Rhode Island postpones budget, bond actions until after election

BY SourceMedia | MUNICIPAL | 09/14/20 11:53 AM EDT By Paul Burton

Gov. Gina Raimondo and top Rhode Island lawmakers have postponed action on the state budget ? and proposals to send voters nearly $500 million of bond questions ? until after the November elections.

Lawmakers don?t expect to reconvene in Providence until then. State officials are still awaiting a clearer picture about rescue aid from Washington over COVID-19 relief measures.

Bond initiatives will go to a special election ?shortly thereafter,? according to a statement from Raimondo; House Speaker Nicholas Mattiello, D-Cranston; and Senate President Dominick Ruggerio, D-North Providence. They had been on track to appear on November general election ballots.

Raimondo had recommended three bond measures for voters: $310.5 million for housing and infrastructure, $117 million for higher education and a $69 million green bond to cover water and stormwater resilience and other environmental measures, including parks and recreation upgrades.

?COVID-19 has caused significant damage to our national and local economies, and it is critical we have a full understanding of the funding available to the state,? the three said in a joint statement.

The Center for Global and Regional Economic Studies at Bryant University and the Rhode Island Public Expenditure Council project Rhode Island's gross domestic product to have experienced a "historic" contraction of 40.6% annualized in the second quarter of 2020, compared with a 6.2% reduction in the first quarter of 2020. Previous expansions were 1.6% and 2.2% in the third and fourth quarters of 2019, respectively.

"Rhode Island?s economic contraction is more severe than contractions across the region and the nation," they said.

The legislature in late June approved a supplemental $11.8 billion budget for fiscal 2020 to buy some time. The spending plan combined the rainy-day transfer, new federal funding and unspent funds throughout state agencies to close about a $250 million budget gap largely due to revenue losses related to the coronavirus.

Raimondo is a Democrat and her party controls both branches of the legislature by a large majority.

State Rep. Brian Newberry, R-North Smithfield, questioned the delay.

?After the election but before the new legislature is seated? Is that an option?? he said on Twitter. ?That would be interesting ? and infuriating to a lot of people.?

Newberry also suggested an awkward scenario of a lame-duck House speaker, should Mattiello lose his re-election bid to Barbara Ann Fenton-Fung. Mattiello only defeated GOP challenger Steve Frias by 85 and 329 votes, respectively, in the past two District 15 elections.

Winds of change are rippling through Rhode Island politics after eight Democratic legislative incumbents, including Senate Finance Committee Chairman William Conley, D-East Providence, fell to a progressive slate in last week's primaries while Ruggerio survived a scare.

Rhode Island law requires voter approval on bond measures.

Green-bond projects would benefit the state?s overall economy, according to General Treasurer Seth Magaziner.

?Not only can we afford to do this, it will pay dividends to us for a long time to come. Rhode Island does have the capacity to issue these bonds,? Magaziner said on a webcast.

?This upfront investment will strengthen our economy and strengthen our finances for years to come.?

Moody?s Investors Service rates Rhode Island?s general obligation bonds Aa2. S&P Global Ratings and Fitch Ratings rate them AA.

All three assign stable outlooks.

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.