PROVIDENCE, R.I. (WPRI) — Rhode Island leaders will face a once-unfamiliar problem yet again next year: what should we do with all this money?

In a report issued late Tuesday, state budget officer Joe Codega said the state is on track to finish the current 2022-23 fiscal year with a surplus of $610 million when the books close next June.

That number would have been a stunner just a few years ago, but the projected surplus was in the same ballpark last November. The state has been staying in the black thanks to soaring tax revenue and generous federal aid tied to the pandemic.

The projection is based on actual spending from July through September, plus newly updated forecasts for revenue and social services.

Codega’s report indicates that the state finished the last fiscal year, which ended June 30, with a surplus of $480 million. That was due in part to $244 million in pandemic-related reimbursements expected from the Federal Emergency Management Agency (FEMA).

Last year’s $480 million surplus is now the foundation of the current budget year’s newly projected surplus of $610 million, since the extra money carries over from year to year. Tax revenue is also coming in considerably higher than projected back in May, and overall state spending is below forecast so far.

Rhode Island isn’t alone. Massachusetts has begun sending out nearly $3 billion in tax refund checks to residents after soaring revenue triggered Chapter 62F, an obscure 1986 law which requires a portion of the extra money to be remitted back to citizens.

Senate President Dominick Ruggerio told 12 News the new surplus projection is “welcome,” adding that he is “encouraged that the downturn that had been forecast has been slower to take hold than anticipated.”

“Nevertheless, out-year growth is modest, inflation is a major concern, and economic advisors caution that a recession remains likely,” said Ruggerio, D-North Providence.

“As we did with our federal stimulus funding and prior surpluses, I believe that one-time investments in areas such as infrastructure, addressing learning loss, mental health and human capital, and other urgent needs should be our priority for surplus revenues,” he said.

Codega’s quarterly budget report also ticked off a number of specific items of note.

The R.I. Department of Corrections stood out as the only agency that is spending significantly more than budgeted, with its expenses totaling about $15 million more than lawmakers had anticipated in June.

The enacted budget envisioned that the department would save money by closing 13 housing modules at the state prison, but officials have now determined they can’t do so due to COVID-19 concerns. Additional drivers of the overspending include “unbudgeted overtime expenses, contracted nursing and hospital/health services, pharmaceuticals, building maintenance, and food costs,” the report said.

However, other agencies have kept spending under their budget authorizations, with the Department of Children, Youth and Families lower by $5.5 million, the judiciary lower by $4.5 million, and the Department of Public Safety lower by $3.5 million.

One reason: the state workforce remains unusually lean, according to Codega. He said total personnel reached a “recent historical low” during the last budget year, and the number of filled jobs “have not yet recovered to the pre-pandemic level.” The employee count is currently averaging 13,661 for the fiscal year, down by over 500 since the pandemic.

The Biden administration has also further extended its temporary enhanced match for the Medicaid health insurance program due to the pandemic, keeping it in place through at least March. The federal government is currently picking up over 60% of Rhode Island’s Medicaid costs, compared with about 54% to 55% normally.

It’s unclear how much longer the big surpluses will continue. State tax revenue is projected to rise only slightly, by less than $24 million, in the 2023-24 fiscal year that begins July 1. That would bring total revenue for next year to about $5.3 billion.

Gov. Dan McKee is due to submit his budget proposal for the 2023-24 fiscal year in January. Lawmakers will then hold hearings on the proposal during the winter and spring, with a final budget plan usually enacted during the month of June.

“I am proud of our record of thoughtful, long-term strategies for improving the lives of all Rhode Islanders and remain mindful of the need to address current economic realities with a close eye on the looming recession,” House Speaker Joe Shekarchi, D-Warwick, said in a statement.