RIPEC budget outlook: Voters should consider bond impacts

PROVIDENCE – The nonprofit Rhode Island Public Expenditure Council last week released an analysis of Rhode Island’s budget outlook, saying that due to increased revenues and lower-than-anticipated expenditures, the state’s projected opening surplus for fiscal 2015 has been increased to approximately $8.8 million.
The figure is based on the preliminary fiscal 2014 closing, debt position and 2014 ballot questions, according to a press release from RIPEC.

Despite the projected surplus, the state continues to face “significant deficits” as expenditure growth “continues to outpace revenue growth.” RIPEC writes in its report that by fiscal 2019, the state will face a deficit ranging between $390.6 and $428.3 million.

RIPEC stated that the “unknown implications” of public policy changes associated with casino gaming in Massachusetts, state funding sources for HealthSource RI and the state’s expansion of Medicaid, as well as the pending litigation related to the Rhode Island Retirement Security Act also will have unknown fiscal impacts.
According to actuarial estimates released earlier this year by the Employee Retirement System of Rhode Island, the state’s projected fiscal 2016 required pension contributions would be $280 million if the current reforms are upheld in court, a savings of about 45 percent. A complete reversal of the 2011 pension overhaul would result in state annual required contributions of $500 million for the fiscal year ending June 30, 2016, or about 14 percent of the $3.55 billion in state revenue projected for that year, Moody’s said.
Unless the state’s structural deficit is resolved, the state also will continue to have to choose between making investments and relying on short-term financial fixes, RIPEC stated.
As a result, RIPEC is asking residents to consider the four bond proposals on the November ballot in light of the state’s structural deficit, its overall debt position and the fiscal implications of bond repayment. RIPEC did not take a position on the proposals, but advises residents to consider factors including if they improve the labor market.

“Voters should consider the degree to which public investment in the proposed projects has the capacity to strengthen the state’s economy,” John C. Simmons, RIPEC executive director, said in a statement.

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Although the state has made significant improvements in debt management in recent years, it still ranks in the top half of the country for debt per capita and as a share of personal income.

Four of the ballot questions would authorize up to $248 million in new general obligation bond debt on Nov. 4. The total cost of the proposals ranges from $365 to $398 million in additional debt costs, depending on interest cost, RIPEC said. It estimated that yearly costs of the four proposals would be $19.1 million.

The four bond issues are:

  • $125 million for capital projects at the University of Rhode Island for phase I of its engineering building renovations project
  • $35 million to finance capital improvements and renovations at arts and cultural facilities throughout Rhode Island
  • $35 million to improve the state’s mass transit infrastructure, including construction of a new transit hub next to Garrahy Courthouse as well as improvements to facilities in Kennedy Plaza and the Amtrak station in Providence
  • $53 million for environmental and recreation programs.

Read RIPEC’s report HERE.

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