As government coffers shrink, financial tensions between Rhode Island municipal and state leaders are growing.
The Rhode Island League of Cities and Towns recently criticized the Raimondo administration for withholding federal stimulus money and short-changing municipalities on shared revenue, exacerbating the financial woes cities and towns are facing amid the COVID-19 pandemic.
“Between the cost of the response and the revenue shortfalls, it’s a double whammy,” said Brian Daniels, the league’s executive director.
A recent survey by the National League of Cities indicated Rhode Island was one of three states – along with New York and New Jersey – not to share any of the funds from the federal Coronavirus Aid, Relief, and Economic Security Act with local communities. Rhode Island’s federal stimulus package amounted to $1.25 billion.
The state also withheld $56.8 million in fiscal year 2020 revenue from municipalities, mostly car tax reimbursements and the Payments In Lieu Of Taxes made by government entities and nonprofits that do not pay property taxes. Rather than the nearly $68 million in PILOT money and car tax revenue expected on July 31, the state distributed $11 million, announcing its decision the day before payments were made.
Cranston Mayor Allan W. Fung, a political rival of Gov. Gina M. Raimondo, described this as “just plain wrong,” noting that the roughly $6 million due to Cranston – the second-largest amount of any municipality – will impact not only the city’s current cash flow but its ability to balance its fiscal 2020 budget that ended June 30.
“This was one area where we did not anticipate an issue,” said East Greenwich Town Manager Andrew Nota. “If the state would have coordinated with us a month ago, we would have at least known it was coming.”
In a letter to the R.I. Division of Municipal Finance shared with Providence Business News, Thomas A. Mullaney, state budget officer and executive director for the R.I. Office of Budget and Management, explained the decision to share only a month of tax revenue with municipalities, rather than a full year, as a function of uncertainty around the fiscal 2021 budget. Once the General Assembly passes a fiscal 2021 spending plan, the state will pay the balance of shared revenue to municipalities, he wrote.
As for the decision not to share federal stimulus money with local communities, an R.I. Department of Administration spokesperson pointed to many other programs and spending that have helped municipalities indirectly, including aid to local school districts, a new workforce training program, COVID-19 testing and state contracts awarded to small businesses.
While Nota and Fung said their municipalities would survive the short-term financial hit, providing they eventually get the rest of the shared revenue, the bigger issue is lack of including cities and towns in important state financial decisions, they said.
Raimondo recently spoke with municipal leaders and agreed to improve communications, Daniels said.
“What’s frustrating is when we’re asked to help do enforcement but not be at the table when they’re distributing federal aid,” Daniels said. “It sometimes feels like a one-way relationship.”
Nancy Lavin is a PBN staff writer. Contact her at Lavin@PBN.com.