RIPEC projects R.I. budget gap of $150M to $175M

PROVIDENCE – In its mid-year forecast, the Rhode Island Public Expenditure Council predicts a state budget shortfall of $150 million to $175 million in the current budget year and $380 million to $450 million in fiscal 2009.
Revenue will fall short of expectations by $113.4 million this budget year (fiscal 2008) and $116.4 million the following year, according to projections from the November 2007 Estimating Conference, RIPEC said. Personal income taxes will yield $3.36 billion in fiscal 2008, coming up $10.9 million or 3.3 percent short of what the budget anticipates, while business taxes will yield $10.9 million less and sales taxes $43.7 million less than expected, RIPEC said.
“Coupled with increased state costs for cash and medical assistance programs, out-year budget deficits are projected to be greater than previous estimates,” the conference report said.
The economy will grow more than previously anticipated in the current economic year, analysts said, boosting their projections for employment growth through 2010. The unemployment rate also is expected to better the group’s May estimates, staying at 4.8 to 5.0 percent through 2010.
But long-term projections call for “a slowdown in growth at both the national and state levels, driven by steady but slow job growth, high oil prices and the real estate market decline.” The report boosted the estimate for personal income growth in fiscal 2008 to 4.9 percent, from the previous 4.5 percent. But it cut the estimate for fiscal 2009 by 0.6 percentage points to 4.3 percent, and pared the estimate for growth in 2010 by 0.4 percentage points to 4.5 percent.
Consumer price increases are expected to shrink from 2.6 percent in fiscal 2007 to 2.0 percent in 2010, and to be lower than previous estimates in all but the final year.
Meanwhile, though caseloads for the Family Independence Program and Child Care will continue to decline, the cost per person will be slightly higher than in previous estimates, RIPEC said. And caseloads for both Supplemental Security Income (SSI) and General Public Assistance “are slightly up,” RIPEC said. Total costs for those cash-assistance programs are estimated at $142.6 million in fiscal 2008, including $57.9 million from the state’s general revenue fund – or $3.0 million more than enacted – and $140.3 million in 2009, with $55.9 million from general revenue.
Medicaid spending administered by the R.I. Department of Human Services also will increase above that in the enacted budget, rising 1.5 percent to $1.39 billion in fiscal 2008 and 6.9 percent to $1.48 billion in 2009, the forecasters said. General revenue spending on the program is projected to exceed the current fiscal year’s $667.4 million allotment by 2.9 percent in fiscal 2008 and 6.8 percent in fiscal 2009.
The estimates assume a decrease in federal funding under the State Children’s Health Insurance Plan as more states suffer SCHIP shortfalls, RIPEC said.
The Rhode Island Public Expenditure Council is a nonpartisan, business-backed nonprofit public policy research and education organization. To learn more, visit www.ripec.com.