PROVIDENCE, R.I. (WPRI) — Experts on Monday announced a huge increase in Rhode Island’s projected state revenue over the next two years, even as legislative leaders warned part of the reason for the surge of receipts is record inflation that will have other budgetary effects.

The number-crunchers who took part in the semiannual Revenue Estimating Conference forecast that state revenue should be $387 million higher in the current 2021-22 budget year — and $193 million more in the upcoming 2022-23 budget year — compared with what they had projected the last time they met, back in May.

That combined $580 million in newly identified tax revenue is separate from the more than $1 billion that the state has received from the federal American Rescue Plan Act, as well as additional funding coming into the state from the bipartisan federal infrastructure law.

The close of the May revenue meeting fires the starting gun on the always-frantic closing weeks of the General Assembly session, as Rhode Island legislative leaders finalize a budget, their biggest undertaking of the year. A new budget is written for each fiscal year, which runs July 1 to June 30.

The two lawmakers with chief responsibility for Rhode Island’s budget — House Finance Committee Chairman Marvin Abney and Senate Finance Committee Chairman Ryan Pearson — warned their colleagues to think twice before assuming all the additional revenue will be freely available to spend.

“We are pleased that revenue estimates continue to beat forecasts; however, we need to remain cognizant of what these increases represent,” Abney, D-Newport, and Pearson, D-Cumberland, said in a joint statement.

“Most of the additional revenue is from increases in income and sales tax receipts, reflective of higher wages and rising prices,” the two chairmen continued. “The state’s budget is also impacted by these economic trends, as the cost to procure and provide goods and services is also increasing at rates beyond what the current budget funds.”

“As we consider the numerous proposals before us, we will work to ensure the best use of both one-time and ongoing resources to maintain a robust and lasting recovery,” they concluded.

Gov. Dan McKee proposed a $12.8 billion budget plan in January that includes a blueprint for spending the unprecedented influx of federal funds from ARPA. At a candidate forum last week, McKee suggested state leaders may consider using the higher revenue to reduce the sales tax from 7% to 6.25%, putting it in line with other states.

Senate President Dominick Ruggerio has previously suggested using the revenue to eliminate the municipal car tax a year ahead of schedule.

The new numbers agreed to at Monday’s Revenue Estimating Conference project Rhode Island’s state revenue will rise 14% during the current 2021-22 fiscal year, to $5.07 billion, up from $4.44 billion in 2020-21. But it’s actually projected to decline from there in 2022-23, falling to roughly $4.95 billion, a dip of 2%.

The governor and lawmakers are required by law to use the Revenue Estimating Conference’s forecasts when they put together the state budget.

Ted Nesi (tnesi@wpri.com) is a Target 12 investigative reporter and 12 News politics/business editor. He co-hosts Newsmakers and writes Nesi’s Notes on Saturdays. Connect with him on Twitter and Facebook