PROVIDENCE – The R.I. Public Expenditure Council urges the General Assembly to show fiscal restraint
as the state faces looming deficits that could exceed a quarter-billion dollars by 2027.
In its analysis of Gov. Daniel J. McKee’s $13.68 billion fiscal year 2025 budget proposal released Thursday, RIPEC anticipates an opening surplus of $195.9 million for fiscal 2025 but this fiscal endowment will be short-lived unless spending is curtailed, RIPEC said.
McKee’s proposal is a 2.8% overall decrease from the fiscal 2024 state budget; however, state general revenues have only grown 2.6% over fiscal 2024 and are projected to grow 2.9% annually, “dramatically lower” than the 6.4% annual growth rate over the previous five fiscal years, according to RIPEC.
Characterizing the budget as a “transitional spending plan between a series of budgets flush with abundant federal pandemic relief funding and more challenging fiscal times ahead," the report cites the administration's own projections of a roughly $250 million deficit for fiscal year 2026 and $265.4 million in fiscal year 2027.
RIPEC said a contributing factor to structural deficits is McKee's proposed surplus spending and the reallocation of $40 million in State Fiscal Recovery Funds to cover operating expenses for the R.I. Department of Corrections and the R.I. Public Transit Authority.
The strategy “does not fully reflect the more difficult budgetary choices anticipated in the next fiscal year and beyond,” said RIPEC President and CEO Michael DiBiase.
McKee's budget includes no changes to the broad-based tax regime and 15,725 full-time state government positions, representing the highest level of authorized positions since 2008, according to RIPEC.
Adding to the fiscal challenges is the rising costs of health and human services, driven largely by Medicaid spending, which has grown 9% on average since 2019 and now encompasses close to one-third of all general revenue expenditures. Plus, spending from the Division of Developmental Disabilities has increased by more than 82% since 2021 despite no growth in the population it serves.
RIPEC said that transportation will continue to be “a critical long-term fiscal challenge,” exacerbated by the close of the Washington Bridge, while state gas tax revenues – the largest funding source for transportation – are projected to decrease from $157.2 million in fiscal 2024 to $146 million in 2028. Pending the resolution of an ongoing federal court case, the loss of truck tolling revenue for fiscal 2025 is $40 million.
State housing investments have been buoyed by federal dollars since 2021, and McKee has proposed a record $100 million housing bond be put before voters in November.
But more will be needed, RIPEC finds. Its analysis projects that $85 million of the bond will produce 431 net new affordable rental units and 193 net new affordable homes.
Indeed, the report said that state investments to date will net only 1,616 new affordable units due to “rapidly rising development costs” and subsidy requirements that are approaching between $500,000 and $150,000 per unit, respectively.
RIPEC recommends the General Assembly "resist proposals to increase broad-based taxes" while curtailing spending growth in health and human services, developing a “sustainable finance plan for transportation” by identifying alternative revenue sources, and shifting more dollars to affordable housing "while improving return on investment."
Christopher Allen is a PBN staff writer. You may contact him at Allen@PBN.com.
