Fighting a growing deficit monster
State government officials are well aware that something needs to be done to avoid ending the fiscal year in a multi-million dollar deficit, but there’s little guarantee about whether or not there’s enough time left to maneuver the ship away from that crash course.
As of a report released in early December, the state is on track to hit a $60.2 million deficit when the current fiscal year ends on June 30, 2018. There is a simple formula which explains why this is this is the case – there is more money being spent in the $9.2 billion budget than is being earned in revenue.
However simply reducing spending and increasing revenue is very easy to say and much more difficult to accomplish, and the entirety of the process relies on necessary mathematical assumptions and estimates based on trends and projections which may or may not materialize as expected, as was the case earlier in the year when revenue projections were found to be off by about $100 million less than expected, spanning into next year.
The result is an uncertain situation surrounding huge dollar amounts that does very little to raise faith in the voting populace about the instability of the state’s nearly $10 billion budget. It doesn’t help that the most recent fiscal data that is readily accessible to the public via the state’s own internet portal only reflect numbers from FY16 (which ended on June 30, 2016).
The beasts of budget season – salaries, healthcare costs and retirement benefits for state workers – are not going to be any less formidable in the upcoming Fiscal 19 either, and the projected debt for that period is even scarier, projected at around $200 million with the current revenue versus expenditure trends.
Adding to the uncertainty is the possibility of the federal government slashing healthcare contributions to states through the Affordable Care Act, as has been a long-stated objective of President Trump since declaring his candidacy for president. Should that happen, states would either be on the hook for providing a huge stop-gap in healthcare funding to residents, or they would have to deal with a huge influx of residents who no longer have healthcare.
Governor Raimondo has faced criticism for not doing enough to address the growing deficit within the state’s ballooning budget and, unless something drastic changes in regards to projected revenues or an unexpected economic boom actually occurs in the wake of the president’s frighteningly-risky tax plan, that criticism will become harder and harder to shed.
Such criticism may be stymied slightly if some of her plans are able to successfully chip away at the deficit.
One of those plans is the tax amnesty program, which is a carrot or the stick method of retrieving a chunk of the more than $110 million owed to the state in unpaid taxes. The program is projected see a return of around $12 million, but may potentially garner around $25 million if it exceeds expectations like a similar program enacted by Lincoln Chafee in 2012, by slashing accrued interest and penalties on large, unpaid debts – so long as they are repaid by Feb. 15, 2018.
Another program is the early retirement incentive for state workers who are already eligible for retirement. As many as 80 state workers have taken the offer from Raimondo which would give them a large-sum, onetime bonus (capped at $40,000) as an incentive to retire now, and getting their salary off the books.
This strategy, at this point, is difficult to pin down in terms of how much the state will save – as the costs of the bonuses and added pension costs from an influx of retired workers will have to be levied against the cost-savings of having fewer workers on salary, especially since – reasonably – some of those positions will simply have to be re-filled anyways.
Our officials have work to do.