Dear Neighbors:
As our country approaches its 250th anniversary, I recommend highly the PBS series on the American revolution you can view by clicking here. It reminds me of the values our country stands for, as they are tested in current events. In this week’s letter I will discuss the State’s initial analysis of the budgetary and programmatic impacts on State government programs triggered by the reconciliation bill passed by Congress earlier this year.
Earlier this fall, the Governor’s office announced the publication of a series of reports analyzing the impacts Rhode Islanders will sustain from the passage of the H.R. 1 (a.k.a. the “One Big [ ] Bill Act”) and numerous executive orders freezing or terminating federal funding of State programs.
A. Reductions in Food Stamps and Medicaid
1. Supplemental Nutrition Assistance Program (Food Stamps of “SNAP”)
The EOHHS Report from the Executive Office of Health and Human Services analyzes reductions in the SNAP program, which served 145,000 Rhode Islanders last year, at a total program cost (federal and state) of $347 million. H.R. 1 will reduce eligible recipients by as many as 14,000, and may increase the State’s contribution by as much as $73 million in order to maintain the current level of service as a result of the State’s high “error rate” in failing to target food stamps exclusively and completely to Rhode Islanders who are eligible under the program’s guidelines.
2. Medicaid
H.R. 1 will reduce health insurance subsidies for thousands of Rhode Islanders while also reducing federal aid to the State’s Medicaid program by tens of millions of dollars. For example, H.R. 1 will reduce the “provider tax” through which the State receives federal Medicaid dollars via a pass-through flow of funds through hospitals in amounts that increase from $12 million in fiscal year 2028 to $91.3 million in fiscal year 2032. The Report projects the overall program reduction in federal funding to increase from $80.1 million next year to more than $300 million in fiscal year ending 2030.
B. Canceled and Suspended Federal Grants
The Report from the Office of Management and Budget tabulates dozens of federal grants to State agencies in a broad array of areas such as education, business development and the environment that have been either terminated or suspended. Added together, these reductions amount to more than $11 million terminated and $124 million suspended (subject to further federal review and/or court challenges). These funding cuts cover a broad range of programs in such areas as immunizations, special education, clean energy and coastal resilience.
C. Reductions In Tax Revenue
The Department of Revenue (DOR) prepared a Revenue Report that documents the impact of the federal bill’s changes on our State’s revenues. While the General Assembly passed legislation in June to decouple the Rhode Island income tax from reductions anticipated in the federal package, other changes remain that DOR projects will reduce tax receipts by roughly $35 million during both this fiscal year next year. Most of them ($22.8 million) reduce corporate income tax collections due to accelerated and increased deductions.
D. The Pre-existing Structural Budget Deficit
Before accounting for these federal cuts, we already knew of significant stresses on the coming year’s State budget. When presenting his budget in January, the Governor projected a “structural deficit” for next year’s budget of $300 million. While changes in policy and subsequent financial data have reduced that projection, it remains the case that the projected gap between revenues and expenses requires the State to set priorities for the coming year, and (at least in my opinion) make difficult choices to ensure a more fiscally sustainable path going forward.
E. A Sustainable, Long-Term Approach
This year’s budget outlook reminds me of the challenges our City faced in 2011, when I first joined the Council and Mayor Taveras presented a plan to address the “Category 5 fiscal hurricane.” His plan combined program and staffing reductions, revenue increases, collective bargaining concessions, pension reform and increased support from nonprofits. Different constituencies opposed each individual initiative because they did not want the City to balance the budget “on their back.” As a whole, the package provided near universal “shared sacrifice” across all of these constituences to advance the goal of fiscal stability in both the short and medium term.
Following the mantra (attributed to Rahm Emanuel) of “Never allowing a crisis to go to waste,” I will advocate for our State government follow the City’s 2011 example by addressing the coming year’s budget challenges in a comprenesive, longer-term sustainable manner.