Election year math: 6 things to know about McKee’s 2027 budget

Rhode Island Gov. Dan McKee shared his new $14.9 billion budget proposal with the General Assembly on Thursday. The legislature will spend months holding hearings on the spending plan before revising it and passing its own version in June.

At nearly $15 billion, the proposal includes about half a billion dollars more spending than what the legislature passed last year, even though the state budget office expects an increase in general revenue of a more modest $145 million.

Here’s a look at some of the top elements in the plan.

Ian Donnis/Ocean State Media

Get ready for a vociferous debate on whether hiking the state’s top income tax rate, from 5.9% to 8.9%, will help or hurt Rhode Island.

Progressives maintain this is an issue of fairness and they say the wealthy are not paying their share. Conservatives counter by predicting an outward migration to more favorable tax climates.

During a Smith Hill briefing for reporters, director of the state Office of Management and Budget Brian Daniels said Rhode Island has the lowest top marginal tax rate among the New England states. And he put the blame on President Trump for sparking the proposed change.

“The governor has not supported a millionaires’ tax in the past,” Daniels said. “We were paying attention to what happened in Massachusetts, we weren’t quite ready to advance that proposal. [Trump’s 2025 spending bill] really forced our hands on this. There are tens of millions of dollars of impacts …. so we really had to start thinking about how we can pay for this.”

The governor’s proposal would change the tax rate for income over $1 million and it would take effect for tax year 2027. The new bracket is projected to initially generate $67 million and then $135.5 million for fiscal 2028.

Rhode Island voters haven’t preferred a Republican presidential candidate since Ronald Reagan won re-election in 1984. But the dominance of Democrats in the Ocean State hasn’t sealed off the influence of President Trump. On the contrary, Daniels said Washington’s shifting approach on a range of topics has added uncertainty to the budget process. More specifically, the federal administration match for the Supplemental Nutrition Assistance Program (SNAP), for example, is being halved, from 50% to 25%, causing the state to face an additional full-year impact of about $13 million. McKee’s budget also includes $19.3 million meant to help Rhode Islanders who receive SNAP and Medicaid keep their benefits. Daniels blamed Trump’s approach for worsening the state’s long-term fiscal outlook. About 30% of the $537 million deficit projected for fiscal 2031 is due to changes coming from Washington, he said.

Budgets are political documents, so it’s worth remembering that the bid by McKee, 74, to become Rhode Island’s longest-serving governor is on the line this September. In his message on the budget, the governor said in part: “My priorities are clear: putting money back in families’ pockets, protecting the most vulnerable from President Trump’s safety net cuts, and keeping Rhode Island building to support good-paying jobs and long-term economic growth.”

Rhode Island does not allow the governor a line-item veto, unlike 44 other states. McKee let the budget become law last year without his signature since he didn’t like some of the changes made by the General Assembly, including additional taxes and fees. The governor is responding by including in his budget plan a proposal to let voters decide whether to add a line-item veto. This is almost certainly DOA at the General Assembly.

McKee’s budget would repeal the two-cent hike in the gas tax that lawmakers passed last year. Smokers will continue to take it on the chin, since his spending plan boosts the cigarette tax from $4.50 to $5.25, good for about $6 million in expected revenue. A proposed $325 per child tax credit is meant to benefit all Rhode Islanders with children, and even those without tax liability would get a refund. Seniors are an important voting bloc, so it’s worth noting that McKee envisions phasing out tax on Social Security income, a move the administration described as a hedge against growing healthcare costs. The phaseout would take place over three years, concluding in tax year 2029, adding 32,000 Rhode Islanders to the 43,000 already exempt from tax on Social Security income. The governor’s budget also proposes significant savings for energy ratepayers.

The $600 million in proposed borrowing contained in McKee’s five suggested ballot questions is the most ever. Voters tend to support these as an investment in the state’s future, even as they carry millions more in borrowing costs. The biggest proposed bond ($215 million) is for higher education facilities, followed by $120 million for housing and home ownership, $115 million for economic development, $50 million for the cultural economy, $50 million for career and technical education, and $50 million for the green economy and clean energy.