Home Economy RIPEC urges fiscal ‘restraint’ for FY 2025 state budget

RIPEC urges fiscal ‘restraint’ for FY 2025 state budget

By

Christopher Allen

-

01/12/2024

Michael-DiBiase — THE RHODE ISLAND PUBLIC EXPENDITURE COUNCIL on Friday recommended reigning in spending growth in its analysis of the state’s fiscal outlook as lawmakers begin to craft the 2025 state budget. / COURTESY NEW HARBOR GROUP

PROVIDENCE – With the historic infusion of federal revenues from pandemic relief programs expiring and a reversal of record state revenue surpluses, the state’s general revenues are growing at a slower rate, the R.I. Public Expenditure Council said Friday in its report examining Rhode Island’s fiscal outlook in anticipation of the 2025 state budget. Micheal DiBiase,

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PROVIDENCE – With the historic infusion of federal revenues from pandemic relief programs expiring and a reversal of record state revenue surpluses, the state’s general revenues are growing at a slower rate, the R.I. Public Expenditure Council said Friday in its report examining Rhode Island's fiscal outlook in anticipation of the 2025 state budget. Micheal DiBiase, RIPEC president and CEO, said state finances are in a “major transition point” and are “entering a period of fiscal restraint.” “The challenge for the governor and General Assembly will be managing spending expectations set when the state was flush with money, while also needing to tackle serious policy needs in vital areas which include healthcare, education, transportation and housing,” he said. “The needs and expectations in these areas versus the available resources are going to create budgetary pressures.” State spending surged post-pandemic, reflecting the record $14 billion fiscal 2024 budget, a 46% increase over fiscal 2019. Federal sources jumped from $3.2 billion to $5.64 billion over the same time. And state expenditures grew 37%. State estimates now project the average growth rate for general revenue from 2024 through 2028 will be 3%, less than half the 7.4% annual average during the preceding four years. On the expenditure side, general revenue spending on K-12 education has jumped 26% since 2019, or $309 million. RIPEC also pointed out that 37% of total general revenue spending in the fiscal 2024 budget was dedicated to health and human services, “the single largest and fastest-growing component of the state budget” that has grown dramatically over the past five years, according to the analysis, with Medicaid making up 71% of total expenditures for health and human services, increasing 45% between 2019 and 2024 and surpassing the overall spending growth rate of 37%. “Despite this large jump in state spending on Medicaid, there is considerable pressure to increase provider rates, which would further increase Medicaid costs,” said DiBiase, suggesting that increasing these rates "would not appear to be affordable absent major changes to the health delivery system.” The state is also investing heavily in increasing the housing supply, a costly initiative given the price-tag for one affordable housing unit is close to $500,000, according to RIPEC, which projects the state's recent allocations will produce approximately 2,340 units, or 10% of the state's estimated need of 24,000, said DiBiase. RIPEC recommends steering clear of spending commitments beyond available resources and curtailing spending growth; streamlining programs and improving returns on investments; increasing Medicaid reimbursement rates in a strategic manner; pursuing comprehensive reform of the school funding formula; developing a sustainable finance plan for transportation; and develop a more sustainable plan to the development of affordable housing by exploring more efficient models and encouraging land use reform. Christopher Allen is a PBN staff writer. You may contact him at Allen@pbn.com