Dear Neighbors:
Three days ago, we celebrated Rhode Island Statehood day, harking back to our joining the Union on May 29, 1790. Just as Rhode Island was the first state to declare independence, so were we the last of the original 13 colonies to ratify the Constitution. Many of the issues why Rhode Island was reluctant to join the Union (earning contempt from the other United States) involved financial disputes. With that in mind, I will provide in this week’s letter an update on the State budget.
Last Thursday night, the Finance Committee completed its review of Senate finance bills, as well as the Governor’s budget (subject perhaps to some last-minute amendments). In the coming weeks (perhaps as soon as the end of this week), the House Finance Committee will present its proposed legislative budget, beginning the home stretch of this year’s session. That budget will be presented for approval to the full Rhode Island House of Representatives within a week, and from there it will go (as amended) to the Senate Finance Committee and the full Senate, which typically will review the budget along with many other bills on the last night of the session.
While we wait for the House Finance Committee to approve its recommended budget, I can offer some initial thoughts about the challenges the General Assembly will face in revising the Governor’s budget to (1) fill in gaps to bring it into balance and (2) address needs that the Governor’s budget did not meet adequately. I also will discuss future budgetary challenges and the General Assembly’s response.
1. Gaps In The Governor’s Budget
Although the May Revenue and Estimating Conference concluded that the projected revenues and expenses would provide a net $80.2 million in available funds beyond those appropriated in the Governor’s budget, the Finance Committee’s review of that budget revealed what I estimate to be more than $125 million in gaps (as listed in this Chart). In other words, the General Assembly will have to find a combination of $45 million in cost savings and new revenues to bring the Governor’s budget into balance.
2. Unmet Needs
As described in my April 27 letter, the State is facing a drastic shortage of primary care physicians, as part of a broader stress on our health care system generally, including but not limited to hospitals, community health centers and nursing homes. It will be possible to provide some relief through regulatory reform (such as reducing prior authorization requirements), the most direct solutions involve expenditures of additional tens of millions of dollars of State funds, through greater Medicaid reimbursement, funded residencies for new health care providers and scholarships for medical and nursing students.
3. Future Challenges
On top of this difficult combination of budgetary gaps to fill and unmet needs, the federal budget currently under consideration in Washington appears poised to shift new and substantial financial burdens onto State government. As summarized in this analysis, Congress is considering substantial Medicaid cuts that could reduce significantly federal funding, which in 2022 provided roughly $2 billion of Rhode Island’s $3 billion program. The current version of the reconciliation bill also contains reductions in the Supplemental Nutrition Assistance Program, which according to this Bulletin, could reduce Rhode Island’s annual share by as much as $100 million. We will not know the final content of the federal budget before the General Assembly adjourns.
4. The General Assembly’s Response
In Senate Finance Committee hearings, we learned about possible responses, including several possible funding sources for RIPTA, and different broad-based taxes to increase general revenue. Over the past few weeks, leadership in the House and Senate have discussed possible solutions to these budgetary challenges. The House Finance Committee budget will reveal the result of those negotiations. Legislative leaders have stated publicly that they do not expect this year’s budget to anticipate and address changes in federal funding. Instead, the General Assembly may return to session this fall should those changes create new substantial gaps in the State budget.