PROVIDENCE, R.I. (WPRI) – Rhode Island budget officials are directing state department heads to submit fiscal year 2021-22 budget proposals with 15% cuts across the board, citing uncertainty over federal aid and a prolonged shortfall of revenue amid the pandemic.
R.I. Office of Management and Budget Director Jonathan Womer wrote a memo Aug. 7 to all state agencies, saying the public health crisis and the associated economic fallout has required the state to “fundamentally reshape” the way it allocates funding and does business.
“It will come as no surprise to you and your staff that the upcoming budget cycle will be full of difficult choices,” Womer wrote. “Given the uncertainty of federal aid and anticipated revenue shortfall, every agency is expected to submit a constrained budget equal to 15% reduction for [fiscal year 2022].”
The directive for the budget that will be put together next year comes even as state leaders have yet to finalize a tax-and-spending plan for the current 2020-21 fiscal year, which started July 1. Gov. Gina Raimondo and the General Assembly agreed to postpone passage of the annual spending bill in the hopes that Congress will pass a new relief bill that includes additional state and local aid.
State leaders initially expected some federal action by August, but Congress has failed to reach an agreement. The inaction spurred President Donald Trump to sidestep Congress last weekend, when he signed multiple executive orders he claims will help solve some of the financial challenges created since parts of the $2.2 trillion CARES Act federal relief package expired at the end of July.
But the president’s orders didn’t include any direct funding for cash-strapped local and state governments, and even asked states to help pay unemployed Americans an extra $400 per week. Trump and some Republicans in Congress have expressed skepticism about sending more money to states and municipalities on top of the funding they already got in the CARES Act.
Despite the inaction in Congress, Womer said in his memo “there is some indication additional funds will be available” for the current fiscal year, but he warned federal support for following fiscal year is “very uncertain.”
If circumstances change, however, “the constrained budget reduction target could be reduced,” he said.
State department heads are expected to submit their budget proposals to the governor by Oct. 1. Under normal circumstances, Raimondo would then submit her budget proposal to the General Assembly by Jan. 21.
But the uncertainty surrounding federal aid isn’t Rhode Island’s only money problem, as the state continues to grapple with slumping revenue. The coronavirus crisis brought many businesses – especially those in food, tourism and entertainment – to a screeching halt, translating into less tax revenue for the state.
The state’s third largest revenue source, gambling, has also faltered, as the two casinos operated by Twin River Holdings Worldwide were closed during April and May. And even when the gambling facilities reopened in June, their usually lucrative slot machines generated $11.7 million for the month, a 73% decrease from the $43.8 million generated in February, according to R.I. Lottery financial records.
Womer expects revenue to continue to fall short throughout the next fiscal year.
“We are projecting continued revenue difficulty through [fiscal year 2021-22],” he wrote.
To help departments – including several that overspend budgets on an annual basis – come up with the 15% cuts, the state budget office has partnered with The Policy Lab at Brown University. That organization is led by David Yokum, who worked in the Obama White House, and funded in part by longtime Raimondo supporters Laura and John Arnold. (It replaced the Rhode Island Innovative Policy Lab, another venture at Brown that has advised the Raimondo administration.)
The partnership is supposed to give department heads the ability to find the cuts through “the lens of evidence-based budgeting,” according to Womer. The Policy Lab staff is expected to work with department heads throughout this month and September, leading up to when the proposals are due to the governor.
Despite the dreary tone of the memo to department heads, Womer offered some optimism, arguing the difficult policy environment also presents a “significant opportunity for us to think differently, and strategically change our operations for the better in the long term.”
Ted Nesi contributed to this report.