CRANSTON, R.I. (WPRI) – Rhode Island’s state budget crisis is trickling down to municipalities, as local leaders grapple with how to balance their own spending plans when it’s unclear how much state money will be available.
The dynamic is playing out across the state, but it’s coming to a head in Cranston where Mayor Allan Fung has proposed a $303 million budget for the upcoming fiscal year, which is about 1.5% more than the current $298 million budget.
The proposal wouldn’t raise any taxes in Rhode Island’s second-biggest city, which Fung said was important to him because of the economic pain that many of his residents are feeling due to the COVID-19 public health crisis.
But balancing expenditures with revenue required a leap of faith that the city would continue to receive a consistent amount of state aid at a time when Gov. Gina Raimondo and General Assembly leaders aren’t sure how they’re going to balance the state’s $10 billion budget.
“Out of the 12 budgets I’ve gone through, this is probably the most difficult to project and estimate what’s coming down from the state,” Fung said. “The dollars that were projected down from the state, we left intact, and that’s what we’re advocating for.”
The reliance on the state funding, however, has raised concerns in the City Council, which is responsible for approving the mayor’s proposal. City Council President Michael Farina, who is running in this fall’s election for mayor as Fung steps aside due to term limits, said banking on money that might not be available could result in a lot of municipal cuts or supplemental tax hikes.
“If we pass the budget next week, and the revenues do go down, then we basically create a hole in the budget that will need to be filled somehow,” Farina said.
‘So much uncertainty’
At a House Finance Committee hearing this week, House fiscal adviser Sharon Reynolds Ferland estimated Rhode Island’s state government is facing a roughly $900 million budget deficit for the current 2019-20 fiscal year and the upcoming 2020-21 fiscal year that follows.
In an effort to stem spread of the disease that’s resulted in the deaths of about 550 Rhode Islanders and more than 300,000 people globally, Raimondo ordered strict social distancing mandates that effectively shuttered hundreds of businesses, pushed tens of thousands of people into unemployment and halted casino gambling – which fuels the state’s third largest revenue source.
State leaders are hopeful the federal government will pass a new spending bill with state and local aid that would help cover the huge deficit, but it’s unclear whether that will happen. If it does, there’s no assurance that it gets done before the fiscal year ends in a little more than a month.
“It is very difficult right now to think about how to create a budget in light of so much uncertainty,” Raimondo said during a new conference on Thursday. “I’m taking it a week at a time.”
But Raimondo acknowledged that the U.S. Senate, controlled by Republicans, isn’t likely to take up the $3 trillion Heroes Act passed by the Democratic-controlled U.S. House, or any other new spending bill, before the first week of June.
The fiscal year for the state and most cities ends June 30, meaning the clock is ticking, although Raimondo didn’t rule out the possibility of needing to do something on a temporary basis if Congress doesn’t reach a deal next month.
“If they get us something in the first, second or third week in June, let’s get to work,” Raimondo said. “If they can’t get that done, if it’s going to be mid-July, and we have some certainty that it’s going to happen, then yeah, maybe we’ll have to get creative.”
During a WPRI 12 congressional town hall Tuesday night, U.S. Sen. Jack Reed similarly suggested state leaders “might have to go ahead and put together some type of contingent budget for the following year with opportunities or mechanisms to incorporate federal funding that becomes available,” though he said he will continue to advocate for quick action on another spending bill.
At the local level, Fung is banking on the money coming down from the federal government or the state making cities whole in one way or another. He echoed Farina, saying any reduction in local aid would likely result in a lot of pain in terms of municipal jobs and city services.
In his proposed budget, Fung is seeking to eliminate 15 unfilled positions across city departments including police, planning and treasury. The mayor hasn’t reached a point where the city has laid off any employees or needed to furlough anybody, but he said that’s likely to change if the city doesn’t receive level funding from the state.
“We’re all waiting, not just Cranston, but every municipality across the state,” Fung said. “We might have to go further with furloughs and even drastic layoffs if the money doesn’t come. It’s not something we as municipal leaders want to do, but it’s one tool in our toolbox if it becomes unmanageable because the dollars aren’t there.”
‘Timing and revenue’
Fung says assuming level funding makes sense under state law in the event the General Assembly fails to meet to pass a budget because of an emergency. Other communities, including Pawtucket and North Kingstown, have done the same and already passed budgets. Others – such as Cumberland – have delayed the process.
Included in Fung’s proposed city budget is $168 million for School Department, representing a $5 million increase compared to the current fiscal year. That increase also assumes a boost from the state’s education funding formula, which is another form of state aid.
Fung has proposed nearly $33 million for the Fire Department, representing a 5.6% increase from the current fiscal year. The Police Department would receive about $25 million, representing a 1.5% increase compared to a year earlier, according to budget documents.
Fung is also proposing to pay about $21.5 million into the locally administered police and fire pension fund, representing 100% of the amount the city is required to contribute to ensure money is available for the first responders when they retire.
During past economic downturns, municipal leaders across the country have shortchanged local pension funds to balance operating budgets, resulting in long-term fiscal problems that helped fuel high-profile bankruptcies and insolvencies, including Detroit in 2013 and Central Falls in 2012.
Fung said the city has worked hard in recent years to build up its reserves in preparation of tougher economic times, which he said allowed Cranston to extend a tax deadline and waive owed-interest payments until the end of the year.
“If we weren’t in a better financial position, we wouldn’t be able to absorb a lot of the costs that are coming through right now,” he said.
Fung is hopeful the budget will pass soon, in part because the Cranston needs to start sending tax bills to residents for the upcoming fiscal year, which isn’t typically done until a budget is in place.
But Farina, who said he’s generally pleased with the mayor’s spending proposal, is wary about the timing of passing a budget — which will be considered again during next week’s City Council meeting. He has asked the city’s legal team to explore whether they can delay sending out the tax bills to wait and see whether there will actually be enough state aid to balance the budget.
“I gave Mayor Fung credit because I could sit here and pick apart expense lines … but in aggregate it feels like the total is right,” Farina said. “Right now, the problem is timing and revenue.”