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May 9, 2008

Update: R.I. budget gap, largest in decades, grows again

PROVIDENCE -- Ten days after the General Assembly cut local community aid and some health-care benefits to balance this year's state budget, it has an even more ominous task: balancing a larger fiscal 2009 budget deficit that's grown by $50 million to $55 million, according to figures released today.

The deficit for the year beginning July 1, which the governor previously put at $384 million, is projected to have grown, though it's not as simple as adding the projected growth to the previous figure, according to officials at a revenue-estimating conference at the State House today.

The primary cause was said to be lagging income and sales tax collection because of the weakened state economy.

The increase is not surprising given that The Journal reported Tuesday those revenue sources --the state's largest -- are down sharply through the first 10 months of the fiscal year, as lawmakers grapple with closing the largest deficit in nearly two decades.

“I was pleased when the General Assembly largely accepted my spending reduction proposals for the current fiscal year,” Governor Carcieri said in a statement late today. “Unfortunately, these new projections leave us with much more work to do. In the coming weeks, I will be meeting with the legislative leadership to jointly develop plans that will resolve the expanded deficit.”

Carcieri said that "whatever course we take, we must avoid raising taxes to solve this problem. Rhode Islanders already bear one of the highest total tax burdens of any state in the nation."

-- projo.com staff writer Michael P. McKinney, with reports from Steve Peoples of the Journal State House Bureau

Economists reported last week that the state is one of nine around the country and the only in New England going through an economic recession.

The state's tax administrator said earlier this week that sales tax collections were down $23 million, or 3.1 percent, compared with the same period last year, while income tax revenue is down $9 million, or 1 percent. Should the trend continue through the end of the fiscal year in June, as expected, it would be the first time that the state’s largest two revenue sources collectively fell since the early 1990s.

Today's conference included the governor's budget officer and the fiscal advisers for the House and Senate.

To close a mere $168 million deficit in this year's budget, lawmakers made cuts to aid to cities and towns, reduced health-care benefits for retired state workers and eliminated subsidized health care for more than 2,800 immigrant children. The plan doesn’t increase any state taxes, but the cuts drew rancorous debate as lawmakers finallly approved the plan.

Another debate awaits them.

Posted by Mike McKinney  at 6:00 PM | Permalink

Comments

The general assembly is going to have to trim the state back to the time frame when we all voted in the lottery commision. This will be painfull, will require capping state non union wages to a max $99,000 level across the board, and reduce the number of agencies. A new way of thinking for federal money as "taxpayer money" with a strict accounting and rule following will also be needed.

Just think back, the lottery was to enable the state to remove the sales tax. With our democratic general assembly big spenders the laugh is now on the taxpayers that reelected them.

unclestu | May 9, 2008 7:13 PM link

Hmmm, "cut benefits to retired workers". I guess that's a euphemism for Age Discrimination and Extortion. Didn't cut those benefits to the judges though, or the Nat. Guard? Do the State Police still get to retire with full benefits after 25 years?

roger williams | May 9, 2008 8:50 PM link

I think this is what you call "the chickens coming home to roost."

Jim | May 9, 2008 10:35 PM link

Looking on the bright side (a novel thought in a ProJo doom and gloom forum) based on initial information, the gap is less than was originally thought. There were fears the 09 gap would approach $500 million.

The size of the State, along with many other well documented factors make us ripe for these types of downturns. With only one urban area, we are much more susceptible to recession than other states, who have multiple urban areas and more diversified macro-economies.

The lesson going forward is gaurding against this susceptibility using strategic economic growth and control of social program spedning. The guardian of the lesson is the Rhode Island voter, who, truth be told, has not done his/her job on this front in the past.

As to how the 09 budget is balanced, hold on to your hats....because we're in for a bumpy ride.

T. J. Queenan | May 9, 2008 10:47 PM link

You know something, people are taxed half to death in this state. Our employers are taxed almost to the point of bankruptcy. Every penny we earn and everything we buy is tax upon tax upon tax and the state's losing revenue because of it. Just lighten up on the taxes a bit and business's will operate better, provide better wages and the employees will spend more money providing the state of Rhode Island with more tax revenue. Taxing us to death obviously isn't working and will only make things worse.

Larry | May 9, 2008 11:25 PM link

Close the state down one day each month for a year. This should include judicial, governor's office, etc. No Exceptions! The governor should stop hiring his $100,000 cronies, and he should do some spring cleaning of his own. How can you expect people to purchase goods and services to help our state's economy when they are too busy putting their $$ into slot machines. State needs to look at opening Quonset Port...now that would be a BIG Jackpot!

j | May 10, 2008 6:24 AM link

Consolidate school, fire and police departments. Eliminate superfluous bureaucrats. Slash duplication of administrative positions. Enact term limits in the State Assembly. Reduce business tax rate to attract new enterprise. Change all state pensions to defined contributions. (Oh, I forgot, this is Rhode Island. Forget I said anything. Let's go get a cannolli on the Hill!)

Peter | May 10, 2008 6:57 AM link

Does anyone believe that the legislature, which behaves like a wholly owned subsidiary of the AFT&NEA, will change the state collective bargaining law.? That law effectively overrides local tax and appropriation authority. In turn, successive teacher union dominated legislatures vote to automatically subsidize whatever spending increases are forced down the throats of local taxpayers. How fiscally responsible is that? How politically responsible is that? There is no way this state can ever afford to perpetuate that approach. So will the current legislature address it? Of course not. It has the spine of a chocolate eclaire on a hot July day. Binyamin Efreom

Binyamin I. Efreom | May 10, 2008 7:09 AM link

Why has our state economy weakened; and why do we have the highest unemployment in New England? Because our neo-con, supply-side, Governor and his cohorts at the General Assembly, sold some of us on the idea that you can give tax cuts, credits, and a flat-tax system to a wealthy minority without a concomitant decrease in spending. Of course they all knew the consequences, but this was the plan. This is the neo-con trick of "starving the beast." Forcing cuts in social welfare and state programs with the ultimate goal of complete privatization of the economy.
You can see the results of this agenda at the federal level. In 8 years, they have nearly doubled the national debt to about 9.4 trillion dollars. Ultimately, these deficits will force cuts in "entitlement" programs.

John St Lawrence | May 10, 2008 3:53 PM link

So whats cacieri's plan for next year, or the year after that? why does the budget keep growing by the month? It seems to me its getting worse as time goes by. Is he planning on ever improving the state economy or will he keep on blaming the legislature and the state employees, how many more 6-figure positions will he create?

michael | May 11, 2008 9:13 AM link

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