PROVIDENCE, R.I. (WPRI) — Rhode Island leaders will need to close a roughly $275 million deficit when they finally put together a state budget for the fiscal year that began back on July 1, lawmakers were told on Wednesday.
The new deficit estimate was presented at an afternoon House Finance Committee hearing at the State House, with some lawmakers attending in person and others participating remotely. The House number is significantly higher than the $114 million deficit estimate that was put forward on Monday night by the Raimondo administration’s Office of Management and Budget (OMB).
Sharon Reynolds Ferland, the House fiscal adviser, told the committee that OMB’s $114 million estimate relies on an unrealistically low baseline for spending, partly because no new budget has been enacted, whereas her estimate includes some additional expected costs. (With no budget, state agencies have been operating month-to-month off a portion of the funding they would usually get.)
“I’ll always emphasize that this is our perspective,” Ferland said.
In its own report, OMB acknowledged that its team had excluded $139 million in spending the governor has proposed including in the final budget – which would close a significant part of the chasm between OMB’s estimate and Ferland’s.
Speaking at the hearing, OMB Director Jonathan Womer said he believed Ferland’s deficit estimate was generally on target.
Regardless of the exact amount, both deficit projections are far below the eye-popping $900 million shortfall that had been estimated last spring, when the economic effects of the coronavirus pandemic were much more uncertain. State leaders have delayed putting together a new budget for months, in part because they hope Congress will provide more federal aid to close the gap.
Still, Ferland warned, “The remaining amount is not a small amount.”
Womer echoed that point, saying, “It’s still a relatively substantial problem.”
According to the House Fiscal Office analysis, the biggest driver in reducing the original $900 million deficit is a $562 million positive swing thanks to higher-than-expected revenue and lower-than-expected social services costs. Also playing a role is the use of $145 million from the state’s $1.25 billion CARES Act Coronavirus Relief Fund to cover some state personnel costs.
One notable factor in the revenue uptick: forecasters have revised upward their estimate of total tobacco tax revenue this year by $24 million, which Ferland attributed in large part to sales of flavored tobacco to residents of Massachusetts, which recently banned those products.
She also reminded the committee that even after the recent improvement in the forecast, total general revenue in 2020-21 is still on pace to be $185 million below what had been expected at this time a year ago.
On the other side of the ledger, House Fiscal estimates the state will face $171 million in additional costs to deal with coronavirus after Dec. 30, which is the deadline when any of the $1.25 billion Coronavirus Relief Fund money must be given back to the federal government if unused. Members of Congress including U.S. Sen. Jack Reed have urged more flexibility in the timing and use of that money.
House Fiscal estimates the Raimondo administration has allocated all but $185 million of the $1.25 billion from the Coronavirus Relief Fund at this point, as shown in this slide:
Womer said the administration expects to allocate the entire $1.25 billion before the Dec. 30 deadline and will not have to forfeit any of the money. “Certainly we have needs that outstrip the amount of funds we have,” he said.
The first option he cited for using some of the remaining funds is to deal with coronavirus costs past Dec. 30, though that could only be done if Congress changes the law. Other options include replenishing the state’s unemployment trust fund, which has been depleted during the pandemic.
Separately, Ferland said there is also the potential to shave over $100 million off the deficit if additional costs in last year’s 2019-20 budget are retrospectively charged to the Coronavirus Relief Fund, as well as if the federal government extends its enhanced Medicaid funding further into 2021.
There has been no official announcement on when the full General Assembly will return to the State House to finally enact a full 2020-21 budget. But House Majority Leader Joe Shekarchi, who is set to succeed Nicholas Mattiello as speaker in January, said on last week’s Newsmakers that he thinks lawmakers may return in early December to tackle the issue.
House Finance Committee Chairman Marvin Abney, D-Newport, promised at the hearing that legislators will take a “very methodical” approach to putting together the budget in the coming weeks, including multiple hearings. But he offered few specifics.
“I can’t say what will be included, what will not,” Abney said. He added, “I do know we’re trying to avoid any decisions of some kind of a policymaking … but that’s about as much as I can say on that at this point.”
Right around the corner, meanwhile, both the Raimondo administration and the Assembly will have yet another budget to deal with: the governor’s proposed tax-and-spending plan for the 2021-22 fiscal year is due on Jan. 21. (That would be the fiscal year which begins on July 1, 2021.)
“I can’t overstate that even once we get a [2020-21] budget done, completely done, it’s the next year’s budget that is my concern,” Abney said.
Ted Nesi (firstname.lastname@example.org) is WPRI 12’s politics and business editor and a Target 12 investigative reporter. He is a weekly panelist on Newsmakers and hosts Executive Suite. Follow him on Twitter and Facebook