Rhode Island state budget (2008-2009)

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State Information


Rhode Island was facing a $370 million deficit for fiscal year 2009, approximately 11 percent of general fund.[1] However, for fiscal year 2010 the Center on Budget and Policy Priorities estimated a budget gap of $450 million.[2] In December 2008, Rhode Island's unemployment rate reached 10 percent, the highest rate since 1975.[3] In light of these numbers, Gov. Donald Carcieri called for not only budget cuts but also reforms to the state's tax and pension systems. “As a state, we are facing a very challenging time, perhaps the most challenging of our lifetime,” said the governor. “The decisions we make today will have long lasting impact on the future of Rhode Island. We must, as elected leaders, and as Rhode Islanders, make responsible decisions that protect our citizens and strengthen our state.”[4] However, in early April the legislature approved a revised $7.2 billion budget that did not include the governor's proposed pension reforms. Carcieri said that he would not veto or sign the bill, but did oppose the exemption.[5]

Impact of budget woes

See also: State budget crisis, 2009-2010
  • In December 2008, Rhode Island's unemployment rate reached 10 percent, the highest that the state had seen since 1975. According to the Department of Labor and Training, there were 56,800 unemployed state residents. At the time the nationwide unemployment rate averaged at 7.2 percent. At the end of 2008 there were 22,000 fewer jobs than in 2007. The following industries saw the greatest declines: retail trade, -4,600; manufacturing, -3,800; professional and business services, -3,700; construction, -2,500; government, -2,100.[3]
  • In light of the state's budget gap and declining revenues, state officials announced a $5 million cut in Medicaid payments for nursing homes and a 2 percent cut of what was planned for nursing care for FY 2009.[6]
  • The budget proposal suggested boosting the state's cigarette tax by $1 to $3.46, the highest in the nation.[7]
  • Additionally, lawmakers were proposing to increase gasoline tax by 2 cents per gallon. The tax was at 30 cents per gallon; in addition consumers paid an additional one-cent “environmental protection regulatory fee.” According to state officials the 2 cent increase could add $9 million to the $135 million the tax brings in per year.[7]
  • Providence, Rhode Island was facing a $16.1 million deficit, which lawmakers said was due to cuts in state funding and declining revenue. More than half of the city's budget was reserved for education and in light of necessary budget cuts, lawmakers said that they would look for savings elsewhere.[8]

Budget background

See also: Rhode Island state budget

Rhode Island's fiscal year begins July 1 and ends June 30 of the following year. According to the state Constitution, every year the governor must present a spending recommendation to the legislature. However, prior to the governor's presentation to the legislature on the third Thursday in January, the governor reviews individual agency requests along with past and present expenditure and revenue data. Both the Senate and the House use the following months to making necessary adjustments to the proposed budget bill. Once both houses approve a final budget, the bill returns to the governor, who may veto legislative appropriations. The legislature may override any veto by a two-thirds majority vote.[9]

  • The proposed FY 2010 budget was estimated to raise the state budget for the year by $304.1 million to $7.2 billion. The increase included federal stimulus dollars; however, the portion paid for by state taxes would drop by $247.4 million.[7]

Budget figures

The following table provides a history of Rhode Island's expenditures and gross domestic product (GDP).

Fiscal year Expenditures (billions) GDP (billions)
2000 $6.4[10] $33.6[10]
2001 $7.2[10] $35.1[10]
2002 $7.9[10] $36.9[10]
2003 $8.4[10] $39.4[10]
2004 $8.9[10] $42.1[10]
2005 $9.2[10] $43.1[10]
2006 $9.6[10] $45.7[10]
2007 $10.1[10] $46.9[10]
2008 $10.5[10] $48.1[10]
2009 $11.0*[10] $49.3*[10]
  • NOTE: The figures for FY 2009 had not been finalized at the time this data was compiled.

Ideas about why the crisis occurred

  • Rhode Island officials reported in March 2009 that Rhode Island's tax revenue dropped nearly $80 million in the previous eight months. Officials attributed the drop to an across the board decline in sales, income and business tax revenue. Rhode Island's total revenue dropped $233 million dollars during the eight month period. Specifically, the state experienced a $12 million dollar drop in sales tax earnings from car sales and a $53 million dollar decline in state income tax collection.[11]
  • According to a report by the state Department of Revenue, Rhode Island could collect an extra $1.3 billion in estimated revenue every year should the state not issue any tax breaks. Approximately 48 percent of the estimated forfeited revenue related to state sales tax breaks and about 41 percent to personal income tax breaks.[12]

Proposed actions

Governor Donald Carcieri

In response to the state's growing budget deficit Gov. Carcieri proposed eliminating, for future retirees, the guaranteed 3-percent annual cost-of-living increases retired state workers and teachers receive. Additionally, the governor proposed changing the new minimum retirement age to 59. The changes, he said, would shave millions off the taxpayer cost of pensions.[7] In his revised 2009 budget, the governor eliminated $204 million, lowering the FY 2009 budget to $3.064 billion. For FY 2010 Gov. Carcieri called for $3.079 billion in general revenue expenditures, excluding federal stimulus funds. "My budget uses the federal stimulus money as it was intended – to preserve and create jobs. It includes tax reform policies that will make Rhode Island more tax friendly, competitive and will grow our economy," said Carcieri. Under the governor’s FY 2010 budget, the corporate income tax would be reduced from 9.0 percent to 7.5 percent, effective January 1, 2010. The corporate tax rate would continue to be phased out in stages, with the complete elimination of the tax by January 1, 2014.[4]

In early April Gov. Carcieri announced that he would not veto the legislature’s $7.2 billion budget; however, he added that he would not sign the document either. Instead the budget would become law without his signature. “While the supplemental budget contains nearly 90 percent of my proposed budget, I will not sign it because it does not include the statutory pension reforms which are absolutely necessary to ensure sustainability,” Carcieri said.[5]

Republicans

Even with the state's need to close a large budget gap, some Republican lawmakers said that they were not content with some of the drastic budget cuts, including the elimination of state aid to cities and towns. Rep. John Loughlin proposed increasing the funding by tapping the state's rainy day fund. "Last time I checked, unemployment's in double digits in Rhode Island," Loughlin said. "It's raining. We need this money for our communities ... We can't lay off any more teachers and firefighters. We can't cut our municipalities anymore." Loughlin's proposal was shot down.[13] In an effort to raise new revenue in the state some state lawmakers proposed a gas tax increase; however, the legislature decided to wait to see what neighboring states planned to do in terms of an increase. House Minority Leader Robert Watson called the delay "cynical" and a maneuver to allow for enough time to quiet the opposition before moving ahead with a potentially larger tax increase. “We’re raising your taxes, trust me … [and] the fact that it was done in secret without any real meaningful dialogue, and the fact that we only held it back because we took a wall of criticism justifiably… [and] we held off because we want to overreach even beyond that, that’s offensive, it’s cynical. And it’s embarrassing,” Watson said.[14]

Democrats

The FY 2010 budget plan by Democratic lawmakers proposed several changes, including budget cuts and tax increases. Lawmakers warned that this might not be enough. "The way things are going, we don't need a rainy day fund, we need a typhoon fund," Sen. Daniel Da Ponte. In reaction to the approved supplemental 2009 budget, Democratic lawmakers restored half of the previously removed state aid to cities and towns. However, Sen. Frank Ciccone III warned, "There is no more money to go around." Under the budget bill, the state's cigarette tax would increase by $1 to $3.46 per package.[15] Additionally, lawmakers discussed a gas tax increase to stave off service cuts at the Rhode Island Public Transit Authority and repair local roads, said Rep. Steven Costantino. "I don't think any of us like to increase taxes," Costantino said. "You have potholes right now in streets. You can't wait four months from now and decide, 'Oh, we're going to fix them.'" However, in an effort to reduce state expenditures, the governor recommended reforms to the state's pension system. Democrats rejected the changes that Carcieri wanted to make to the state employee pension system, including setting a minimum retirement age and eliminating annual cost-of-living adjustments.[16]

State aid to cities and towns

In 2009 the state legislature proposed a supplemental budget to help close FY 2009's budget gap; however, on March 29, 2009 a group of mayors argued against the proposition. The bill recommended cutting $55 million in state aid to cities and towns for the next three months and to tax unemployment benefits. Providence Mayor David Cicilline said that the tax on unemployment benefits would be a strong blow to people "who are already facing the indignity of not being able to find a job.” Instead, Cicilline suggested that the legislature adopt pension reform. “I’ve got three months to find $3.5 million in cuts, and there’s no way to do it,” said Johnston Mayor Joseph Polisena. “The state has a bad budget. Don’t make 39 bad budgets.” One of the problems, said the mayors, was that the budget proposal didn't give communities the ability to control minimum staffing levels. North Providence Mayor Charles A. Lombardi noted that without the ability to make minimum staff changes, budget cuts were going to be tough to complete.[17]

"The General Assembly has chosen to avoid making the tough decisions while tying the hands of cities and towns and raising taxes. By eliminating the $55 million in general revenue sharing to cities and towns, without providing them with the tools they need to balance their budgets, they are left with no other choices but layoffs, severe cuts to municipal services, or large property tax increases," said Gov. Carcieri of the legislature's supplemental budget.[18] In April 2009 lawmakers restored approximately half of the $55 million in state funding to the cities and towns.[13]

Economic stimulus package

Rhode Island was expected to receive $1.08 billion from the $787 billion dollar economic stimulus.[19] All told, the federal stimulus plan would create or save 12,000 jobs in Rhode Island, based on White House estimates.[20]

According to preliminary reports, Rhode Island was expected to receive:

  • $3.4 million would be used towards local train stations[21]
  • $165 million in stabilization funds[22]
  • $135 million towards public school and three public colleges[22]
  • $11 million for the Providence VA Medical Center[23]
  • $17 million to retrain workers and employ youth[24]

Budget transparency

Rhode Island began posting its checkbook register online in February 2008. The site was created using existing monies within the state budget.[25] It allows citizens to view the Treasury's Accounts Payable expenditures.[26] The checkbook register was posted by the Treasurer of Rhode Island, Frank T. Caprio, as fulfillment of his campaign promise made in 2006:

"This pilot project achieves a key priority of my administration. Our hope is that the Office of the General Treasurer's transparency site will quickly become the model for state and local government in their efforts to be more accessible and accountable to the taxpayers of Rhode Island," Treasurer Caprio said.[26]

The site also contains information on the current year's fiscal statement, budgets and some general salary data.[27] The state also had various Independent transparency sites.

Rhode Island's Department of Administration began posting its expenses online in February 2009.[28] Other departments and government offices have since since posted their spending records online as well.

Economic stimulus transparency

  • The Economic Recovery and Reinvestment Act of 2009 designated $787 billion to be spent throughout the nation. Of that $787 billion stimulus package, it was estimated that 69%, or over $541 billion, would be administered by state governments.[29]
  • Rhode Island was expected to receive an estimated $697,905,208.[30]

Independent transparency sites

The Ocean State Policy Research Institute has launched a transparency website called the Transparency Train that provides access to a variety of websites designed to present public information in a Google-style searchable format.

The Rhode Island Statewide Coalition Foundation maintains a transparency website called TheMoneyTrail.org, as well as RhodeIslandVotes.org, which displays comprehensive legislation and voting records.

The Ocean State Policy Research Institute established a transparency website dedicated to tracking the federal stimulus money coming into the state. RI Stimulus Watch provides users with information on all public projects being funded by the federal stimulus money and allows the public to vote on whether they support each project, as well as to post comments. Projects can be sorted by cost, location, and most/least critical (based on user ratings).

Public employee salary information

See also: Rhode Island state government salary

See also

External links

Additional reading

References

  1. Associated Press, "Cigarette, fuel tax hikes in RI budget plan," March 28,2009
  2. Center on Budget and Policy Priorities, "State budget troubles worsen," March 13,2009
  3. 3.0 3.1 The Providence Journal, "Rhode Island unemployment rate hits 10 percent," January 23,2009
  4. 4.0 4.1 Gov. Carcieri, "FY 2010 Budget to Include Major Tax Reforms Amendments to FY 2009 Budget Partially Restores Local Aid and Averts Reductions to Critical Social Programs," March 10,2009
  5. 5.0 5.1 The Providence Journal, "Carcieri lets budget stand without signature or veto," April 8,2009
  6. Associated Press, "Nursing homes in R.I. bracing for worker cuts," April 19,2009
  7. 7.0 7.1 7.2 7.3 The Providence Journal, "R.I. House Finance panel OKs its own plan to fill state budget holes," March 28,2009
  8. The Brown Daily Herald, "City faces deadline to solve budget woes," April 14,2009
  9. State of Rhode Island, "Budget process primer," accessed April 19,2009 (dead link)
  10. 10.00 10.01 10.02 10.03 10.04 10.05 10.06 10.07 10.08 10.09 10.10 10.11 10.12 10.13 10.14 10.15 10.16 10.17 10.18 10.19 US Government Spending, "Rhode Island State and Local spending," accessed April 15,2009
  11. WPRI, "State loses tax revenue in bad economy," March 25,2009 (dead link)
  12. The Providence Journal, "Groups seek improved reports on R.I. tax-breaks," April 10,2009
  13. 13.0 13.1 Associated Press, "RI lawmakers restore some money for cities, towns," April 2,2009
  14. The Providence Journal, "Measure to close R.I. budget deficit OK’d by House," April 2,2009
  15. Associated Press, "RI Senate approves $7.3B budget making deep cuts," April 2,2009 (dead link)
  16. Associated Press, "Cigarette, fuel tax hikes in RI budget plan," March 27,2009
  17. The Providence Journal, "Mayors call for Assembly to revamp supplemental budget," March 30,2009
  18. Gov. Carcieri, "Governor Carcieri Blasts General Assembly FY 2009 Supplemental Budget Proposal," March 26,2009
  19. State of Rhode Island, "Frequently Asked Questions-Economic Recovery and Reinvestment," accessed April 15,2009
  20. American Recovery and Reinvestment Act, "Impact," accessed April 15,2009
  21. The Providence Journal, "In R.I., $3.4 million of the federal stimulus package for train stations," March 27,2009
  22. 22.0 22.1 Providence Journal, "Stimulus money for Rhode Island's public colleges at risk," March 24,2009
  23. Associated Press, "RI Veterans Centers Getting Stimulus Funds," March 28,2009
  24. Associated Press, "R.I. gets $17M to train unemployed workers, youth," March 30,2009
  25. Rhode Island State Treasurer, How much did this project cost?
  26. 26.0 26.1 Rhode Island.gov, Treasurer Caprio Debuts State's First Ever Online, Real-time Checkbook of State Spending, Feb. 9, 2009
  27. Rhode Island Treasurer, 2009 Budget
  28. RI.gov, "Department of Administration Launches Transparency Portal," 02/16/2009
  29. National Taxpayers Union, "A Letter to the Nation's Governors: Ensure Transparency and Accountability by Posting Stimulus Expenditures Online," March 10, 2009
  30. Wall Street Journal, "Stimulus spending by state," April 9,2009