PROVIDENCE, R.I. (WPRI) — Rhode Island lawmakers on Wednesday unveiled a long-delayed $12.8 billion budget plan for the current fiscal year, using a fire hose of federal money to cover a coronavirus-driven deficit while putting off most big policy decisions until the new year.
The newly released budget plan is for the 2020-21 fiscal year, which began back on July 1 and is already nearly halfway over. State leaders dispensed with their usual goal of passing a budget by June due to the uncertainty caused by the pandemic, not to mention the desire among incumbents to avoid making unpopular choices prior to the November election.
Rhode Island’s short-term financial situation has improved markedly since then, largely because revenue has not plunged as much as originally feared, helping cut the estimated deficit from $900 million to $275 million. And the state’s $1.25 billion allocation from the federal CARES Act’s Coronavirus Relief Fund is being used to plug most of that shortfall, according to legislative leaders.
“It’s a transitional budget,” state Rep. Joe Shekarchi, the incoming House speaker, told reporters during a briefing. “It stabilizes the state.”
The House Finance Committee approved the budget bill at a hearing just after its public release on an 11-2 vote. All the Democrats voted in favor, while Republican Reps. Blake Filippi, the House minority leader, and Justin Price voted no. The full House is scheduled to take up the budget bill next Wednesday during a special session at the Veterans Memorial Auditorium.
No taxes or fees are raised in the budget bill, and no programs are being created or eliminated, according to information provided at the briefing, which came before the bill text was released. Full funding is included for year four of the six-year plan to phase out the car tax, which was a top priority of outgoing House Speaker Nicholas Mattiello, who lost his seat last month.
“I did not want to impose spending reductions or ask Rhode Islanders for any more of their money at this critical time,” Shekarchi said. “We can have all of those conversations next year — and when I say next year, I’m talking about three weeks.”
Spending levels for state departments are being adjusted upward to cover current costs, legislative leaders said, and an additional $20 million in municipal aid is being added on top of full funding of the education formula as well as restoration of money Gov. Gina Raimondo had tried to cut. More money is also being earmarked for Rhode Island’s three public colleges.
“We’re very generous,” Shekarchi said. “We help the cities and towns a lot. We help the educational institutions.”
Municipal leaders — who have been frustrated with the governor all year for first proposing to cut their funding and then withholding some of what they expected during the period before the budget passed — were elated.
“These state and federal funds will target resources to some of the hardest-hit communities, support essential municipal and educational programs and provide certainty to local officials and taxpayers,” Brian Daniels, executive director of the Rhode Island League of Cities and Towns, said in a statement.
The budget also puts $400 million in proposed bond referendums on the ballot for a special election that will likely be scheduled for March 2. Bond questions are usually handled on the November ballot, but the delay in passing the budget ruled that out. The seven proposed questions include $107 million for higher education facilities and $74 million for environmental and outdoor projects.
Shekarchi defended the size of the potential borrowing, which General Treasurer Seth Magaziner endorsed as affordable.
“The time to spend is now, when the interest rates are low and the economy needs it,” Shekarchi said.
The size of the state budget has grown enormously since the pandemic began.
The final budget for 2018-19 was only $9.4 billion, but the budget for 2019-20 wound up being $11.8 billion largely due to coronavirus-related spending, and now the 2020-21 budget is coming at $12.8 billion. All told, that is a 36% increase in two years.
The lion’s share of that upswing is federal money, most of it appropriated by Congress earlier this year to help address the pandemic. While spending from Rhode Island’s General Fund over the two years is up by $229 million, or 6%, spending from federal funds is up by a whopping $2.7 billion, or 86%. And that excludes additional federal money that went toward paying unemployment benefits.
In some cases, the budget was balanced by shifting the source of funding for programs and institutions. For example, some of the University of Rhode Island’s budget will now be paid for with federal coronavirus dollars rather than state-generated revenue; Sharon Reynolds Ferland, the House fiscal adviser, said the shifts would leave URI with a net funding increase of $7 million.
The much-discussed $1.25 billion from the CARES Act has now been almost entirely allocated, according to Ferland. State leaders were under pressure to make sure the money was fully committed before Dec. 30, when they will have to forfeit any unused portion of the money and give it back to the federal government.
Other steps to close the deficit include putting only $90 million back into the rainy-day fund, not the entire $120 million that was taken out in June to balance the 2019-20 budget, and retroactively using federal money to cover costs in last year’s budget; the latter move freed up state dollars that could now be used to balance the current budget.
But the governor’s proposed so-called “scoops” — transfers from the accounts of quasi-public agencies like Rhode Island Housing — were rejected.
As part of the effort to avoid making any long-term policy decisions in the budget bill, Shekarchi said it extends the governor’s Rhode Island Promise free tuition program for one additional year — to cover the high school Class of 2021 — and extends the sunset on various R.I. Commerce Corp. incentive programs by an additional six months, to June 30.
That leaves all sorts of big debates to be hashed out at the State House next year, from the push to raise taxes on higher-income Rhode Islanders to the potential legalization of recreational marijuana.
And even as lawmakers put the finishing touches on the 2020-21 budget, attention is already turning to the next budget, for 2021-22. Officials have warned the state could face a significant deficit — especially if Congress declines to send another round of coronavirus relief aid, which is currently being debated on Capitol Hill.
“I hope that Washington does send relief now,” Shekarchi said.
The governor is usually required to submit a budget for the upcoming fiscal year in January. But lawmakers tucked a provision into the bill that passed Wednesday giving Raimondo an extension — her 2021-22 budget proposal will not be due until March 11.
Ted Nesi (email@example.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