RI Lacks a Plan for Curbing "Crippling Effect" of Persistent Budget Deficits

Sep 19, 2013

Rhode Island's budget must be balanced by the end of the legislative session. But projected deficits for the next fiscal year are a constant -- and the long-term outlook is getting worse.
Credit RIPR

Every year, when Rhode Island lawmakers start working on a new budget, they face a spending plan mired in red ink. By law, the budget must be balanced by the end of the legislative session, usually in June. But like a boomerang, projected budget deficits zoom back to Smith Hill by the time the new session starts in January. Next year will no different -- Rhode Island already faces the fiscal year starting in July 2014 with an estimated $149 million hole. And the state lacks a plan for overcoming budget deficits that are projected to get far worse with time.

On Valentine’s Day in 2012, advocates for the developmentally disabled held a Statehouse rally to protest reductions in state funding. Frank Flynn of the Rhode Island Teachers and Allied Professionals union fires up the crowd.

“Since 2008, the Rhode Island General Assembly has cut over $37 million from the developmentally disabled budget, including $24 million in this past budget alone,” Flynn says. “That’s unconscionable.”

Flynn’s union represents workers serving the developmentally disabled at the Trudeau Center in Warwick. The legislature made the $24 million cut to help close a $300 million state budget gap in 2011. Flynn says the cuts undermined important services for some of Rhode Island’s most vulnerable citizens.

“This will set back the progress that Rhode Island has made in this area by decades,” he says. “It’s simply unfair and unjust to target this population.”

The outcry and backlash from multiple years of cutting sparked the General Assembly to restore some of the funding. But from year to year, there’s no telling what else might be cut – or what new fees might be added -- to balance Rhode Island’s budget.

Governor Lincoln Chafee says he’s never been a fan of deficits. But Chafee says the demands of keeping the state going make it nearly impossible to eliminate Rhode Island’s annual battle with red ink.

“All those needs are out there,” Chafee says. “The social services in terms of difficulty for hardworking Rhode Islanders; roads and bridges; our infrastructure. These are the balances we have to make.”

Every year at the General Assembly, a fleet of lobbyists fights to keep the budget from being balanced at the expense of their clients. Instead, the yearly cascades of red ink have been wiped out, for example, by charging Rhode Islanders more to go to the beach, to own and register a car, and by using one-time fixes, like grabbing money from a settlement with tobacco companies. Taxes have been hiked for services -- like taxi rides and pet grooming -- that don’t have powerful advocates.

One longtime budget-watcher, Gary Sasse of Bryant University’s Hassenfeld Institute for Public Leadership, says a budget gap for any given year is not a crisis in and of itself. But the persistent red ink amounts to a larger percentage of the state budget each year -- and that’s a big problem.

“We don’t have the resources to invest in people and in our future, and so the impact is much more than the balance sheet of state government,” Sasse says. “The impact is not being able to compete with other states who are spending more on higher education, who are putting in place tax regiments to lower the cost of business. And so it’s a very debilitating, crippling effect on the economic future of the state.”

Rhode Island’s persistent deficits are due to how state revenue isn’t keeping up with the growing cost of a variety of state programs. By law, the General Assembly has to balance the budget by the end of its session. But it’s been well over a decade since the legislature has closed shop for summer without Rhode Island already facing a projected deficit for the next fiscal year.

Gary Sasse says the General Assembly hasn’t shown the political will necessary to cut Rhode Island’s long-term structural deficit down to size. State projections show that the budget hole is expected to grow to more than $400 million for the fiscal year starting in July 2017.

“We ought to be putting in place a policy and you cannot eliminate the deficit in one or two years – that would be naïve -- but where the slope, the line, is going down,” Sasse says.

House Finance Chairman Helio Melo, an East Providence Democrat, is the lawmaker responsible for shaping the legislative budget process. Melo says he’s concerned about Rhode Island’s persistent budget deficits, and he hopes that economic development initiatives backed by the House of Representatives will bolster state revenue over time.

“Those are things that we need to work on,” Melo says. “We have a tremendous amount of resources here in the state of Rhode Island. We just need to capture those and make it to the best for Rhode Island.”

Melo rejects assertions by the General Assembly’s tiny Republican caucus that Rhode Island has a serious spending problem. He says the ruling legislative Democrats are mindful of how the cost of government programs is outstripping state revenue, while saying it’s important to protect traditional safety net programs.

“We continue on a daily basis to look at the expenditures and we try to control those increases as best we can,” Melo says. “And then revenues, like I said, if we can continue to work forward to increase those percentages, I think we can come out with a balance at some point.”

But state lawmakers don’t have a formal plan for trying to cut Rhode Island’s structural deficit down to size. To make matters worse, one of the state’s largest revenue sources – gambling – is expected to take a big hit when Massachusetts starts cashing in with new casinos. And if a recent study is right, a decline in coming decades of Rhode Island’s working-age population will further reduce state revenue.

So for now the General Assemble may continue to pursue what critics call a muddle-through approach when it comes to dealing with Rhode Island’s latest budget deficit.