A Rhode Island watchdog organization that monitors government spending is charging state legislators with fiscal irresponsibility in drafting the budget for the next fiscal year.
The Rhode Island Public Expenditure Council, an independent public policy research organization, said the fiscal year 2003 budget will create long-term fiscal shortfalls in Rhode Island.
“The budget as presented, while certainly balancing the ’02 and ’03 budgets, will not solve long-term challenges over the next five to six years,” said Peter Marino, director of policy for RIPEC. “This is proven out in the state’s five-year forecast, which [predicts] operating deficits of $150 million or more over the next five years. The degree of spending is simply outpacing the rate revenues coming into state coffers.”
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The budget, enacted on June 12 by the General Assembly after an override of Governor Lincoln Almond’s veto, essentially level-funds general revenue appropriations, relying on the implementation of a number of cost-saving initiatives to balance the budget.
Operating deficits will be avoided by increasing the state’s gasoline tax and other fees, and by tapping into nearly $544.2 million of the state’s one-time tobacco settlement bond money.
In passing the budget into law, the General Assembly directed the governor’s office to develop budget reduction plans totaling 2 percent of each department’s personnel costs, 5 percent of operating costs and 10 percent of contracted services. The budget prohibited the governor from reducing expenditures in other areas of the budget, such as local aid, grants or capital projects.
But the budget does not specify which programs should be modified to reduce costs, where personnel reductions should be made, or where reductions should be made in contracted services. These decisions are left to the administration, which identified spending reductions totaling $25.7 million last week.
Citing the House Fiscal Office as the source of its information, RIPEC said that if all the proposed cost-saving initiatives are implemented in fiscal year 2003, the state will still face an estimated $110 million operating deficit in fiscal year 2004.
“Unless decision makers demonstrate the political will to make the needed tough fiscal choices, the opportunity to finance critically important public investments in our people and infrastructure may be put in harm’s way. We again may be witnessing the fiscal health of the Ocean State unravel,” RIPEC states in a bulletin analyzing the budget.
Governor Almond called the Fiscal Year 2003 budget “a fiscal nightmare, a policy disaster and constitutional crisis” when he vetoed it on June 3.
“Because of the overspending in this budget, my successor will be left with a budget hole of over $200 million to confront on inauguration day,” Almond said in his veto message to the House of Representatives.
Like RIPEC, Almond also said that the budget relies too heavily on the tobacco settlement revenues over the next 13 months, Almond said. He had proposed using up to $300 million that Rhode Island secured as part of a lawsuit settlement between several states and the tobacco industry to pay down state debt. Under Almond’s plan, the remainder would be used over a multi-year period, so that as the economy rebounded, the state’s use of the tobacco money would wane.
“If we had put this money into a surplus fund, we would not be facing the fiscal issues we have today, nor would we need to be draining all of our tobacco settlement funds,” he said.
Almond also cited the increased auto excise tax exemption as another reason he has vetoed the budget. Since the inception of this tax phase-out in 1998, Almond has warned about the affordability of the program, noting that it has cost the state over $350 million.
On July 26, Governor Almond issued an executive order that continues restrictions on state hiring, purchasing and other spending.
