Home Economy Economic Activity RIPEC: State budget has increased 10.9% over last 2 years

RIPEC: State budget has increased 10.9% over last 2 years

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PBN Staff

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08/21/2025

IN ITS ANALYSIS of the state’s fiscal 2026 budget, the Rhode Island Public Expenditure Council said state spending has grown 10.9% over the last two fiscal years, despite revenue only increasing by 6.4% during that same time.

PROVIDENCE – State spending continues to expand at a relatively high rate despite slowing general revenue and the uncertainty of future federal funding, the Rhode Island Public Expenditure Council warns in its latest report. In its analysis released Wednesday of the state’s fiscal 2026 budget, the nonprofit public policy research organization found that state

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PROVIDENCE – State spending continues to expand at a relatively high rate despite slowing general revenue and the uncertainty of future federal funding, the Rhode Island Public Expenditure Council warns in its latest report. In its analysis released Wednesday of the state’s fiscal 2026 budget, the nonprofit public policy research organization found that state spending has grown 10.9% over the last two fiscal years despite revenue only increasing by 6.4% during that time. The jump in spending over the past several years was driven in large part by the growth in federal aid, but also by robust growth in expenditures from state general revenue, RIPEC said. However, RIPEC warns, much of the increased spending in the fiscal 2026 budget is supported by one-time surplus funds – resulting in large and growing projected future deficits. Health and human services and education spending helped push the state’s fiscal 2026 budget to $14.3 billion, RIPEC said. Medicaid expenditures increased 8.4% from fiscal 2025 to $377.9 million, while general revenue spending on K-12 education grew by 4.4%, and by 5.3% on a per-pupil basis, in fiscal 2026. “Total Medicaid spending in Rhode Island’s state budget has increased from $2.93 billion in fiscal year 2019 to $4.90 billion in the fiscal year 2026 enacted budget – a 9.6% average annual increase,” RIPEC said. “The largest part of the state budget, health and human services, and particularly Medicaid, has seen enormous spending increases over the last several years, including in the fiscal year 2026 enacted budget. Given that federal resources for Medicaid will be constrained, state policymakers should turn their focus to addressing health care costs, including through better transparency and data reporting as to the drivers of spending.” Personnel spending also jumped 4.9% to $65.3 million in fiscal 2026 due to new collective bargaining agreements and continued growth in authorized and filled state employees, RIPEC said. To support in the increased spending, RIPEC said the General Assembly relied on a one-time general revenue surplus of $230.2 million, contributing to a structural budget deficit projected at $304.3 million in fiscal 2027 and growing to $462.1 million by year 2030. Also, the General Assembly relied on several revenue initiatives to fund increased spending, including a health services assessment, a gas tax increase, a real estate conveyance tax increase and new fees on electric and hybrid vehicles. RIPEC recommends that the state should avoid tax increases and bring spending growth in line with available resources. “State general revenues are expected to increase by only 1.5%, from fiscal year 2025 to fiscal year 2026, yet general revenue appropriations grew by 3.8%, as one-time surplus funds were again used for recurring spending – leading to a large projected deficit for fiscal year 2027,” RIPEC said. “The state needs to live within its means by addressing spending growth, particularly in the areas of health and human services and K-12 education.” RIPEC also said the state should focus on and pursue comprehensive reform of school funding to make state spending on K-12 education more sustainable and equitable and require meaningful local contributions. “General revenue spending on K-12 education in the fiscal year 2026 enacted budget grew at a rate faster than overall general revenue spending, yet the funding fails to deliver more equitable support for urban communities,” RIPEC said. “The state has long been in need of comprehensive reform of school funding to better target state funding to urban core communities and to require more meaningful local spending commitments.” RIPEC concluded that state policymakers should seek to constrain the growth in spending on personnel in future budgets and should focus on more transparent and accountable evaluation of the effectiveness of state programs. “The [fiscal year 2026] budget adds new tools to improve program integrity and tax collections, but a lack of public transparency on program evaluations makes it hard to assess how effectively state funds are used,” RIPEC said.