General Assembly leaders to meet to discuss borrowing $300 million

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PROVIDENCE — Rhode Island’s top legislative leaders are calling a first-ever meeting of a “disaster emergency funding board” to approve up to $300 million in borrowing to keep state government afloat during the COVID-19 pandemic.

The board — composed of the House speaker, the Senate president and the chairmen of the House and Senate Finance Committees — is expected to meet at the State House on Thursday for a remotely televised but closed-to-the-public meeting.

If all goes according to plan, the board will discuss “the options for funding the state’s financial demands” during the state of emergency declared by Governor Raimondo on March 9, including the potential borrowing of up to $300 million for up to two years.

While historic, the move is not unexpected amid warnings about the toll the actions taken to slow the spread of the new coronavirus have already taken on the Rhode Island economy, and state government funding.

In recent days, state Treasurer Seth Magaziner told The Journal the state is “weeks not months’’ away from running out of money to make payroll and pay its bills. Raimondo said the state was working with one or more banks to line up emergency lines of credit.

In emails to their colleagues in the General Assembly, House Speaker Nicholas Mattiello and Senate President Dominick Ruggerio laid out some of the known financial consequences so far.

“With the state casinos closed and many restaurants, hotels and stores closed or limited in their operations, action to bridge the short-term financing gap will be required in the near future,’’ Ruggerio wrote.

Mattiello elaborated, with numbers: “The casino shut downs … present an immediate impact to revenues, likely over $25 million per month … [and] the three month delay in the income tax filing date means that revenues, potentially measured in the hundreds of millions, will not be received by the time the fiscal year closes on June 30,’’ Mattiello wrote.

Add to that: the “closure of businesses will impact both sales tax collections from the reduction in activity and income tax collections from the associated employee layoffs. Those two sources account for nearly two-thirds of all state general revenues.”

Adding to the strain: “State assistance to those impacted by this crisis is also going to put pressure on expenses,’’ he wrote.

The law enabling Mattiello, Ruggerio, House Finance Chairman Marvin Abney and Senate Finance Chairman William Conley to meet is “Section 30-15-10” of the state law titled: Military Affairs and Defense – Emergency Management.

Adopted in 1973, it says in part: “It is the intent of the general assembly and declared to be the policy of the state that funds to meet disaster emergencies shall always be available.”

“It is the legislative intent that the first recourse shall be to funds regularly appropriated to state and local agencies.

“If the governor finds that the demands placed upon these funds in coping with a particular disaster are unreasonably great, with the concurrence of the disaster emergency funding board, he or she may make funds available by transferring and expending moneys appropriated for other purposes or may borrow for a term not to exceed two years from the United States government or any other private source.”

The law began as “House Bill 5597″ introduced by then-Reps. Joseph Potter, Francis Sherman, John Skiffington, Aldo Freda, Frederick Lippett, Theodore Low, Carmine DiPetrillo, George MacDonald Jr., Edward Manning, Leo Baronian, John Revens, Monroe Knight, Herbert Holmes, Aram Garabedian, Anthony Giangiacomo, Charles Ted Wright, Albert Vanasse, William McElroy, John Romano, Donald Bonner.”

Rep. Blake Filippi, the House Republican leader, raised concerns about Thursday’s meeting of this currently all-Democrat board:

“If we would have passed our ’House Bill 7757’ setting up emergency remote meetings of the General Assembly, there wouldn’t be a need for the board to exercise these extraordinary powers. Rather, the full House and Senate would be making these critical decisions — as they should be,” Filippi said.

“Absent remote meetings, the [emergency funding board] laws need to be updated to have bi-partisan representation — likely by adding the House and Senate Majority and Minority Leaders,’’ he said.

Added state GOP Chairwoman Sue Cienki: “The Disaster Emergency Funding Board cannot ignore the state constitution’s restrictions on debt. … It is the voters not a handful of State House politicians who decide Rhode Island needs hundreds of millions in debt. There are constitutional ways to get through this crisis.”

“If necessary, our General Assembly should quickly convene and vote on any legislation needed to get through Rhode Island through this crisis,’’ she suggested.

House and Senate spokesmen had this response to the questions about the legal and political-process questions: “The meeting was requested in a letter by the Governor. After consultation with the experts, including the Governor’s executive staff, the General Treasurer and bond counsel, the meeting was posted.

“The Governor declared a State of Emergency on March 9. This is an extraordinary time that this board was created to address. The General Assembly is committed to addressing an unprecedented health care crisis and its consequences and is committed to informing and protecting the public.”

In a letter dated Monday that legislative leaders made public on Tuesday, Raimondo requested a meeting of the Disaster Emergency Funding Board.

“I have determined that since the demands placed upon funds regularly appropriated to state and local agencies in coping with the Disaster Emergency are too great, it is necessary and appropriate that the state borrow for a term not to exceed two years from the United States government or any other private source an amount not to exceed $300 million.”

“I have also determined that if the state is unable to timely borrow money … it will be necessary and appropriate to make funds available by transferring funds as needed for cash flow purposes into the General Fund from general obligation capital proceeds, state university and college funds and any quasi-public agencies with available cash balances.”

In an interview on Tuesday afternoon, state Treasurer Seth Magaziner said his team has identified several funds “within state government that we believe we can transfer to the General Fund temporarily to help us with our short-term [cash flow] challenges.”

For example, he said, there is “over $100 million’’ of unspent bond proceeds, approved over time by state voters, that could be temporarily tapped with the approval of the emergency-funding board.

Addressing questions about the constitutionality of the legislature borrowing as much as $300 million from private lenders in the form of lines of credit, he said he has been assured this is legal by lawyers for the governor and legislature and hopes to have a written opinion letter soon.

“We are in final negotiations with more than one possible lender … and we expect to have the details of those lines of credit available before the board meets on Thursday,’’ and then hopefully, he said, Congress will approve a stimulus bill that “will help us with longer term issues down the road.”

Bottom line, Magaziner said: “We are taking action to ensure that the state remains stable financially through the COVID-19 crisis…so that state [government] and front line workers can continue to serve the public without interruption.”

kgregg@providencejournal.com

(401) 277-7078

On Twitter: @kathyprojo

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