senate President Dominick Ruggerio of North Providence, House Finance Chairman Marvin Abney of Newport and Senate Finance Chairman William Conley of East Providence.
While the proceedings – which took place in the State Room at the State House and were broadcast via Capitol TV – were unusual, the lawmakers uniformly sought to reassure residents and dispel questions regarding the process being utilized.

“We’re not rewriting the budget,” Abney said, later added: “If I thought it was a bad deal, I wouldn’t sign it … I’ll be watching every day, every second.”

Conley described the communication among the governor’s office, the General Assembly’s leadership and various state departments as “extraordinary, consistent with the extraordinary times and challenge we’re facing.”

Addressing the governor, he added: “Because of the comprehensive nature of the information you’ve shared with us, because of the level of communication you’ve engaged in with us … I feel confident that this as has been vetted as much as any financial document or study that I’ve been involved with during my service in the Senate.”

Conley also cited “guardrails” in the resolution approved Thursday that will limit the use of loan funding to supporting cash flow and provide for reporting and oversight requirements.

Mattiello said Rhode Islanders “can be very secure in the notion that we are not creating any new spending.” Describing the decline in revenues and jump in expenses related to the crisis as a “clash of the worst possible set of circumstances,” he said the “normal tools don’t work under these set of circumstances.”

“If you’d told me two or three months ago this was going to happen, I just would not believe it … In light of that, I am very comfortable moving forward with an extraordinary resolution to that extraordinary problem,” he said.

Speaking to Raimondo and Department of Health Director Dr. Nicole Alexander-Scott, Mattiello added: “Your judgment’s been very good on behalf of Rhode Islanders.”

Ruggerio added: “I want to thank you for the great job you’ve done … I think you’ve lent a lot of comfort to a lot of Rhode Islanders during these difficult times.”

Others, however, are critical of the borrowing plan, questioning the constitutionality of going through the Disaster Emergency Funding Board rather than a standard legislative vetting process.

In a statement March 24, Rhode Island GOP Chairwoman Sue Cienki said legal action is being considered.

On Thursday, she issued another statement that reads, in part: “Rhode Island’s fiscal health was already in poor health before the coronavirus put it into critical condition. Circumventing the constitution, faulty projections, and bad fiscal management by State House politicians will now cost Rhode Islanders millions more in debt.”

Comments

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John Simoneau

The Feds should use RICO in the State House. If ever there was a corrupt organization in America, it is the RI DEMOCRATIC PARTY! The problem is, that the FBI is even worse!

Thank you Jesus for everything. Now please spread the coronavirus throughout ALL 3 Branches of Local/State/Federal Government, in the NAME OF JESUS I PRAY. AMEN.

4 days ago
perky

the state was already 20 mil in the hole and gina was wanting to raise taxes now we have to pay this back in 2 years and gina is going to say we have to legalize pot to help pay this loan she will raise taxes what did she do with the 20 mil and what about the money she took from medicare and medicade and whathapened to the general fund where did that go

3 days ago
FASTFRED WARD 4

Sick Man. ^^^^

3 days ago
Hugh Jabalz

John Simoneau, disgusting human being

3 days ago
BEN DOVER

AMAZING....You get the kind of government you deserve. So in one fell swoop, 4 members of the general assembly have the power to "borrow" $300M, and the public just nods their heads like Pavlovian dogs? Read Article VI, sections 4, 16 and 17 of the RI Constitution and tell me how this is possible, borrowing with out the full house voting? Forget the ridiculous way they circumvented the Constitution with Quasi public borrowing, here you have 4 members doing the bidding of the whole body? Of course, nobody connected to the leaders will act as bond counsels, correct?

The budget was short $200M 6 weeks ago...the Queen of Raimondi's admission..So now, they are going to use borrowed money to fill the financial hole they created and blame it all on corona virus. You get the kind of government you deserve....Where is Steve Brown and the ACLU? They are worried about New York License plates being turned away...

Just beam me up...What intelligent life?

3 days ago
wwkvoter

Perky, the state was 200 million short this year, until this happened. BUT it IS a 100 year emergency that is actually global. Borrowing an amount 3% of state budget might be the lest of our problems. Sen Reed said we are receiving about 1.2 BILLION in state aid from this recently passed (today) legislation. BTW, ALL of that 2.2 TRILLION is borrowed in the name of us taxpayers lets keep that in mind too.

3 days ago
Educated Voter

Fast Fred and Mr. Jabalz, you are both 100 percent correct-Johnny Pajamas is both a sick man and a disgusting human being, although Mr. Jabalz, some might not agree with your description of Pajamas as a human being, as many would consider him to be a sub-human at best. About the only good thing that comes out of his vile, disgusting, and profane postings is that the entire readership of the Beacon gets to see what a sick and twisted individual he truly is.

3 days ago
Cat

@John Simoneau

“Repay no one evil for evil … live peaceably with all men. Beloved, do not avenge yourselves … for it is written, “Vengeance is Mine, I will repay,” says the Lord. Therefore if your enemy hungers, feed him; if he thirsts, give him a drink … Do not be overcome by evil, but overcome evil with good.” (Romans 12:17-21)

“Bless those who persecute you; bless and do not curse.” (Romans 12:14)

When you put these verses together like you would pieces to a jigsaw puzzle, I think the revelation comes through loud and clear. Though there was some cursing done back in the OT, I believe God wants all of us to live at a higher level in the NT now that we all have the Holy Spirit living on the inside of us to help sanctify us and transform us.

3 days ago
John Simoneau

Uneducated Voter .... At least I'm not a FAGGOT COWARD! I can live with that scumbag. I could care less what you or the rest of the COWARDS here think of me, since TO ME, THERE IS NOTHING WORSE THAN FAGGOT COWARDS

3 days ago
Hugh Jabalz

And that right there is a former PROVIDENCE COP, using those disgusting comments. You have no soul Mr Simmoneau. Collecting a fake disability TAX FREE PENSION..... unreal

3 days ago
John Simoneau

Aren't disgusting comments when TRUE, so @&*%&# you too!

3 days ago
bill123

Raimondo says “revenues have really taken a plunge” due to virus. Haven’t heard the local Leaders say that about city of warwick revenues. Property taxes, sewer taxes etc are expected to be paid regardless. It’s virus-proof income, and it’s not going down. The property owner has to deal with it.

2 days ago