The Rhode Island General Assembly approved a $14.34 billion budget for fiscal year 2026 on Friday (June 20), addressing significant financial challenges while prioritizing healthcare, housing, and municipal support despite looming federal uncertainties.
The Senate passed the budget bill (2025-H 5076Aaa) with a decisive 32-4 vote, following the House’s approval of 66-9 on Tuesday (June 17). The legislation now heads to Governor Dan McKee’s desk for final approval.
The budget represents a $500 million decrease from the current year’s spending plan, reflecting what lawmakers described as one of the most challenging budget cycles in recent memory due to rising costs, federal uncertainty, and a slowing economy.
Healthcare Gets Major Investment
Healthcare emerged as a top priority, with legislators adding over $40 million to boost Medicaid reimbursement rates for primary care providers who have fallen behind rates in neighboring states. The funding includes $15 million in state money supplemented by federal sources.
“This budget reflects our commitment to our priorities: not only protecting, but strengthening the vital Medicaid programs that provide health and safety to Rhode Island’s seniors, children, individuals with disabilities and working families,” said House Speaker K. Joseph Shekarchi (D-Warwick).
Hospitals will see $38 million more than the governor’s original proposal for reimbursement rates and direct support payments, including restoration of the upper payments limit program that McKee had proposed cutting. Nursing homes will receive an additional $12 million above the governor’s proposal to increase staff reimbursement rates as part of revisions to safe staffing requirements.
Housing Crisis Addressed
Legislators doubled down on addressing Rhode Island’s housing crisis, adding $4 million over the governor’s proposal for homelessness programs, bringing the total to $8.5 million. The increase will be funded through an increased conveyance tax and hotel tax on whole home rentals.
The budget introduces a new tax on non-owner-occupied houses valued above $1 million, with revenue dedicated to future low-income housing tax credit redemptions. It also allows developers of Providence’s “Superman” building renovation project to access additional state tax incentive programs.
Municipal Support Strengthened
Cities and towns will benefit from several revenue enhancements, including an increase in the general real estate conveyance tax and extension of hotel taxes to short-term whole home rentals. The local hotel tax rate doubles from 1 to 2 percent.
Distressed communities receive an additional $2.5 million over the governor’s proposal, while library aid and education funding formulas are fully funded. Education aid sees a $16.5 million boost above the governor’s proposal, totaling $59 million more than current year levels.
Newport Finance Committee Chairman Marvin Abney (D-Newport, Middletown) emphasized the budget’s focus on supporting Rhode Islanders during difficult times while positioning the state for future success.
Transportation Funding Challenges
The Rhode Island Public Transit Authority (RIPTA) will receive help through a 2-cent-per-gallon gasoline tax increase, expected to generate about $15 million in fiscal 2026. However, this falls short of RIPTA’s projected budget shortfall, with legislative leaders pushing the agency to find efficiencies while protecting the RIde Anywhere program for disabled passengers.
Electric vehicle owners will face new annual registration fees: $200 for battery electric vehicles, $100 for plug-in hybrids, and $50 for hybrids. The budget also assumes reactivation of commercial truck toll gantries by year’s end to generate $10 million in revenue.
What Didn’t Make the Cut
Several gubernatorial proposals failed to gain legislative approval, including the controversial 10% digital advertising tax aimed at large online media companies and a 50-cent cigarette tax increase that would have brought the total to $5 per pack.
Lawmakers also rejected the “baby bond” proposal, workforce development program increases, and a plan to merge minimum and medium security units at the Adult Correctional Facilities. The proposed “millionaire’s tax” on high earners was set aside, though legislators noted it remains an option if circumstances change.
For the second consecutive year, the General Assembly removed the governor’s proposal to purchase a large Citizens Bank facility in East Providence to house state departments, citing uncertainties including the increased price tag for the Washington Bridge replacement project.
Looking Ahead
Senate President Valarie Lawson (D-East Providence) praised the budget’s immediate healthcare investments while noting it positions the state to respond to federal uncertainty and addresses critical needs from homelessness to municipal aid.
Senate Finance Committee Chairman Louis DiPalma (D-Middletown) characterized it as “not a flashy budget, but one that continues to support everyday Rhode Islanders who are struggling to get by in the current climate.”
The budget now awaits Governor McKee’s signature to become law ahead of the July 1 start of the new fiscal year.