February is Black History Month, and there are many opportunities to learn about this vital part of Rhode Island’s heritage. I recommend, as an introduction, this self-guided walking tour in Providence compiled by the Center for Reconciliation. For a deeper dive that includes more of Providence as well as the rest of the State, I recommend the On the Rhode to Freedom guide published by the Stages of Freedom organization. You can find another helpful collection in this Providence Journal article. In this week’s letter, I discuss the Governor’s budget and the Washington Bridge project.
A. The Governor’s Budget
1. The Structural Deficit
Data compiled by the Revenue and Caseload Estimating Conferences project that a hypothetical “status quo” budget for next year that continued the same structure of State programs and revenue sources in this year’s budget would produce a structural deficit of roughly $300 million. The Governor’s budget proposes ways to close that gap without increasing broad-based taxes, while also introducing new initiatives. As noted in my January 19 letter, one such measure is to cut the RIPTA budget by $32.5 million, which is not realistic and undoubtedly will be changed.
The Senate Finance Committee learned of four additional measures at its February 4 hearing:
2. Four One-Time Revenue Patches To Close The Structural Deficit
The first three are “scoops” in which money in dedicated funds (in this case the Rhode Island Infrastructure Bank, the Rhode Island Student Loan Authority and the Underground Storage Tank Fund) are “scooped” for use by the general fund in the amounts of $2 million, $2.7 million and $3 million, respectively. The Director of the Student Loan Authority testified that the program depends upon financing, the cost of which is based on the Authority’s fiscal position. As a result, diversion of Authority funds to the general fund could impair the reach and, ultimately, the sustainability of this program
The fourth is to reclaim $43.3 million of excess revenue from fiscal 2024, which previously had been designated to be split 50/50 between a supplemental “rainy day” fund and a contribution to the employee retirement system. I was not surprised to hear the testimony of labor and retirees protesting the possible reversal of a commitment to fund the State’s retirement program to ensure a sufficient funding level to restore cost of living adjustments.
3. Lessons From Providence’s Category Five Fiscal Hurricane
While I understand the Governor’s goal of balancing the budget without broad-based tax increases, this budget’s use of one-time revenue patches concerns me. I am reminded of my first year on the Providence City Council in 2011, when Providence faced a liquidity crisis that newly elected Mayor Taveras called a “Category 5 Fiscal Hurricane.” That budget contained a $110 million structural deficit to close. In previous years, the City had balanced its budgets by liquidating tens of millions of dollars of reserve funds, but they were now all depleted. In 2011, the City had to “face the music” of lacking any additional short-term fixes. Mayor Taveras developed a package of long-term measures, including reductions in departmental budgets, concessions from public sector labor unions, pension reform and a tax increase. He persuaded all of those stakeholders to accept “shared sacrifice” on the premise that everyone was participating, and that the budget was not being balanced “on the back” of any particular group or groups.
4. Conclusion
I do not believe that the State of Rhode Island is facing a Category Five fiscal hurricane. With that said, I am concerned about excessive reliance on one-time measures to balance this year’s budget, as this practice is not sustainable over time.
B. The Washington Bridge
Last Friday, RIDOT issued this Update describing the impacts of demolition work on the Washington Bridge over the next two weeks. On Thursday, the House and Senate Oversight Committees will hold a brief hearing to receive an update from RIDOT.