PAWTUCKET, R.I. (WPRI) – Pawtucket’s leaders have approved a $264 million budget for the upcoming fiscal year, which includes about $2 million in unspecified spending stemming in part from the public health crisis and a drop-off in revenue tied to the now-shuttered Memorial Hospital.
Municipal leaders passed the budget — $135 million for the city and $128 million for the schools — earlier this month without raising any residential or commercial taxes, which Pawtucket Mayor Donald Grebien said was important because of soaring unemployment and widespread uncertainty caused by COVID-19.
But holding the line on taxes means the city has to either come up with $2 million in additional revenue, or make $2 million in unspecified cuts. Grebien said while that would be “manageable,” it could result in some tough decisions.
“There were a lot of unknowns because of COVID,” Grebien said. “Whether we do furlough days, or look at layoffs in the next year, or we look at bringing new revenue in – we know there’s about a $2 million manageable number. But the [City] Council, the administration and the School Committee didn’t want to raise taxes.”
The fiscal 2020-21 budget represents an increase of about 2.2% compared to the current fiscal year that ends June 30. And it includes some optimistic assumptions that the city will receive a boost in state aid based on Gov. Gina Raimondo’s proposed state budget, which was put forward two months before COVID-19 first emerged in Rhode Island.
The public health crisis has since resulted in a precipitous decline in state revenue, in part because Rhode Island closed its two casinos operated by Twin River in Lincoln in Tiverton. Gambling represents the state’s third largest revenue source, and state officials now project a $900 million combined deficit for the current and next fiscal years.
“It’s all about state aid,” Grebien said, acknowledging state leaders face their own difficult decisions in determining how to balance Rhode Island’s roughly $10 billion state budget. “We’re waiting for the General Assembly to finalize its number.”
Uncertainty at the state level is exacerbated by mixed messages at the federal level, since it’s unclear whether Congress will approve additional stimulus money including state and local aid. Rhode Island received more than $1 billion through the $2.2 trillion CARES Act, but states are not allowed to use the money to make up for revenue shortfalls.
State leaders are hopeful the federal government will pass another rescue bill to help close the deficit, which in turn could help municipalities do the same. Rhode Island’s all-Democratic federal delegation is united in saying state and local aid should be a top priority for Congress.
“None of them can borrow or print money the way the federal government can,” U.S. Sen. Sheldon Whitehouse said during a COVID-19 Congressional Town Hall on WPRI 12 earlier this month. “Many of them have constitutional or legal balanced-budget requirements. So it’s the federal government that really has the flexibility here to put money into these local municipalities, counties and states and help them through this problem.”
In some parts of the state, including Cranston, the uncertainty surrounding state and local aid has led some municipal leaders to hold off on passing a budget for the fiscal year that starts in little over a month.
In Pawtucket, Grebien decided to move forward with his budget now and adjust later as needed, saying the city isn’t in “panic mode yet.”
But any cuts to local aid would undoubtedly hurt the city, which is already grappling with a nearly $600,000 cut to its payment in lieu of taxes for Memorial Hospital, which closed in 2018.
The state PILOT program reimburses Rhode Island municipalities for money it would have received on land that would otherwise generate property taxes if it wasn’t used by big nonprofits, such as universities and hospitals.
Raimondo cut the Memorial Hospital PILOT payment from her proposed budget this year because the hospital isn’t operating any more, yet Grebien said he can’t tax the land because it’s still technically considered a non-taxable nonprofit.
“I get the argument, but I don’t have the tools needed to go after it and tax it,” he said, adding that he’s pushing the General Assembly to restore the PILOT money back into its revised budget.
The potential cut in PILOT funding comes at the same time the city is slated to receive nearly 50% less in so-called “distressed communities” funding from the state.
Budget documents show Pawtucket is expected to receive about $731,000 through the state program compared to $1.4 million last year, as Raimondo has proposed cutting Distressed Communities Relief Fund funding in the upcoming fiscal year.
“The economy was doing better, so she made that calculation,” Grebien said, noting that the city’s financial situation has changed in recent months. “The opposition as a distressed community is, look, you should fully fund it. We need more money.”
The Raimondo administration earlier this year argued local aid to municipalities on balance would increase — largely through a boost in school funding, which would offset the decrease in distressed community funding.
But the funding cuts to distressed communities only affect seven of the state’s 39 municipalities: Central Falls, Cranston, North Providence, Pawtucket, Providence, West Warwick and Woonsocket.
Grebien said he told his department directors to hold the line on spending. And while he’s adamant no employees will be laid off on July 1, Grebien acknowledged Pawtucket officials will most likely need to revisit the budget multiple times throughout the fiscal year. After all, he said, there’s no blueprint for how to make ends meet during a once-in-a-generation public health crisis.
“In a year from now when we look back we’re going to have a handbook — a manual — that says this is what we need to do,” Grebien said.
Steph Machado contributed to this story.