Fed, Moody’s predict $400M-$592M state revenue shortfall for R.I. in FY20

NEW REPORTS from the Federal Reserve Bank of Boston and Moody's Analytics project the state will see revenue shortfall of $400 million to $592 million. / PBN FILE PHOTO/NICOLE DOTZENROD

PROVIDENCE – As state spending soars amid unprecedented unemployment claims and new health care needs, the money coming in from taxes has fallen off substantially.

Just how bad a hit Rhode Island revenue will take due to COVID-19 is unclear, but two new reports project staggering losses ranging from $400 million to $592 million.

The Federal Reserve Bank of Boston’s analysis predicts Rhode Island will see a $400 million to $464 million decline in state revenue in fiscal year 2020 – roughly 10.9% to 12.6% of the $4.1 billion in general revenue anticipated in the current budget year. The range reflects either current levels of unemployment or a higher rate based on current unemployment claim filings.

The report states that the same factors driving reduced economic activity also impact state government revenue, including slashes to room and meal taxes as a result of decreasing tourism, falling personal income taxes as unemployment rises, declining business income taxes as business activity drops and a downturn in sales taxes as consumption falls.

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A separate analysis by Moody’s Analytics shows Rhode Island could lose even more in tax revenue through fiscal year 2021 – $505 million under the “baseline scenario” and $592 million under a more severe set of circumstances. Add in the projected Medicaid spending increase, and the “combined fiscal shock” to state coffers comes in between $630 million and $735 million, according to Moody’s.

The state is expected to release its own revenue shortfall projections as part of the Revenue & Caseload Estimating Conference later this week.

Nancy Lavin is a staff writer for PBN. Contact her at Lavin@pbn.com.

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