House Committee on Finance reviews governor’s proposed freeze on car‑tax indexing and targeted school‑aid increases

At a House Committee on Finance hearing, state budget staff outlined two linked parts of the governor’s proposal: a freeze of the sales‑tax indexing that would increase motor vehicle excise reimbursements to municipalities and changes to the education funding formula to target more funding to districts with concentrated poverty.

Sharon, a budget presenter, told the committee that “Article 5 section 13 would repeal that indexing of future funding, and the budget assumes $9,700,000 in savings from that repeal.” She said the current‑law indexing was scheduled to increase local aid in fiscal 2026 and that, under current estimates, the indexed amount for fiscal 2026 would be $2,244,600,000.0; the governor’s proposal would instead freeze the dollar amount and include a small hold‑harmless adjustment of about $140,000 for rounding and data shifts.

The net effect of stopping the indexing grows over time, Sharon said, and under current estimates may reduce what would have otherwise occurred by nearly $50 million by 2030. “These are purely estimates, but directionally probably correct,” she added.

On education aid, Sharon and Brian Daniels, director of the Office of Management and Budget, described changes in Article 7 that would increase targeted funding for students in concentrated poverty. Brian said the budget includes roughly $31 million for formula increases and a concentrated‑poverty factor worth almost $11 million. He explained the proposed change would raise the student‑poverty supplement (the “student success factor”) from 40% to 43% for students who come from districts where more than 60% of students meet the poverty measure; the five districts identified were Central Falls, Newport, Pawtucket, Providence and Woonsocket.

“As you heard, we are proposing using October enrollment data,” Brian said, describing the administration’s choice to rely on October counts as a more timely bellwether for budgeting than prior March updates. He added that the formula still uses the March data to finalize aid when available and flagged that projected aid amounts move as enrollment data are updated.

The committee also heard proposals addressing how local districts calculate the local share withheld from charter schools and mayoral academies. Sharon summarized the current law and history: after 2017 changes there is a statutory mechanism for a local withhold (commonly at least 7%) plus allowable itemizations (for unusually high out‑of‑district special‑education costs, regional district costs, certain transportation and pre‑K costs). The governor’s proposal would keep the existing calculation but cap any district’s holdback at 14% of the local share.

Sharon illustrated how that cap would affect districts: she said a small local withhold (for example, $573 in Woonsocket) can amount to a large percentage of the local share and that, if the proposal were applied with current data, Woonsocket could see about an $800,000 shift and Central Falls almost $900,000. Witnesses representing school committees and educators told the panel that the two changes together risk shifting costs onto districts the proposal otherwise intends to help.

Greg Mancini, a North Kingstown councilor and trade‑association lobbyist, described local budget pressure, saying the “cost of education continues to rise in local communities” and urging higher state contribution. Eric Hasselhurst, representing the National Education Association Rhode Island, said his group supports the increase in the student success factor but opposes capping the charter holdback at 14%. Tim Duffy of the Rhode Island Association of School Committees gave a numerical example of the tension, saying the 3% increase in the student success factor would generate about $545,000 for Central Falls while the proposed cap on charter holdbacks could cost that city more than $300,000 in net resources compared with current law. Paige Parks of Rhode Island Kids Count also urged stronger investments for districts with concentrated poverty and suggested the student‑poverty supplement could be higher than 43% based on research about funding needs.

Committee members pressed administration staff on the local consequences of freezing the motor vehicle excise indexing. Representative Tansey asked whether the governor’s proposal gives municipalities any new authority or relief mechanisms (for example, around property‑tax caps); staff replied that it does not. Brian Daniels said the administration’s rationale is that overall state revenues are forecast to grow more slowly than some categories of aid, and holding local aid growth steady would allow state investments in education to proceed without worsening the projected structural shortfall.

No formal vote was taken during the hearing; the presentations were followed by public testimony and the committee moved to additional witnesses and questions before adjourning.