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Rhode Island state budget

Rhode Island
Annual
Fiscal Year 2012
Signed into law June 30, 2011
GF Revenue


The Rhode Island legislature approved the $7.7 billion state budget on June 29, 2011,[1] and Gov. Lincoln Chafee signed it the following day, the day before the start of fiscal year 2012.[2]

Rhode Island has a total state debt of approximately $19,497,824,000 when calculated by adding the total of outstanding official debt, pension and other post-employment benefits (OPEB) liabilities, Unemployment Trust Fund loans, and the budget gap. [3]

See also: The Rhode Island State Budget on State Budget Solutions
2011 State spending & deficit in billions[4]
Total spending Human services Education Government Protection Transport Natural Resources
$7.5 $2.96 $2.1 $1.4 $0.45 $0.42 $0.097
2011 Local spending & deficit in billions[5]
Total spending Pension Health care Education Welfare Protection Transport Debt
$4.1 $0.2 $0 $2.1 $0.2 $0.7 $0.2 $2.6

[edit] Fiscal Year 2013 State Budget

Rhode Island faces a budget deficit in FY2013 of $120 million. Lawmakers, however, have said that they hope to balance the FY2013 state budget without deep cuts to services or tax hikes.[6]

Governor's Proposed Budget

Gov. Lincoln Chafee proposed the FY2013 state budget as part of he state of the state address he delivered on Jan. 31, 2012. In his budget, the governor eliminated the current exemption on taxes on clothing and footwear items costing more than $175 million.[7] Other taxes he would raise include:

  • upping the cigarette excise tax by four cents to $3.50 per pack;[7]
  • meals and beverage taxes would be increased from 1% to 3%, generating a projected $39.5 million, to be devoted to the school funding formula;[7]
  • expands the lodging tax base, to include rentals of vacation homes and rooms in bed and breakfasts which have fewer than 3 bedrooms to rent;[7]
  • elimination of Election Day as a state employee holiday;[8]
  • ending dental services provided to adult Medicaid recipients.[8]

[edit] Fiscal Year 2012 State Budget

The legislature approved the $7.7 billion state budget on June 29, 2011,[9] and Gov. Lincoln Chafee signed it the following day, the day before the start of fiscal year 2012.[2] The budget can found here.

The state had faced a $290 million deficit for FY2012 according to estimates in November 2010.[10]

The budget that passed and became law did not have several of the recommendations included in the governor's proposed budget. Highlights of the budget include:[2]

  • Instituting a 7 percent sales tax on the purchase of over-the-counter drugs, smartphone applications, software and videogame downloads and sightseeing tours which is expected to generate $17 million in FY2012[11]
  • Cutting more than $100 million in state spending
  • Increases the monthly premiums paid by some families on Medicaid
  • A three-year halt to new school construction projects
  • Ending automatic pay increases for state workers based on years of service.

The fee and tax increases in the budget will generate $20 million in new revenue.[12]

[edit] Cities Asking for State Assistance

In the past three years, the state has cut $193 million in state aid to cities and towns. Cities have asked the state for assistance, and the governor in January 2012 asked the General Assembly to approve $2.6 million for Central Falls, and lawmakers advanced East Providence $12.6 million in state education funds. Other municipalities are requesting more state aid, $111 million in additional school funding. The governor said the challenges facing the state's 39 municipalities threatens the state's economic recovery, but he also acknowledges the state must eliminateits own $120 million deficit.[13]

[edit] Legislative Proposed Budget

The legislature approved the $7.7 billion state budget on June 29, 2011, with the Senate voting 30-7 for passage[14] and the House approving it five days earlier with a vote of 60-9 in favor.[2]

On June 17, 2011, House Democrats released their $7.7 billion state budget. House and Senate Democratic leaders rejected the centerpiece of the governor's budget-proposal — $165 million in new sales taxes -- saying it would be too heavy a burden. Sales tax would rise to 7 percent tax on Oct. 1 on several items, including over-the-counter drugs, digital downloads, insurance proceeds and sightseeing tours, an increase expected to generate $17 million.[15]

Under the proposed House budget, state employees would no longer receive automatic longevity raises but would get their second 3-percent raise in six months in July, at a cost to the state of $25.3 million. They also would not have to pay more into the state pension fund as Chafee proposed.[15] Families enrolled in the state-subsidized health-insurance program RIte Care would pay higher co-shares, but lawmakers rejected lowering the income-eligibility ceiling to 133 percent of the federal poverty level, a move that would have saved the state $26 million but disqualified an estimated 6,000 parents.[15]

Legislators also agreed in part with the governor's move to give increase funding for higher education, giving the state colleges approximately $4 million more.[15]

[edit] Governor's Proposed Budget

The state budget office instructed agencies to submit two budget plans for FY2012: one maintaining current services and another reducing costs by 15%.[16]

Gov. Lincoln Chafee, an Independent, proposed his $7.66 billion FY2012 budget proposal to the General Assembly on March 8, 2011. The state faced a projected $331 million budget deficit in the fiscal year beginning July 1. [17] Chafee proposed a lower, but broadened sales tax as a way to eliminate a budget deficit. Chafee argued that a broader sales tax would allow the state to reduce its overall sales tax rate from 7 to 6 percent.= and would generate more than $165 million in annual. Under the plan some previously tax exempt items would be taxed, including eyeglasses, non-prescription drugs, movie, concert and sports tickets, newspapers, taxi fares and dry cleaning. A new 1 percent sales tax would be levied on clothes, shoes, coffins, heating fuels, residential water bills and textbooks. Groceries, prescription drugs and gasoline would not be subject to the new tax.

Chafee's budget proposal cut $60 million in Medicaid expenses through restructuring reimbursement rates and contracts with nursing homes, hospitals and other medical providers. Chafee recommended cutting the corporate income tax from 9 to 7.5 percent over three years.

Budget highlights included:

  • Spends $13.2 million more on public schools
  • Spends $10 million more on higher education
  • Increase parking fees at state beaches from $6 to $10
  • Double seasonal beach passes from $30 to $60 for residents, and from $60 to $120 for non residents
  • Eliminates a tax credit given to production companies who film in Rhode Island to raise $1.3 million
  • Imposes 6 percent sales tax on medical marijuana to raise nearly $803,000 and levies a 4 percent tax on the net revenues of medical marijuana centers
  • Uses hotel room taxes to create a Tourism Asset Protection fund for funds to maintain and improve state tourist sites and facilities
  • Provides cities that address long-term debt issues with incentives from food and beverage taxes
  • Assess fee of $50 on all returned checks to the Department of Motor Vehicles

[edit] Public Pension Reforms

Chafee's proposed budget calls for higher pension contributions, which he projects would raise $40 million for the state's pension system, which now has a projected unfunded liability of $4.7 billion. Under the plan state police, teachers and workers would increase their pension contributions to 11.75 percent of their paychecks. Now, state workers contribute 8.75 percent and teachers pay 9.5 percent. Chafee's budget plan creates a new Municipal Accountability, Stability and Transparency Fund to offer cities extra state funding if they work to address unfunded pension liabilities. Rhode Island cities and towns have a combined unfunded liability of $1.9 billion when it comes to their pension plans, and a combined unfunded liability of $2.4 billion when it comes to other post-employment benefits (mainly health benefits), a report by Moody’s Investment Services said. [18]

[edit] Reactions to Proposed Budget

Moody's Investment Services issued a report saying Chafee’s proposed budget will benefit cities and towns by helping them address underfunded pension and health-care plans for current and future retirees. A Moody's spokesperson said the governor's plan would have a positive effect on the "creditworthiness of local cities and towns." [19]

[edit] Budget transparency

Rhode Island began posting its checkbook register online in February of 2008. The site was created using existing monies within the current state budget.[20] It allows citizens to view the Treasury's Accounts Payable expenditures.[21] The checkbook register was posted by the Treasurer of Rhode Island, Frank T. Caprio as fulfillment of his campaign promise made in 2006:

"This pilot project achieves a key priority of my administration. Our hope is that the Office of the General Treasurer's transparency site will quickly become the model for state and local government in their efforts to be more accessible and accountable to the taxpayers of Rhode Island," Treasurer Caprio said.[21]

The site also contains information on the current years fiscal statement, budgets and some general salary data.[22] The state also has various Independent transparency sites.

Rhode Island's Department of Administration began posting its expenses online in February, 2009.[23] The site is accessible here. Other departments and government offices have since posted their spending records online as well.

[edit] Government tools

The State of Rhode Island maintains its own Transparency Portal, which contains links to financial records and personnel statements of fifteen government departments. It also links to the RIPAY website, which contains expenditures organized by vendor.

The following table is helpful in evaluating the level of transparency provided by the Transparency Portal:

Criteria for evaluating spending databases
State DatabaseSearchabilityGrantsContractsLine Item ExpendituresDept/Agency BudgetsPublic Employee Salary
RI Open Government Y
600px-Yes check.png
Y
600px-Yes check.png
Y
600px-Yes check.png
P
Partial.png
Y
600px-Yes check.png
N
600px-Red x.png
See also: Evaluation of Rhode Island state website

[edit] Independent transparency sites

The Ocean State Policy Research Institute has launched a transparency website called the Transparency Trainthat provides access to a variety of websites designed to present public information in a Google-style searchable format.

The Rhode Island Statewide Coalition Foundation maintains a transparency website called the www.themoneytrail.org.as well as www.rhodeislandvotes.org.which displays comprehensive legislation and voting records.

The Ocean State Policy Research Institute has also recently established www.ristimulus.org, a transparency website dedicated to tracking the federal stimulus money coming into the state. RI Stimulus Watch provides users with information on all public projects being funded by the federal stimulus money and allows the public to vote on whether or not they support each project, as well as to post comments. Projects can be sorted by cost, location, and most/least critical (based on user ratings).

In addition, the Ocean State Policy Research Institute is developing a site dedicated to transparency in public school spending, which it plans to launch later this year.

[edit] Fiscal Year 2011 State Budget

Find the state’s FY2011 Comprehensive Annual Financial Report (CAFR) compiled by the state government here.

On November 10, 2010, financial advisers advised lawmakers that the state's revenues are approximately $16.7 million higher than expectations.[10]

In June 2010, the General Assembly passed a $7.8 billion state budget for 2010-11, which was crafted to close both a $182 million deficit for FY2010, which ends June 30, 2010, and a projected $386 million shortfall for FY 2011, which starts on July 1, 2010. The budget does not raise sales or income taxes. It pares back public-employee pensions payouts for state retirees by eliminating cost-of-living increases for retirement benefits above $35,000.[24] State retirees must also wait until age 65 to get their first increase.[25]

The budget reduces state aid to cities and towns by $150 million over 13 months, but allows the municipalities to compensate for the loss by taxing all but the first $500 in value of cars and trucks; before they were blocked from taxing the first $6,000.[25] The cut in local aid led to some towns shutting off their street lights and closing swimming pools.[26]

The governor said he would not sign or veto, meaning it would become law without his signature.[24] Carcieri cited its inclusion of $108 million in federal Medicaid payments that have not yet been approved in Washington as a key reason for refusing to sign the budget.[24] The budget includes a provision permitting the governor to make across-the-board cuts if the Medicaid money is not approved by Congress, although the General Assembly could make changes to the proposed cuts.[24] Carcieri was not wholly negative, however, saying in a news release, “I believe we have set Rhode Island on a course that allows the state to emerge from the recession stronger and more competitive. We have done better than hold the line on taxes. We have reduced taxes for most Rhode Islanders. We have improved the business climate by supporting access to capital and loan-guarantee programs, tackling regulatory reforms, making it easier to do business."[25]

[edit] Federal Funds

The FY2011 state budget assumed that the state would receive about $107 million from the federal government for Medicaid reimbursements.[27] In actuality, the state will receive $70 million for Medicaid and nearly $33 million dedicated to schools.[27] Gov. Carcieri said he would like to put the entire $103 million towards Medicaid, but it is unclear if the governor can alter the destination of the federal funds clearly marked for education and the Assembly would have to approve the move.[27]

[edit] Budget Background

Rhode Island's fiscal year begins July 1 and ends June 30 of the following year. According to the state Constitution, every year the Governor must present a spending recommendation to the Legislature. However, prior to the Governor's presentation to the Legislature on the third Thursday in January, the Governor reviews individual agency requests along with past and present expenditure and revenue data. Both the Senate and the House use the following months to making necessary adjustments to the proposed budget bill. Once both houses approve a final budget the bill returns to the Governor who may veto legislative appropriations. The Legislature may override any veto by a two-thirds majority vote. [28]

[edit] Accounting Principles

Main article: Rhode Island government accounting principles

The Office of the Auditor General (OAG) is the State of Rhode Island's legislative audit agency, conducting financial and performance audits to provide independent information to the General Assembly on a variety of topics including the State's financial condition, its use of federal funds in compliance with federal law and regulations, and whether programs are operating efficiently and effectively. The OAG's audit reports are published online. Ernest A. Almonte has been the Auditor General of the State of Rhode Island since 1994.[29]

The Institute for Truth in Accounting (IFTA) rates Rhode Island “Tardy” in filing the state’s Comprehensive Annual Financial Report (CAFR) – The annual report of state and local governmental entities. IFTA rated 22 states timely, 22 states tardy, and 6 states as worst. IFTA does not consider Rhode Island's CAFRs, and those of the other states, to be accurate representations of the state’s financial condition because the Generally Accepted Accounting Principles (GAAP) basis does not include significant liabilities for the pension plans and for other post employment benefits, such as health care.[30] Rhode Island's CAFRs are annual publications of the Rhode Island Office of Accounts and Control under Marc A. Leonetti as State Controller. Despite the tardiness of previous CAFRs, the Office of Accounts and Control already has posted the preliminary 2009 CAFR on its Web site.[31]

The Office of Accounts and Control is responsible for the financial integrity and accountability of state government through sound administrative and accounting controls and procedures. The office is also responsible for the preparation and/or coordination of several publications, including the Comprehensive Annual Financial Report, Condensed State Financial Report, State Payroll Manual, Procedural Handbook of the Department of Administration, and the Consolidated Statewide Cost Allocation Plan.[32]

Credit Rating Fitch Moody's S&P
Rhode Island[33] AA-Aa3AA

[edit] Stimulus

Rhode Island has received $0.6 billion in federal funding.[34]

[edit] Public Employees

Main article: Rhode Island public employee salaries
Main article: Rhode Island public pensions

According to 2008 Census data, the state of Rhode Island and local governments in the state employed a total of 59,761 people.[35] Of those employees, 47,755 were full-time employees receiving a net pay of $225,221,773 per month and 12,006 were part-time employees paid $12,127,083 per month.[35] More than 55% of those employees, or 33,310 employees, were in education or higher education.[35]

[edit] External links

[edit] Additional reading

[edit] References

  1. ↑ The Boston Globe "RI Senate passes $7.7 billion state budget" June 29, 2011
  2. ↑ 2.0 2.1 2.2 2.3 The Boston Globe "RI governor signs $7.7B state budget" June 30, 2011
  3. ↑ State Budget Solutions “Report reveals aggregate state debt exceeds $4 trillion” Oct. 24, 2011
  4. ↑ State of Rhode Island Budget Office, FY2011 Budget Overview
  5. ↑ USA Spending, State Guesstimated* Government Spending
  6. ↑ The Boston Globe "New taxes proposed as alternative to cuts in RI" Jan. 4, 2012
  7. ↑ 7.0 7.1 7.2 7.3 WPRO.com "Chafee budget plan includes new taxes" Jan. 31, 2012
  8. ↑ 8.0 8.1 The Huffington Post "RI lawmakers to review budget proposal" Feb. 28, 2012
  9. ↑ The Boston Globe "RI Senate passes $7.7 billion state budget" June 29, 2011
  10. ↑ 10.0 10.1 The Providence Journal "R.I. revenues improve; deficit still looms" Nov. 11, 2010
  11. ↑ CBSNews.com "States eye fee increases as alternative to taxes" July 23, 2011
  12. ↑ CBSNews.com "States eye fee increases as alternative to taxes" July 23, 2011
  13. ↑ CBSNews.com "RI cities and towns plead for help from state" Jan., 2012
  14. ↑ The Boston Globe "RI Senate passes $7.7 billion state budget" June 29, 2011
  15. ↑ 15.0 15.1 15.2 15.3 The Providence Journal "New twist on sales tax" June 18, 2011
  16. ↑ The Boston Globe "State budget office orders 15 percent cuts" Nov. 29, 2010
  17. ↑ Business Week, RI Gov. Chafee wants lower, broader sales tax, March 11, 211
  18. ↑ Providence Journal, Moody's Says Chafee Budget Good for Cities, Towns, March 15, 2011
  19. ↑ Providence Journal, Moody's Says Chafee Budget is Positive for Cities, Towns, March 15, 2011
  20. ↑ Rhode Island State Treasurer, How much did this project cost?
  21. ↑ 21.0 21.1 Rhode Island.gov, Treasurer Caprio Debuts State's First Ever Online, Real-time Checkbook of State Spending, Feb. 9, 2009
  22. ↑ Rhode Island Treasurer, 2009 Budget
  23. ↑ RI.gov, "Department of Administration Launches Transparency Portal," 02/16/2009
  24. ↑ 24.0 24.1 24.2 24.3 Providence Business News "Gov. OKs $7.8B budget despite concerns" June 10, 2010
  25. ↑ Cite error: Invalid <ref> tag; no text was provided for refs named steps
  26. ↑ National Public Radio "State Budget Gaps: Debt Holes Deepen" Sept. 10, 2010
  27. ↑ 27.0 27.1 27.2 The Providence Journal "Diversion of education funds up to Assembly" Sept. 2, 2010
  28. ↑ State of Rhode Island,"Budget process primer," retrieved April 19,2009
  29. ↑ Rhode Island Office of Auditor General Web site, retrieved November 10, 2009
  30. ↑ Institute for Truth in Accounting, “The Truth About Balanced Budgets—A Fifty State Study,” Page 35
  31. ↑ Rhode Island Office of Accounts and Control Web site, retrieved November 10, 2009
  32. ↑ Rhode Island Office of Accounts and Control Web site, retrieved November 10, 2009
  33. ↑ State of Indiana, “State Credit Ratings-as of June 24, 2009"
  34. ↑ Recovery, "Stimulus Spending by State"
  35. ↑ 35.0 35.1 35.2 2008 Rhode Island Public Employment U.S. Census Data
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