RI facing $235M budget gap as COVID-19 crisis slams state coffers

Politics - Government

PROVIDENCE, R.I. (WPRI) — Rhode Island’s state government is facing a $235 million deficit in the fiscal year that ends June 30 as the coronavirus pandemic crushes state revenue, according to a new report.

The report, issued Tuesday by state budget officer Tom Mullaney, is based on actual spending from July through March and incorporates newly updated forecasts for revenue and social services. State revenue is now expected to be roughly $800 million lower in the current and next fiscal years than originally projected, according to an official analysis released earlier this month.

Mullaney said the COVID-19 crisis and the steps taken to deal with it, such as business closures, “have had an unprecedented impact on the Rhode Island economy and by extension both the state’s revenues and expenditures.”

While Congress has already sent the state over $1 billion to deal with direct costs tied to COVID-19, “as of the date of this report, no such federal assistance has been authorized to assist Rhode Island or other states with the significant decline in state revenues,” he wrote.

Overall, the state is expected to spend about $22 million less than estimated in the enacted budget for the current fiscal year, but the savings pale in comparison to the projected $281 million shortfall in general revenue.

Rhode Island’s coffers have been hit especially hard by the ongoing closures at the two casinos operated by Twin River in Lincoln and Tiverton.

The state now expects to take in $268.6 million from gambling revenue, rather than the $377.1 million projected in November, nearly a 29% decline.

Additionally, the state has missed out on a significant amount of revenue from the sales tax and corporate tax. (Tax revenue from cigarettes and alcohol are both up slightly.)

On the spending side, departmental expenditures are mostly down across the board, except in some specific areas of health and human services. In preparation for the anticipated impact of COVID-19, department heads in March were instructed to cut back on spending, according to Mullaney.

“Each agency was instructed to refrain from spending that was not directly tied to the COVID-19 emergency or to meet critical needs of the agency,” he wrote in the report. “In addition, all personnel actions not directly tied to the emergency or critical to an agency’s operations were to be put on hold.”

As a result, most departments have been able to spend less than what was originally enacted, and significantly less than what Gov. Gina Raimondo proposed in her supplemental budget first unveiled in January.

But the R.I. Department of Behavioral Healthcare, Developmental Disabilities and Hospitals, also known as BHDDH, is projecting a $22 million deficit in the current budget year.

The overspending largely stems from an issue of Medicaid compliance at Eleanor Slater Hospital, which resulted in an unbudgeted $35 million expense. The department has not billed Medicare or Medicaid for hospital services since Aug. 31, according to Mullaney.

The R.I. Department of Children, Youth and Families, meanwhile, is projected to overspend by about $14 million, fueled mostly by an unexpected cost increase to its Child Welfare program.

“The enacted budget was based on aggressive reductions in both caseloads and case mixes that have not come to fruition,” Mullaney wrote.

The R.I. Office of Veterans Services is reporting a $1.7 million deficit largely because of cost overruns at the state-run Veterans Home. The nursing home for wartime veterans has grappled with financial challenges throughout the entire fiscal year.

The new numbers come as the State House’s top Democrats — including Raimondo, House Speaker Nicholas Mattiello and Senate President Dominick Ruggerio — are beginning to discuss how to deal with deep revenue shortfalls for the current and next fiscal years.

The House Finance Committee is scheduled to hold a hearing Wednesday on the budget gap, with the Senate Finance Committee slated to do the same on Thursday.

Ted Nesi (tnesi@wpri.com) 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

Eli Sherman (esherman@wpri.com) is a Target 12 investigative reporter for WPRI 12. Follow him on Twitter and on Facebook.

Copyright 2020 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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