Policy Outcomes 2014

The Institute informed and influenced the debate on a host of policy issues related to affordable child care, workforce development, and tax policy. This brief summary highlights several policy changes that will have an impact on the fiscal health of Rhode Island and its residents.

Child care expansions extended
Two important expansions made to the Child Care Assistance Program last year were extended. First, the
“exit income limit” was extended for two years. This allows parents whose income is low enough to be eligible for child care assistance to earn more without losing affordable child care until their income reaches a higher “exit” income limit. As of June 30th, there were 145 families who were able to increase their earnings because of this change. Second, a pilot program allowing parents to qualify for child care assistance while they participate in short-term training was extended for one year. Prior to this change, parents were only allowed to use child care assistance for time when they were working.

Minimum wage workers get a raise
The minimum wage was increased from $8.00 to $9.00 an hour beginning in January 2015. Local communities, however, were prohibited from establishing their own minimum wage.

Waiver program adopted to help with increased GED testing fees
The high school equivalency test the state uses, the GED, changed from a pen and paper test to a computerized test and the cost of taking the test increased from $55 to $120 beginning this year. A new law requires the Board of Education to establish a program for waiving the fee for low-income individuals.

Doors open for lowest-skilled parents
The restrictive requirement that prohibited low-skilled parents who rely on cash assistance from participating in adult education and work readiness services for more than 6 months was repealed. This will help these parents have more opportunities to get the skills they need to be ready for work.

New permanent funding for workforce development
The Job Development Fund, which is funded by employers to support workforce development services, will no longer lose 10 percent of its funding to the state’s General Fund. The full amount of the employers’ contributions will be used for workforce development. This means $1.3 million more for these services and programs for the new fiscal year.

General revenue funding for workforce development maintained
Last year was the first time that general revenue funds – more than $1 million – were appropriated for workforce training and jobs programs. Those funds were maintained this year.

Unnecessary restrictions on SNAP and electronic benefit cards avoided
Bills that would have required people to show a picture ID when they used their SNAP EBT card at the supermarket and/or would have required DHS to issue new cards with pictures were not passed. Another set of bills that would have limited the places that families could use their cash assistance (RI Works) EBT card or even use an ATM machine to access their cash were also defeated. These bills would have exceeded or violated federal law and/or come with a high cost, despite the fact that there is no evidence of “misuse” of cash or SNAP EBT cards.

Corporate income tax compromise
Lawmakers made three significant changes to the corporate income tax that will generate several million dollars. The changes include the adoption of “combined reporting” which the Institute has been a strong advocate for over the past several years.  However, revenue generated from combined reporting, and another change in how the corporate tax is apportioned, will be used to pay for a reduction in the corporate income tax rate from nine to seven percent. The Institute testified that new revenue from combined reporting should be used to make investments in areas like education and infrastructure but ultimately, the corporate tax rate was lowered by two percentage points

Earned Income Tax Credit modified
The state’s EITC will be reduced from 25 to 10 percent of the federal credit and made fully refundable beginning Tax Year 2015. Currently the credit is 25 percent of the federal credit but only 15 percent of any unused credit is refundable, meaning that the refund is effectively 3.75 percent of the federal credit.  Of the 60,000 EITC filers, 75 percent will get a larger refund, most of whom are the lowest wage workers.  Twenty-five percent of EITC filers, mostly middle-wage workers, will receive less.

Elimination of property tax relief for low-income homeowners and renters
Lawmakers eliminated $8 million in property tax assistance for non-elderly, non-disabled homeowners and renters beginning in Tax Year 2014. Currently, anyone with income of less than $30,000 can receive a refund of up to $300 if their property taxes exceed a certain percentage of their income.

Estate tax giveaway
A new $64,400 estate tax credit was adopted which means that any estate worth $1.5 million or less will now pay no estate tax; all other estates will have taxes reduced by $64,400. This change will benefit just over 200 estates and eventually cost taxpayers $18 million a year.