Rhode Island Governor Allows Budget to Become Law Amid Tax Concerns

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The Rhode Island State Capitol, a center of budget decisions impacting local families.

News Summary

Rhode Island Governor Daniel J. McKee has permitted the approved $14.3 billion state budget to become law without his signature, expressing concerns about new tax increases that may affect families amid inflation. Key increases include a gas tax hike and new fees on health insurers. Despite these reservations, McKee expects the Democratic-controlled General Assembly to override any veto. The budget’s impact on families and services is a contentious topic as McKee faces potential reelection in 2026, amidst rising political tensions surrounding fiscal policy in the state.

Rhode Island Governor Daniel J. McKee has decided to allow the recently approved $14.3 billion state budget to become law without his signature, a stance that highlights concerns over proposed tax increases. In his announcement, McKee criticized the budget for implementing measures that he believes will negatively affect Rhode Island families, particularly amid ongoing inflation challenges.

The budget includes several notable tax increases. These consist of a 2-cent increase in the gas tax, a new annual $48 fee imposed on health insurers for every person covered, and an elevation in the real estate conveyance tax, increasing the rate from $2.30 to $3.75 for every $500 in property value. McKee underscored that Rhode Islanders already contend with higher gas taxes compared to residents in neighboring states like Massachusetts and Connecticut, thus adding to his reservations regarding the new budget.

Anticipating the likelihood of an override by the Democratic-controlled General Assembly, which passed the budget with strong majorities, McKee opted not to use his veto power. Just four days before his announcement, the General Assembly wrapped up the 2025 legislative session. In a letter to House Speaker K. Joseph Shekarchi, McKee conveyed his opposition to the budget, particularly criticizing the state legislature’s decision to impose new tax burdens.

Pointing out a significant state revenue surplus of $67 million, McKee expressed that the General Assembly could have utilized these funds to close budget gaps without resorting to tax increases. He suggested that the adverse impact of rising taxes, especially during times of inflation, would further strain families across the state. McKee indicated that if he had had the authority for line-item vetoes, he would have targeted specific increased taxes for rejection.

The budget’s tax measures have drawn sharp responses from Assembly leaders. Shekarchi and Senate President Val Lawson defended the budget, arguing that McKee misunderstood the financial implications of educational aid and insufficient funding for union agreements that emerged after his initial budget proposal in January. In that proposal, McKee faced bipartisan pushback, with lawmakers citing underfunded agreements and overly optimistic revenue forecasts.

This situation arises as McKee prepares for a potential reelection campaign in 2026, making his stance on the budget a politically sensitive issue. Republican Minority Leader Michael Chippendale criticized McKee’s decision to let the budget take effect without explicit approval, labeling it as a “transparently political PR move.” This marks a recent trend in Rhode Island politics, as it has been over a decade since a governor allowed a budget to become law without a signature, an action that further escalates the political discourse surrounding fiscal policy in the state.

The ramifications of these tax increases remain a point of contention, with advocates arguing that additional revenue is essential for maintaining services and education funding, while opponents caution that such measures may burden families already struggling with increased living costs. Moving forward, the state will closely monitor the impact of the new budget and the political dynamics leading up to the next election cycle.