Governor McKee Rolls Out FY 2027 Budget

Governor’s budget advances state’s first Affordability for All agenda, keeps Rhode Island building with a historic bond proposal, and protects vulnerable Rhode Islanders from President Trump’s safety net cuts

PROVIDENCE, RI – Governor Dan McKee today rolled out his FY 2027 budget. The budget makes key investments to help families with the rising cost of living, shield vulnerable Rhode Islanders from federal cuts, and continue to invest in projects that support jobs and the economy.

“My commitments to Rhode Islanders are clear: putting more 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,” said Governor Dan McKee.

Governor McKee continued, “With the Trump Administration’s tariffs, its inaction to address the cost of living, and the passage of H.R. 1, the State is facing a different set of challenges. These challenges call for clear direction and decisive leadership—and my budget reflects both.” 

Among the investments in the Governor’s budget proposal are:

Affordability for All

·    Eliminating the State tax on Social Security benefits by phasing it out over the next three tax years. Rhode Island is one of eight states that taxes Social Security on at least a portion of its beneficiaries. In the first year alone, 9,200 early retirees will be fully exempt from the state tax on their benefits. 

·    Creating the State’s first Child Tax Credit, converting the existing dependent deduction into a fully refundable credit and delivering approximately $30 million in annual tax relief, with the largest benefits going to lower-income families who receive little or no value under the current deduction—$325 per child per year.

·    Providing more than $151 million in ratepayer relief in 2027 and over $1 billion in cumulative savings over the next five years by reforming the roughly 25 percent of electric bills driven by state programs and taxes. The Governor recommends aligning certain ratepayer-funded programs with peer states and scaling back others to reflect disruptive federal actions and affordability constraints—moderating near-term utility costs while preserving a more affordable path to decarbonization. Repealing the 2-cent motor fuel hike enacted by the General Assembly in the Fiscal Year 2026 Budget.

·    Backfilling the recently expired, enhanced Affordable Care Act subsidies to keep coverage affordable for approximately 20,000 individuals. With the investment of $9.5 million, it is projected that approximately 6,500 individuals would allow their coverage to lapse.

·    Curbing healthcare cost growth and increasing drug-price transparency by authorizing the Office of the Health Insurance Commissioner to set enforceable annual cost-growth targets for payers and requiring Pharmacy Benefit Managers to report detailed rebate, pricing, and fee data—laying the groundwork for more effective oversight and cost containment.

·    Calling for the implementation of a line-item veto, empowering the Governor to strike specific appropriations without approving or vetoing an entire budget, thereby preventing unnecessary tax and fee increases and strengthening fiscal discipline.

“It is encouraging to see Governor McKee proposing measures to improve the cost-effectiveness of the electricity system while continuing to prioritize the state’s transition to lower-carbon energy sources,” said Noah Kaufman, Senior Research Scholar at the Center on Global Energy Policy at Columbia University. “States across the region will similarly need to rethink their strategies to meet decarbonization goals while maintaining affordable electricity, and I look forward to working with them on those efforts.”  

“Keep Rhode Island Building” General Obligation Ballot Initiatives

The Governor proposes placing six general obligation bond questions totaling $600 million on the November ballot. The initiatives are:

·    Higher Education Facilities ($215 million): Investing in capital infrastructure at all three, public institutions of higher education, including an integrated health building for the University of Rhode Island ($105 million); a workforce innovation center on the Warwick Campus of the Community College of Rhode Island ($60 million); and a student success and career readiness center within Adams Library ($50 million).

·    Housing and Homeownership ($120 million): Increases and preserves the State’s affordable housing portfolio through redevelopment, new construction, property acquisition, and infrastructure improvements. $25 million of this bond is dedicated to increasing homeownership across Rhode Island, a priority of Governor McKee.

·    Economic Development ($115 million): Creating pad-ready locations and facilities in the Quonset Business Park ($70 million) and investing in infrastructure that supports Rhode Island’s ocean, defense, life sciences, data analytics, and related industries ($45 million).

·    Green Economy and Clean Energy ($50 million): Investing in energy efficiency infrastructure, vulnerable coastal habitats, recreational facilities, brownfields remediation, and Narragansett Bay’s water quality, among other initiatives. This includes the state’s largest-ever investment in climate resiliency through a $20 million proposal for the Resilient Rhody Fund.  

·    Career and Technical Education ($50 million): Creating new career technical and education programs and improvements to existing programs. This is Rhode Island’s first dedicated Career and Technical Education bond.  

·    Cultural Economy ($50 million): Constructing a State History Center ($45 million) and providing matching grant opportunities for municipalities and nonprofits to preserve and renovate historic sites that are open to the public ($5 million).

Protecting Rhode Islanders from President Trump’s Safety Net Cuts

·    Investing $19.3 million for information technology, personnel, and resources to ensure that Rhode Islanders can retain their Medicaid and SNAP benefits in response to the federal reconciliation bill called H.R. 1, as well as maximize the amount of federal funding that the State receives for these critical programs

·    Providing $10.0 million from all sources of funds to be distributed to Rhode Island-based hospitals through the established Disproportionate Share Hospitals payment to help offset losses related to uncompensated care.

·    Increasing funding for the Office of the Health Insurance Commissioner’s recommended rates by $23.0 million in Fiscal Year 2027 for social and human services providers.  

·    Doubling the amount of funding for the Rhode Island Community Food Bank from $1.0 million to $2.0 million.

·    Helping preserve access to essential preventive and reproductive health services by providing Planned Parenthood of Southern New England with a $600,000 State grant.

·    Beginning to fully reopen the Foxtrot Neighborhood within the Rhode Island Veterans Home, starting with 16 additional beds, which is half of the neighborhood’s capacity. This plan puts the Home on track for full occupancy in FY 2028.

Supporting K-12 and Higher Education

·    Increasing per-pupil education aid by $17.5 million, which is a 3.1-percent increase over Fiscal Year 2026.

·    Boosting high-cost special education categorical funding by $2.5 million – from $17.5 million in Fiscal Year 2026 to $20.0 million in Fiscal Year 2027.

·    Providing $2.0 million for the Learn365RI program.

·    Increasing unrestricted operating support to the three public institutions of higher education by 2.5 percent, or $6.2 million.

·    Converting the Hope Scholarship, which provides in-state students their junior and senior years tuition-free at Rhode Island College, from a pilot program to a permanent one. 

Revenue Initiatives

·    Decoupling from H.R. 1’s research and development tax provision to retain $22.6 million in tax revenue in both Fiscal Years 2026 and 2027.

·    Creating a fourth tax tier at 8.99 percent for income over $1 million starting in tax year 2027. The new tax is projected to generate $67.1 million in Fiscal Year 2027.

·    Launching a tax amnesty program to incentivize delinquent taxpayers to pay outstanding taxes owed to the State. The program is projected to generate $26.3 million in Fiscal Year 2027.

Governor McKee added, “Being the Governor of a small state means I have the opportunity to hear the voices others don’t. I hear the families who don’t have a lobbyist or the loudest voice on Smith Hill. I hear from the early retiree watching her Social Security benefits shrink as health insurance premiums rise; from parents of two feeling the squeeze as tariffs drive up the cost of groceries and utility bills; and from the laborer working to buy his first home and provide for his family, while worrying about whether the next job will be there. I submit my budget proposal for those families, for all families.” 

View Governor McKee’s full budget submission here.