Warwick representative K. Joseph Shekarchi is prepared to prefile legislation this November that could provide Rhode Island’s cities and towns with up to an additional $1.85 million.
When he learned through revenue forecasts provided to state legislators that the state had a surplus of $97 million with only $93.4 million specifically allotted to the fiscal year 2014 budget, Shekarchi began to formulate an idea to support cities and towns using this year’s surplus and any potential surplus in years to come.
He believes that 50 percent of the remaining surplus, between $3.6 million and $3.7 million this year, should be given as aid to cities and towns. That surplus exists because a $93.4 million carry over was projected in the FY14 budget.
Director of Revenue for the state, Rosemary Booth Gallogly, confirmed in a phone call Monday that a total surplus of $97 million was carried over from FY 2013.
“There already is a portion of state surplus that goes to state unfunded liability,” said Gallogly, referring to the $93.4 million accounted for in FY 2014. “But the use of the state surplus is debated every year.”
Gallogly had not heard about Shekarchi’s proposal, however she agrees that cities and towns do need support financially if possible.
“It is very clear from Governor Chafee’s stance that aid needs to be given to cities and towns,” she said.
Shekarchi came up with his newest legislation while speaking with a friend who was a former member of the Pawtucket City Council. He pointed out that cities and towns need to be provided for and coming up with ways to do that was part of his original campaign.
“I wanted to increase aid to cities and towns without raising taxes or cutting programs,” said Shekarchi during a phone interview on Friday.
Currently, Shekarchi said he is not sure where surplus money of this nature goes because he has never experienced a year with a budget surplus like this.
“It’s been years since there’s been a surplus,” he said.
In his legislation, Shekarchi has planned for 50 percent of the surplus for any year to be allotted to cities and towns, and for the other half to go to either the general fund or the state pension fund.
Gallogly did say that if a bill allotting surplus to aid cities and towns passed, it is not something that could be relied upon because a surplus is not always the case.
“You don’t design a budget to have a surplus,” said Gallogly, cautioning that if cities and towns rely on a surplus, structural problems could occur.
There is a stipulation in Shekarchi’s plan, however, when it comes to how this aid can be used. In Shekarchi’s bill, cities and towns would only be able to use the money to pay for unfunded liabilities, bond debt or pension programs.
He believes paying down those liabilities will save money in the long run, upgrade bond ratings and strengthen cities and towns.
“I believe this money should go back to cities and towns, but I also believe it should not be used for new goods or personnel,” said Shekarchi in his press release regarding the bill. “Our communities are struggling financially largely because of unfunded or underfunded liabilities, such as pension plans, and every dollar that can be used to address that fiscal situation should be. Doing that will be more beneficial for our municipalities and their taxpayers in the long run than hiring more personnel.”
While she agreed that many cities and towns are in need of financial aid, Gallogly pointed out that requiring the funds to be used only for unfunded liabilities can be a hard sell.
“Taking money to fund some of those unfunded liabilities might not be popular among those [cities and towns] who have been funding those things,” said Gallogly, pointing out that cities or towns in good standing could use the money for other beneficial ventures.
Despite bringing up her concerns, Gallogly reiterated that it is clear that Rhode Island’s cities and towns are in need, so this idea is something that should be part of the budget debate.
When asked why he believed a $97 million surplus occurred when it was only planned for about $93 million, Shekarchi credited the state government and the General Assembly for their smart spending.
“We’re starting to get it. The government, like everyone, we have to live within our means,” said the representative, adding that he believes the increased surplus is a sign of the improving economy.